project

2. ENTREPRENEURIAL ENVIRONMENT
Entrepreneurial Environment is a combination of
factors that play a role in the development of
entrepreneurship.
First, it refers to the overall economic, socio- cultural,
and political factors that influence people’s
willingness and ability to undertake entrepreneurial
activities.
Second, it refers to the availability of assistance and
support services that facilitate the start-up process.

3. Entrepreneurial environments can be grouped into three
broad streams:
1. General environmental conditions for entrepreneurship
2. Environmental conditions of a particular country or region
3. Role of public policy in shaping the entrepreneurial
environments.

4. 1. General Environmental Conditions
It include:
 Legal and institutional frameworks for efficient functioning
of private enterprises.
 Presence of experienced entrepreneurs and skilled labor
force
 Accessibility of suppliers and customers or new markets
 High degree of competition among firms
 Favorable government policies
 Provision of training and support services
 Supportive infrastructure

5. 2. Country/Region Specific
Environmental Conditions
Countries that keep rules and regulations at a
minimum, better tax structure and other incentives,
and provide training and counselling services to start-
up entrepreneurs
Furthermore, factors such as availability of financial
resources, large size urban areas, and presence of
universities for training and research are found to be
very important to increase the rate of new venture
creation

6. 3. Role of Public Policy
It includes -
Tax-based incentives, and government procurement
programs
Protection of proprietary ideas and innovations
Investment in education and research
Explicit recognition and support for entrepreneurship by
government agencies
Promoting of entrepreneurship by educational institutions
Minimization of entry barriers.

7. Economic Environment Factors
Following are the main economic factors which affects
the entrepreneirship.
1. Capital,
2. Labour,
3. Raw materials and
4. Market.
5. Infrastructure

8. (a) Capital
Capital is one of the most important prerequisites to
establish an enterprise. Availability of capital helps an
entrepreneur to bring together factors of production.
If capital is available, people who have innovative ideas
would like to put them into reality.
So, if capital is available, entrepreneurial activities will
increase.

9. (b) Labour
The quality and quantity of labour is another factor
which influences the emergence of entrepreneurship.
Availability of labour makes entrepreneurship
attractive.
If entrepreneurial activities are initiated near areas
where labour is available, then it is easy to carry out
the business more comfortably and profitably at low
cost.

10. (c) Raw Materials
Raw materials are required for establishing any
industrial activity and therefore has an influence in
the emergence of entrepreneurship.
In the absence of raw materials, neither any enterprise
can be established nor an entrepreneur can emerge.

11. (d) Market
Ultimately, it is the market that fetches revenue for any
business.
If sufficient market is not there, people will naturally
hesitate to do business in a sector where there is no
market.
In addition to market opportunities, it is equally
important to ensure future market opportunities for
the emergence of entrepreneurial activities.

12. (e). Infrastructure
Expansion of entrepreneurship is depended on
properly developed communication and
transportation facilities.
Apart from the above factors trade/ business
associations, business schools, libraries, etc. also
make valuable contribution towards promoting and
sustaining entrepreneurship’ in the economy.

13. Legal Environment
This consist of the laws, regulations and procedures of
a country which business enterprises are anticipated
to comply within the course of their operations.
These laws may facilitate entrepreneurship
development or discourage people from taking
entrepreneurship activities.

14. • Legal environment of a business includes –
• 1 Various legislations enacted, amended or repealed by the
government,
• 2 Administrative orders declared by government
authorities,
• 3 Decisions issued by various commissions and agencies of
the central, state or local government as well as judicial
activities.

15. • The legal environment of a business indicates a
twofold purpose set by the government
• It helps the business to flourish and in turn, benefits
the citizens either by generation of employment or by
any service.
• But legal environment, specially in socialist or mixed
economies may also constrain or hinder the growth of
the business.
• The limitations for entrepreneurship activities are
decided by legal environment.

