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PART I
LESSON NO. 1
ENTREPRENEUR AND ENTREPRENEURSHIP
WHO IS AN ENTREPRENEUR
An economic agent.
Economic development of a nation depends upon entrepreneurs.
Has knowledge, skills, initiative, drive and spirit of innovation.
Achieving goals. Seizes opportunities for economic benefits to oneself and to the society.
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THE CONCEPT OF ENTREPRENEUR
The word "Entrepreneur" is derived from the French verb
ENTREPREDRE. It means to undertake.
According to Joseph Schumepeter, "An entrepreneur in an advanced
economy is an individual who introduces something new in the economy
a method of production not yet tested by experience in the branch of
manufacture concerned, a product with which consumers are not yetfamiliar, a new source of raw material or of new markets and the like".
The functions of an entrepreneur according to Schumepeter: - 1.
Introduction of a new product, 2. Introduction of methods of production,
3. Developing new markets and finding fresh source of raw materials,
and 4. Making changes.
According to Cantillon "An entrepreneur is the agent who buys factors of
production at certain prices in order to combine them into a product with
a view to selling it at uncertain prices in future".
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To conclude an entrepreneur is the person, who bears risk, unites various
factors of production, to exploit the perceived opportunities in order to
evoke demand, create wealth and employment.
CHARACTERISTICS OF AN ENTREPRENEUR
Action oriented.
Highly motivated individuals who takes risks to achieve goals.Unwavering determination and commitment.
Creative and result oriented. They work hard in return for personal and
financial rewards.
Accept responsibilities with enthusiasm and endurance.
Have self confidence, they are dedicated, setting self determined goals.
Thinkers and doers, planners and workers.
Depends on the intelligence, imagination and strength of purpose of the
individual,
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QUALITIES OFAN ENTREPRENEUR
Essential qualities of entrepreneurs are as follows:
Success and AchievementyRisk Bearer
yOpportunity Explorer
yPerseverance
yFacing Uncertainity
yFeedbackyIndependence
yFlexibility
yPlanner.
ySelf Confidence
yMotivator.
yStress Taker
Above discussed qualities determines entrepreneurs are born not made.
In other words business family background, knowledge and skills,
education and experience is essential for a successful entrepreneur.
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DISTINCTION BETWEEN AN ENTREPRENEUR AND A MANAGER
A manager executes the plans of the
entrepreneur.Thus a manager
translates the ideas into practice.
As an innovation he is called as
change agent who introduces goods
and services to meet changing needs
of the customer
5. Innovation
A manager receives Salary as
reward for service rendered which isfixed and regular can never be
negative
Entrepreneur for his risk bearing
role he receives profits. It is notonly uncertain and irregular but can
at times be negative.
4.R
ewards
A manger being a servant does not
bear any risk involved in the
enterprise
An Entrepreneur bears all risks
and uncertainty involved in the
enterprise.
3.Risk
A manger is the servant in the
enterprise.
Entrepreneur bears all risks and
uncertainty involved in the
enterprise.
2.Status
But the main aim of a manager
is to render his service in an
enterprise already set up by
someone.
An entrepreneur starts a
venture by setting up a new
enterprise for his personal
gratification
1.Goal Management
A ManagerEntrepreneurPoint or Distinction
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10. Public bureaucracy
9. Customer relation8. Management
7. Marketing
6. Parallel opportunities
5. New product5. Co-ordination with outside
agencies
5. Innovation4. Engineering4.
Tackling labour problem4. Management
3. Acquiring and assembly of the
factory
3. Maintaining cordial employer
and employee relation
3.Decision making
2. Dealing with public bureaucracy2. Expansion of the enterprise2. Organisation
1. Management of share resource1. Diversification of Production1. Planning
Function important for
developing countries
Other FunctionPrimary function
FUNCTION OF ENTREPRENEUR
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Planning process involves the following steps:
Scanning of the best suitable idea.
Selection of product line.
Determination of type of business organisation (Individual or
partnership)
Estimation of the capital needed.
Selection of capital resources.Selection of location
Studying the government, rules, regulation and policies.
Selecting the way to fulfill the govt. formalities.
Study of availability of labour force.
Study of market and market strategy to be adopted.