16. Following are some of the government Acts &
government policies relating to legal environment –
1 Environmental protection laws
2 Indian Companies Act
3 Income Tax Act
4 The Consumer Protection Act
5 Environment Protection Act
6 Agricultural Policy
7 Intellectual property laws
8 Industrial Policy

17. • 8 Labour Law
• -Minimum wage act
• - Fixed working hours
• -Maternity benefits
• -Workplace discrimination
• -Industrial dispute act
• 9 Fiscal Policy
• 10 Monitory Policy
• 11 EXIM Policy
• 12 Foreign Investment Policy

18. • Benefits of studying legal environment of a business
• 1 It helps to decide how to perform the business
properly.
• 2 Proper studying of the legal environment helps to
maximise the margin of profit.
• 3 It aids in planning a proper business strategy.
• 4 The studying of the legal environment contributes
to successful business.
• 5 It helps to get introduced to the legal agendas of a
country which, in turn, helps in taking managerial
decisions in the future.

19. • Limitations of studying legal environment of a
business
• 1 A thorough study of the legal environment helps in
gathering a lot of information which may create
confusion in practical situations.
• 2 Too much studying of the legal environment makes
one very cautious and it may discourage from taking
strategic risks in business.
• 3 Studying the legal environment does not provide
any explanation of uncertain events in business.

20. Political Environment
How Political Environments Support or Suppress
Entrepreneurship ?
The following are some of the ways in which the
political environment influences entrepreneurship:
1. Political conditions -
Where government policies change frequently
discourage business, as investors fear for the safety
of their investments.

21. 2. Government support to economic development
through infrastructure development, facilitation,
industrial parks which all encourage
entrepreneurship.
An entrepreneur, however creative he/she may be,
cannot function without the supportive actions of
the Government.
It is for the government to ensure the availability of
required resources for the entrepreneurs and also
the accessibility to them.

22. 3. Policies relating to various-economic aspects like
prices, availability of capital and other inputs,
taxation etc. affect growth of entrepreneurship to a
large extent.
4. Promotive government activities such as incentives
and subsidies contribute substantially to
entrepreneurial performance.

23. 5. Government policies like licenses, regulations,
government monopolies, etc. are undesirable for the
growth of business enterprises.
6. Government that is politically stable and united can
effect entrepreneurial activities in a significant
manner.

24. 7. Entrepreneurs may be discouraged to start a
business if they have to follow many procedural
requirements, if they have to report to many
institutions, and if they have to spend more time
and money in fulfilling the procedural requirements.
8. History and more specifically certain milestone
events such as wars, alliances, nationalism,
implemented reforms, etc.

25. 9. High taxes that cut into the returns usually
discourage entrepreneurs. On the other hand, tax
holidays to encourage business attract start-ups
10. The availability of infrastructure and utilities such
as good roads, power, communication facilities
encourage entrepreneurship,
11. Less corruption and efficient bureaucratic system
encourage entrepreneurship.

26. Social and Cultural Environment
Development of entrepreneurship in a society
may take place not just because of better
economic factors but because of the presence
of positive social and cultural factors.
The following social and cultural factors influence
the development of entrepreneurship in a
society.

27. (a) Social norms and values:
A society sets certain norms and values for the
behaviour of people who are part of that society.
As a result, many people are forced to accept
certain types of jobs and tasks that reflect the
social environment.

28. If the society has an open and flexible approach
towards various types of jobs and works, then
people will feel free to do whatever they like and
even go in for innovation and creativity.

29. (b) Role models:
Societies that celebrate entrepreneurship and
felicitate successful entrepreneurs in a way
encourage many future generations to take up
entrepreneurial activities.
This is because successful businessmen prove to
be role models for the society at large.

30. For instance, states like Gujarat, Maharashtra and
to some extent Tamil Nadu and Haryana have
experienced better industrial development as a
result of higher concentration of entrepreneurs
compared to lesser industrialised states such as
Orissa, Chattisgarh, Madhya Pradesh and other
Northeastern states.

31. (c) Social pressure:
If a society is orthodox, close and imposes a lot of
restrictions, then it is likely to backfire.
Because of negative pressure, more number of
people would like to become entrepreneurs as a
means of improving their status.
People became entrepreneurs just to prove their
abilities and establish an identity in the society.

32. (d ) Family background :
This factor includes size of family, type of family and
economic status of family.
Background of a family will also influence on to what
level members of that family are interested in taking
entrepreneurship.

33. (e) Education :
Education enables one to understand the outside
world and equips him with the basic knowledge
and skills to deal with day-to-day problems.
In India, the system of education prior to the 20th
century was based on religion. In this rigid
system, critical and questioning attitudes
towards society were discouraged.

34. Later, when the British came to our country, they
introduced an education system, just to produce clerks
and accountants. The base of such a system, is very
anti-entrepreneurial.
The unfortunate result of it is that young men and women
in our country have developed a taste only for service.
The emphasis is till on preparing students for standard
jobs, rather than marking them capable enough to
stand on their feet.

35. (h) Attitude of the Society :
A related aspect to these is the attitude of the
society towards entrepreneurship.
Certain societies do not tolerate changes and in
such circumstances, entrepreneurship cannot
take root and grow.
Similarly, some societies have an inherent dislike
for any money-making activity.

36. (I) Social Problems
Social problems also affect the objectives and nature of
entrepreneurship.
Problems include concerned for pollution, demand for
socially responsible marketing policies etc.

37. Psychological Factors
Following are the some psychological factors which
affects the entrepreneurship.

38. (a) Need Achievement:
 According to David McClelland’s theory of need
achievement, a high need achievement is the major
determinant of entrepreneurship development.
 Therefore, if the average level of need achievement
in a society is relatively high, one would expect a
relatively high amount of entrepreneurship
development in that society.

39. (b) Withdrawal of Status Respect:
E.E. Hagen linked between the withdrawal of status
respect of a group and the genesis of
entrepreneurship.
Giving a brief sketch of history of Japan, he concludes
that Japan got developed before other non-
Western society due to two historical differences.

40. First, Japan had been free from western disturbance
and
Secondly, the existence of important groups and their
traditional values (Samurai) in japan's society drove
them with increased creativity.

41. Hagen maintains that once status withdrawal has
occured, the sequence of change in personality
formation is set in motion.
He refers that status withdrawal takes a long period of
time – as much as five or more generations to result
in the emergence of entrepreneurship.

42. c. Motives :
Other psychological theories of entrepreneurship
stress the motives or goals of the entrepreneur.
Cole is of the opinion that besides wealth,
entrepreneurs seek power, prestige, security and
service to society.
Stepanek points particularly to non-monetary aspects
such as independence, persons’ self-esteem, power
and regard of the society.

43. On the same subject, Evans distinguishes motive by
three kinds of entrepreneurs :
(a) Managing entrepreneurs whose chief motive is
security.
(b) Innovating entrepreneurs, who are interested only
in excitement.
(c) Controlling entrepreneurs, who above all other
motives, want power and authority.
Finally, Rostow has examined intergradational changes
in the families of entrepreneurs. He believes that
the first generation seeks wealth, the second
prestige and the third art and beauty.

44. Technological Environment:
 The technological environment can be regarded as
the state of the use of scientific principles and
mechanical arts to different tasks in the society.

45. Technological advancement has become a catalytic
agent in the promotion of entrepreneurship.
Following are the ways through which technology
impacts entrepreneurship
1. Changes in the production methods -
New advanced methods of production will encourage
more and more prospective entrepreneurs to enter
into businesses

46. • 2. Development of new machinery, tools, equipments
and designs
• These will help to existing as well as new
entrepreneurs to grow and expand their businesses.
• 3. Development of new raw material or substitute for
the existed raw material

47. 4. New inventions to modernize plants , workshops
and technical processes
5. Exchange of technology between entrepreneurs
and enterprising nations
6. Changes in purchasing, publicity , media and means
of transportations
7. Support for R&D from govt.
8. Pace of technology change in the economy

48. In other words, technology can accelerate both good
and bad ideas, and it can accelerate these ideas
towards success or failure.
Successful entrepreneurs—those who have a clear
concept of what they are trying to accomplish—
leverage technology in order to help them achieve
their goals more quickly.

49. Significance of Entrepreneurial
Environment or Need and
Importance of Entrepreneurial
Environment

50. Entrepreneurial environment is studied for many
things to know. It creates awareness towards the
problems and their solutions.
There are many reasons to study entrepreneurial
environment which are as follows.