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ORGANISATION:
Co-ordinates assembles and supervises land, labour and capital during the
promotion stage and at the performance stage, for optimum utilisation of the
resources. Efficient expansion and growth of the enterprise largely dependson the efficiency of the organisational network employed and monitored by
the entrepreneur.
DECISION MAKING Aruther H. Cole has described the entrepreneur as a
decision maker. As a decision maker he takes various decisions regarding
following matters:
Determination of the business objectives of the enterprise.
Decision regarding procurement of machine, material, men, money and
market.
Decision regarding requisition of efficient technology and new equipments.Decision regarding development of a market for the product.
Maintenance of good relations with public authorities and with society at
large.
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MANAGEMENT: The management with reference to entrepreneur
stands for not only the working of the venture but also managing of the
day-to-day problems. It includes future expansion and policies in the
long run. Direction of men, machine, material, money, organising of
land, labour and capital for the enterprise.
INNOVATION: Implies "doing of new things or doing of things that are
already being done in a new way". Schumepeter considered economicdevelopment as a desire dynamic change brought by entrepreneur by
instituting new combinations of production. According to him innovation
may occur in any one of the following five forms.
yLaunching of new product in the marketyIntroduction of new technology in the production
yCreation of new market
yDiscovery of new and better source of raw-material
y
Creation of monopoly or breaking up monopoly.
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RISK BEARING: An entrepreneur undertakes the responsibility for loss
that may arise due to unforeseen contingencies in future. He guarantees
interest to creditors, wages to labour and rent to the landlord and risk canbe insured.
UNCERTAINITY BEARING: Risk which cannot be insured against
and it is incalculable. Entrepreneur bears uncertainity refers to the
uncertain trends of market, trade credits etc. which by its nature cannotbe insured, nor capitalised nor salaried too.
Besides the above functions, the entrepreneur has to perform many other
activities at the later stage
y Diversification of production
y Expansion of the enterprise
y Maintaining cordial employer/employee relations
y Tackling of labour problems
y Co-ordination with outside agencies
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The functions of an entrepreneur with reference to the underdeveloped
countries include wide range of activities has been provided by Kilby.
y Management of scarce resources.
y Dealing with public bureaucracy (concessions licenses, taxes)
y Acquiring and overseeing assembly of the factory.
y
Industrial designing and engineering.y Marketing of product and responding to competitions.
y Perception of market opportunities (novel or imitative).
y Financial and production management.
y Management of customers and supplier relations.
y Management of scarce resources.y Innovation or creation of new product or service.
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TYPES OF ENTREPRENEUR
Following are the classification of entrepreneurs on the basis of common
characteristics.Entrepreneur
4. Drone
3. Cognitive3. Fabian
2. Large Scale2. Public2. Rational2. Imitative
1. Small Scale1. Private1. Empirical1. Aggressive /
innovative
D. On the basis
of Scale ofenterprise
C. On the basis
of ownership
B. Arthur
H. ColeClassification
A. Clarence
Danhof.Classification
IVIIIIII
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CONCEPT OF ENTREPRENEURSHIP
The term 'entrepreneurship' is often used synonymously with the term
'Entrepreneur' though, they are two sides of the same coin, conceptually
they are different.
Entrepreneurship, as the indivisible process flourishes, when the
interlinked dimensions of individual psychological entrepreneurship,entrepreneur traits, social encouragement, business opportunities,
Government policies, availability of plenty of resources and
opportunities converge towards the common good, development of the
society and economy.
Entrepreneurship is the process of identifying opportunities in the market
place, arranging the resources required to pursue these opportunities and
investing the resources to exploit the opportunities for long term
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gains. It involves creating wealth by bringing together resources in new
ways to start and operate an enterprise.
According to Cole "Entrepreneurship is the purposeful activity of an
individual or a group of associated individuals undertaken to initiate,
maintain and aggrandise profit by production or distribution of economic
goods and services".
According to Higgins "Entrepreneurship is meant to be the function of
foreseeing investment and production opportunities, organising an
enterprise to undertake a new production process, raising capital, hiring
labour, arranging the supply of raw materials, finding site, introducing a
new technique, discovering new resources or raw materials an selectingtop managers for day to day operations of the enterprise.
The above definitions highlights risk bearing, innovating and resource
organising aspects and an individual or group of people achieve goalthrough production or distribution of products or services.
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To conclude entrepreneurship is set of activities performed by an entrepreneur.
Thus, entrepreneur precedes entrepreneurship.
The relationship between entrepreneur and entrepreneurship is given in the
following table.
ENTREPRENEUR ENTREPRENEURSHIP
Person Process
Visualiser Vision
Organiser Organisation
Decision maker Decision making
Innovator Innovation
Risk bearer Risk bearing
Motivator Motivation
Creator Creation
Leader Leadership
Manager Management
Initiator Initiation
Planner Planning
Technician Technology
Communicator Communicator
Administrator Administration
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NATURE AND CHARACTERISTICS OF ENTREPRENEURSHIP
Above study of entrepreneurship has shown that the process of
entrepreneurship is indeed complex and also when we say entrepreneuris what an entrepreneur does experts have enlisted the characteristics of
entrepreneurship.
y Ability to create enterprise
y Organising functiony Innovation
y Risk bearing capacity
y Managerial and leadership-functions
y Gap filling
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Managerial andleadership activity
Organising factors
of production
Entrepreneurship
character
Ability to create
enterprise
Risk bearingcapacity
Innovative
ideas
Gap filling
function
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SCOPE OF ENTREPRENEURSHIP
Entrepreneurship and the economic development compliment each other.
An economic system of country determines the nature and scope of
entrepreneurship. Entrepreneurship can bring about drastic changes in
the very structure of the economy.
Entrepreneurship works in different ways in different economic systemssuch as capitalism, socialism and mixed economy.
CAPITALISM A capitalist economy represents free enterprise, means
freedom to save and invest, free competition, consumer sovereignty and
very less interference from the government.
Price of the product will be determined on the basis of the force ofdemand and supply with reference to cost of production. The
entrepreneur controls all the activities with reference to the process of
production and distribution. Entrepreneurs play vital and prominent role
in the enterprise because, he controls domestic market by assuming the
role of a competitor .
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SOCIALISM Private entrepreneurship is absent in a socialist economic
system. Economic and financial experts play important role in the
development of entrepreneurship in the system. Such entrepreneurship
mainly to serve the society not to mint money or to make profit only.
CENTRAL AUTHORITY in the socialism economy is appointed by
the Governmental to make policies, frame plans and procedures for the
proper and efficient mobilisation of resources, and mobilisation andallocation of resources into those industries of national prominence. In
this system of economy private entrepreneur has neither a role or
responsibility.
MIXED ECONOMYT
he mixed economy is characterised byco-existence of both the private and public sectors in, the same line of
production. Consumer goods are left to the private enterprises.
Government undertakes the production of capital goods.
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In a mixed economy, restrictions are placed by the Government to
eliminate the problems of monopoly capitalism. Government under
this type of economy curbs the growth of monopolies and encourage
competition.
Mixed economy has built in stabilisers which solve the problems of
production, pricing and distribution in a better manner, apart from
satisfying and helping in the various enterprise goals, mixed economyalso helps in reducing of inequality of incomes among people, fixation
of minimum wages etc. in an efficient and effective way.
Thus entrepreneurship plays a great and vital role in all major
economic systems. Its importance stands beyond challenges andmaking of huge profit in every economic system.
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Scope of
entrepreneurship
EnterpriseCapitalismSocialism
Mixed Economy
Fig: Scope of Entrepreneurship
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FACTORS AFFECTING ENTREPRENEURIAL GROWTH
Following are the factors of environment affecting entrepreneurial
growth. These conditions are grouped under two categories.
Economic conditions
Non economic conditions
ECONOMIC CONDITIONS
Economic conditions includes the capital, labour, raw material and
market.
Capital
Labour Raw material
Market
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NON-ECONOMIC CONDITIONS
Socio-cultural norms and values Degree of approval or disapproval of entrepreneurial behavior.
Family background, standard of education, technical knowledge
and in formation.
Financial stability, caste and religious affiliation.
Psychological conditions are as follows.
David McClelland's 'Theory of need achievement According to him
a constellation of personality characteristics, and high need
achievement is the major determinant of entrepreneurship.