51. 1. knowledge about the complexities and problems.
Business has many problems and complexities. These
can have harmful effects on the success of an
enterprise. Hence an entrepreneur should have an
clear perception of problems and opportunities to
remove crisis and gain advantage.

52. 2. Essential for growth
 It is the internal dynamic environment which
regulates entrepreneurial activities. It has a positive
relationship with the development of
entrepreneurship.
 Modern business is treated as an open system
which is affected by the political, social and
economic forces..

53. 3. Determines the entrepreneurial spirit
 A no. of environmental forces determine the
entrepreneurial spirit among the people.
 The spirit generates urge , risk bearing capacity and
productive atmosphere. These factors help nurture
creativity.

54. 4. Affects performance
 Always the environments are dynamic and keeps on
changing. It affects different enterprises in different
ways.
 Environment provides data and information. It
makes aware of the future problems. It helps in
creating right vision which improves performance.

55. 5. Positive and negative influence
 Every entrepreneur is associated with the
environment surrounding him. The environment
may have both positive and negative influences on
the development of entrepreneurship.
 So after knowing the environment an entrepreneur
can take advantage of positive factors and can look
upon the negative factors.

56. 6. Ignorance is risky
 Ignoring the environment can be risky for any
entrepreneur because it can lead to losses of
opportunities for profit and even can lead to shut
down of enterprises.

57. 7. Impact on decision making
The entrepreneurs decisions are governed by various
external factors such as market conditions,
competitors strength, social , economical and
technological considerations.
These forces influence every important functional
decision area of entrepreneurs.

58. 9. Optimum use of resources
The study of the environmental factors helps in
making optimum use of physical and human
resources in a firm. It increases the profitability of
the firm.

59. 10. To plan strategy
To form long term policies it is necessary to study
various forces of environment.
Without studying the environment one can not plan
its business strategy.

60. Characteristics of an Entrepreneurial
Environment
1 Environment is Affected by Various Factors
• The environment includes various factors or elements, physical,
economic, social, political, cultural, technological, moral, statutory
and others.
• These factors not only affect each other but also affect the
environment and also get affected by the environment.

61. 2 Dynamism or Change-Ability
• The environment is dynamic, and not stable or everlasting,
because:
• Regular and new changes take place in all types of
environment.
• The policies, methods, and Systems go on changing from
time to time.
• The strategies, policies, and objectives also go on changing,
with changes in all factors.

62. 3 Uncontrollable
• The environment is uncontrollable since it is the composition
of such factors which are beyond the control of the business,
like government policy, statutory controls, social structure,
politics, and foreign cooperation, etc.

63. 4 It Brings the Challenges
• The environment in present scientific age put challenges
before human beings.
• Various challenges like environmental balance, control of
anti-social activities, worldwide pressures, providing dignity
to human resources, and safeguarding of human health are
emerging in the dynamic environment.

64. 5 Responsible Towards all Elements
• The entrepreneur is responsible for all components or
elements of Environment, Government, consumers, the
common man, employees, investors, government
organizations, competitors, Institutions, society, and the
nation.

65. Project Identification & Project Formulation
• A prospective entrepreneur may have several ideas about
projects in his mind. He may come across several investment
opportunities. Here he has to select most feasible and
promising project.
• The proper identification and selection ensures success of an
enterprise.

66. Project identification
Meaning
It is a process of finding out the most appropriate project from
among the several investment opportunities.
It is concern with collection, compilation and analysis of
economic data for the eventual purpose of locating possible
opportunities for investment.

67. Steps in Project Identification
1 Generation of New Ideas
It is an important stage of project identification.
Here an entrepreneur will have to search profit making
business ideas.
A project idea can be generated by looking at existing
successful businesses or by brainstorming or by SWOT
analysis.

68. 2 Preliminary screening of ideas
After generating ideas, one has to screen the all ideas and
decide the priorities of all these project ideas.
Here all ideas are understood and analyzed quickly without
investing much time and efforts.

69. 3. Feasibility Study
To choose right line of business entrepreneur has to see
feasibility of each project in terms of different aspects.
Here it is found out that whether the project is practically
possible to start or not with reasonable profit of margin.