Individual works in the society but remains different.
Impact of achievement motivation and training programmes
influence development of entrepreneurship.
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LESSON NO. 2
ENTREPRENEURSHIP MOTIVATION AND ENTREPRENEURSHIP
DEVELOPMENT PROGRAMME
INTRODUCTION TO MOTIVATION
Human behaviour is governed by needs and desires.
Entrepreneurs feel motivated when their needs and expectation are
satisfied as a result of working for the enterprise.
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DEFINITION OF MOTIVATION
According to Robert Dubin "something that moves the person to action
and continues him in the course of action already initiated.
According to Dalton E McClalland "motivation refers to the way in
which urges, drives, desires, striving, aspirations or needs direct control
or explain the behaviour of human being"
MOTIVATIONAL PROCESS
Motivation is the result of an interaction between human needs and
incentives., A person feels motivated when available incentives lead tothe satisfaction of his motives or needs. Various steps in the process of
motivation are described below.
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Motive
GoalBehaviour
Fig: Motivational Process
Awareness of need is the first step in the motivational process.
Motives are directed towards the realisation of certain goals, which
in turn determine human behaviour. This behaviour leads to goaldirected behaviour. In, order to satisfy and achieve goal. Individual
looks for a suitable action. He develops certain goals and makes an
effort to achieve them.
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MOTIVATION THEORIES
Motivation explains about human nature and human need. Maslow's
needs of hierarchy and McClelland acquired needs theory are
prominent theories among these theories which has relevance to
entrepreneurship.
MASLOW'S NEED OF HIERARCHY THEORY
yPsychological needs
ySafety and security needs
ySocial needs
yEsteem needs
Self Actualisation
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McCLELLAND'S ACQUIRED NEED THEORY (OR
ACHIEVEMENT MOTIVATION THEORY)
As a result of ones life experience a person experiences three types
of needs.
y Need for affiliation
y Need for powery Need for achievement
MOTIVATING FACTORS
Following are the factors motivate an entrepreneur. They are of twotypes
y Internal
y External
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INTERNAL FACTORS
y Desire to do something new
y Educational qualificationy Technical background
y No. of years of experience
y Occupational background
EXTERNAL FACTORS
y Government support and assistance
y Availability of factors of production
y Encouragement from already established business housey Promising demand for the product
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ENTREPRENEURSHIP DEVELOPMENT PROGRAMME
ENTREPRENEURSHIP DEVELOPMENT: INDIA'S
EXPERIENCE
Based on the belief that potential entrepreneurs can be identified and
trained, the entrepreneurship development programme (EDP) has been
designed to promote small enterprises by tapping this latent talent. The
programmes uniqueness lies in its integrated approach, which providesinstructions and counseling from selection through the actual operation
of enterprises.
In India in the 1960's a great deal of discussion centered up on whether
growth could resolve income and regional disparities and whether thefruits of development were being concentrated in a few areas and classes.
India's development strategy was altered in 1969, to give particular
emphasis to industrial promotion in relatively backward states and
districts. It was soon clear, however, that fiscal and financial incentives
by themselves would be insufficient.
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Technical assistance will also be required if non-traditional sources of
entrepreneurial talent were to be tapped. It was in response to this need
that Gujarat's financial institutions evolved a practical, result-oriented
programme to develop such entrepreneurs.
EDP was initiated in 1970 under a sponsorship of a state financial cum
promotional institution, the Gujarat industrial and investment
corporation.T
he programme was run by GHC, and its basic elementsand its characteristics were crystalised through repeated experience
experiments until 1987, when Gujarat's financial and institutions and
industrial promotions agencies jointly sponsored a separate centre for
entrepreneurship development to administer the programme. The centre's
success in turn convinced India's national financial institutions that theprogramme was relevant for other states and a national agency would be
needed. The entrepreneurship. Development Institute of India (EDI-I)
was set up in 1983 to conduct research offer consultancy and training and
assist state level agencies in carrying out their programme.
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EDP is characterised by an emphasis on operational rather than academic
training, flexible design of training programmes to meet the specific need
of the participants and active involvement of the financial and business
communities. The programme directly ties its training to the setting up ofenterprises and tailors its techniques and strategies to the socio-economic
and cultural contexts in which it operates. Costs are kept down and
training kept practical through the participation of established
entrepreneurs, businessmen and others within the field experience, whoparticipate in the programme at their own cost.