70. 4 Selection of appropriate idea
Based on the data analyzed here best idea is selected. Here
entrepreneur can decide the best idea based on feasibility
report. The ideas which has highest positive points can be
selected.
5 Implementation of Idea
This is the last step in which entrepreneur will now start
working on the selected project.

71. Problems of Project Identification
1 Competing stakeholders interest-
Many times in the project identification process interest of
stake holders like financers, users, regulators etc. may clash
with the interest of project or entrepreneur.
2 Inadequate information-
Information available is not sufficient to identify best project.
It might happen because of reason like nature of project.

72. 3 Sabotage
It is the deliberate obstacles to the project ideas by opponents.
Competitors may create problems for project identification process.
4 External dynamics
If the external environment is more dynamic in nature it creates more
problems for project identification process.
Till an entrepreneur comes to certain stage in project identification the
external environment is so much dynamic that it has changed a lot.

73. 5 Apathy
It is nothing bus lack of interest. An entrepreneur can loose
interest in between the process of project identification.
6 Over ambition-
Over ambition of an entrepreneur might lead to over
estimation and passing by minor and detailed analysis of each
project idea.

74. Project Formulation
• It is essential to examine the most critical aspects of the
project before making commitments on investment.
• Thus, it is worth spending a small amount of money on an
exercise called pre-investment study/formulation.
• Project formulation involves step by step investigation and
development of project idea. It helps in taking decisions of
accepting or rejecting an idea.

75. Stages in Project Formulation
1. Feasibility Analysis
2. Techno-economic Analysis
4. Project Design and Network Analysis
6. Input Analysis
7. Financial Analysis
8. Cost-Benefit Analysis
9. Pre-Investment Analysis

76. 1 Feasibility Analysis:
Examination to see whether to go in for a detailed investment
proposal or not
Conclusion could be:
The project idea seems to be feasible or
The project idea is not a feasible one or
Unable to arrive at a conclusion need more adequate data

77. 2 Techno-economic Analysis
Choice of Optimal Technology, Plan and Design etc.
Specifications and standards
Demand for the project output(goods/services)
Overall benefits
Provides platform for preparation of detailed project design

78. 3 Project Design and Network Analysis
• It is the heart of the project
• It defines the sequence of events of the project
• Time and resources are allocated for each activity
• It is presented in the form of a network drawing/bar chart
• It helps to identify project inputs, finance needed and cost-
benefit profile of the project

79. 4 Input Analysis
• It defines the inputs required for each activity
• Inputs include materials, equipment, machines, software,
human resources etc.
5 Financial Analysis
• Involves estimation of the project costs, operating cost and
fund requirements
• It needs caution and foresight in developing financial
forecasts

80. 6 Cost- Benefit Analysis
The overall worth of a project in comparison with the cost
involved in it.
More the worth better is the project.
7 Pre-investment Analysis
• The results obtained in previous stages are consolidated to
arrive at clear conclusions
• Helps the project-sponsoring body, the project-
implementing body and the consulting agencies to
accept/reject the proposal

81. Attitudinal factors of Entrepreneurs
• Attitudes are psychological traits that shape people’s
behaviour. Attitude is predisposition to respond in a positive
or negative way to someone or something in one’s
environment.
• Attitude defines the positive and negative feelings about a
place, persons, objects, and other things

82. SOURCES OF ATTITUDES
• Attitudes may be attributed to a variety of sources.
1. Personal experiences: People gain attitudes from their personal
experience. The attitude of one person may be different from another
person even in the same conditions. For example, two subordinates
might have differing personal experiences with their supervisor.
Ultimately, each will have a different attitude to his superior.

83. 2. Association:
Every action has an impact on a person’s attitude. For example, if an
employee is efficient and works hard for the company, the boss will
have a positive attitude towards that person. Let us presume that after
some time, a new employee joins the organisation, also works hard and
efficiently. The supervisor may transfer appreciation to the new
employee as well.
3. Social learning:
Attitudes are also obtained from family, teachers and superiors.

84. ATTITUDES OF AN ENTREPRENEUR
Some essential attitudes required for entrepreneurs are:
1. Patience:
Entrepreneurship is not a one-day activity. At times, it takes
long to establish oneself in the market and create a brand
image. So, entrepreneurs need to be patient.

85. 2 Positivity:
Entrepreneurs must have the capability to take risk and stay
positive. A positive attitude is not only required to conduct a
business but also for the successful future of the enterprise.
3. Perseverance:
Entrepreneurs need to put in regular hard work to accomplish
business goals.

86. 4 Resilience:
Entrepreneurship is not a old career option, so it is natural
that entrepreneurs may be cornered for their choice to be an
entrepreneur. In such times, entrepreneurs need to be
extremely resilient to achieve their goals.
5. Imagination:
Entrepreneurs are considered visionaries. To tap market
opportunities, entrepreneurs must use their imagination.

87. 6 Change:
Entrepreneurs have a positive attitude towards change.
Entrepreneurs accept change and modify themselves
accordingly.
7. Performance:
Entrepreneurs are performers. They complete their tasks
against all odds.

88. 8 Networking:
Generally, entrepreneurs have a good networking circle.
9. Respect:
Entrepreneurs have a positive attitude towards their
stakeholders like customers, suppliers and investors. They
respect their stakeholders.

89. role of Government in promoting
entrepreneurship in India

90. • The government plays an important role in the
development of entrepreneurship. The central and
state governments have set up a number of
institutions to promote entrepreneurship. They are:

91. i. Small Industries Development Organization ‐ SIDO formulates
policies for the development of small scale industries in the
country. It provides support for promotion of rural
entrepreneurship.
ii. ii. Management Development Institute ‐ MDI conducts
management development programs to improve managerial
effectiveness in the industry.

92. • iii. Entrepreneurship Development Institute of India ‐ EDI has helped
to set up twelve state‐level exclusive entrepreneurship development
institutes and centres.
• iv. All India Small Scale Industries Board ‐ AISSIB advises the
Government on all issues related to the small scale sector. It
determines the programmes and policies for the development of
small scale industries.

93. • v. National Institution of Entrepreneurship and Small Business
Development ‐ NIESBUD supervises the activities of the different
agencies involved in the entrepreneurial development programmes.
• vi. National Institute of Small Industries Extension Training ‐ The
objective of the institute is to direct and coordinate the syllabi for
training of small entrepreneurs. It organizes seminars for small
entrepreneurs and managers.

94. • vii. National Small Industries Corporation Ltd. ‐ NSIC provides a
vast‐market for the products of the small industries through its
marketing network. It also helps the small units in exporting their
products to foreign countries.

95. Schemes For Financing Micro, Small And
Medium Enterprises:
• Repayment For Iso‐9000 Certification Scheme The scheme was begun
in March 1994, and it gives up to Rs. 75,000 for every small industrial
unit which procured ISO‐9000 Certification. Since the beginning of the
scheme of ISO‐9000 repayment, 4101 small industrial units to the
tune of Rs. 1944 crore have been profited up to Nov – 2006.

96. • Laghu Udyami Credit Card Scheme Laghu Udyami Credit Card Scheme,
presented in November 2001, has been executed by the banks for
giving borrower‐friendly credit facilities to small venture.

97. • Credit Guarantee Fund Trust Scheme For Micro And Small Industries
The plan covers guarantee free credit facility reached out by qualified
loaning establishments to new and existing Micro and Small
Enterprises up to Rs. 50 lakh per borrowing unit.

98. • National Equity Fund Scheme (NEF) The target of NEF Scheme is to
provide equity type finance to business visionaries for setting up new
tasks in the tiny or small industrial sector for undertaking extension,
modernization, technology upgradation and enhancement of existing
modest, Small Industries and Service Enterprises and for reinstallation
of practical wiped out units. In this scheme, the expense ought not to
surpass Rs. 50 Lakhs.

99. • Integrated Infrastructure Development Scheme (IIDS) IIDS was
launched in 1994 with the target of giving essential infrastructural
facilities like Power Distribution network, Telecommunication, Water,
Roads, Drainage and Pollution control facility, Storage, Banks, and
Marketing outlets, Common administration facilities and
Technological backup administrations, and so on.