While each programme is adapted to local needs, the basic aspects of
EDP are the same and are summersied here. Selection of trainees is the
initial step in the entrepreneurial development the identification processis supervised by the programme's trainer motivators work in a very
personal manner. By contacting social workers, teachers, bankers and
other socially respected but non-political person, they develop a list of
suitable candidates.
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Application are distributed personally and individually interviews are
conducted. In urban areas newspapers advertisements or poster notices
might be used to attract application and forms are often distributed
through the mail.
At successive stages, applicants are evaluated, on the basis of behavioral
science techniques to determine the extent of their entrepreneurial
capacity. Testing is meant to measure, among other things, candidates
motivation to achieve, their capacity to take risks and resolve problems,the extent of their positive self image, and their interest in setting up
business by trying something new or unconventional. Personal
interviews conclude the selection process, permitting a committee that
includes trainer and business and academic experts to make a final
assessment of entrepreneurial aptitude and a determination of what will
be needed in training.
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Training EDP emphasises practical hands on experience. It is designed to
motivate participants, guide them in the selection of appropriate
opportunities and develop their management skills. The programme used
behavioral and psychological techniques to intensify the desire to
achieve, to develop the ability to define goals realistically and to fulfill
them, and to increase self awareness and confidence. In helping trainees
find appropriate enterprise EDP counsels trainees on available
opportunities and helps them to turn their interests with projects that may
already have been identified by technical consultancy agencies or areknown to be candidates for start up funding. Participating ,experts from
management schools and entrepreneur are on hand to explain to trainees
what will be required to manage a small business.
The training process is centered around a subject exercise, whichinvolves participants in the conduct of market surveys and the
preparation of project plans. Trainees are exposed to the thought
processes and field experience necessary to make a rational choice of
business product line, market mix, and related aspects of the projects.The exercise culminates with the com letion of a ro ect re ort.
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Ideally commercial banks and other supporting institutions are brought
into this process at an early stage. Finance can thus be raised for the
project, and a link thereby established between the completion of training
and support of financial institution for the implementation of the project.
At the meeting of the senior executives of the All India Financial
Institution held on 19 May 1979, it was felt that state level institution can
be the best agency for conducting EDP's.T
he state level interinstitutional group (IIG) would, therefore appear to be a suitable agency
to co-ordinate, monitor and follow up the entire programme at the state
level. As suggested at this meeting an advisory board of 10/12 persons
could be set up at the state level comprising representatives of the state
government, IDBI, IFCI, ICICI state level institutions, SISI, majornationalised banks and DIC's to work out the detailed programme and
review progress. This body could at best be a subcommittee of IIG, on
which all the institutions referred to above are represented. This plan
presuppose an adequate number of trained trainers to execute the plan.
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A "lead" institution, for a start, could commence with a few of the
districts under its charge and as it gains experience could gradually cover
the other districts for which it is responsible.
The activities of the state level committees will be supervised and
monitored by an All India Advisory Body. To prevent the body from
being too unwieldy it is suggested that it may comprise a representative
each from the DIC. SSI. The all India Financial institutions and a zonal
representative from the northern southern/eastern and western zones. Anorganisational chart of the operational machinery is given below:
Advisory body at the all India level coordinating body at the state level
(preferably a sub-committee of IIG) "lead" institutions at the
regional/district level.
The "lead" institution in turn will have their own organisational structure.
It may be mentioned that SBI has an EDP cell in each circle. "Lead"
institutions could form similar cells. ,
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The contribution of entrepreneurship development programmes is very
uneven among different regions and definite programmes need to be
chalked out to bring about some degree of uniformity and upgradation.
Before these problems are tackled, some important issues needimmediate attention for e.g. (1) structure and composition of
entrepreneurship development prograrnmes (2) area of operations
(3) fixing of priorities (4) follow up (5) spatial dispersal of the
entrepreneurship development programmes (6) training of trainees
(7) financing pattern.
Apart from these some of the operational problems experienced in the
course of implementing the entrepreneurship development programmes
are listed below:
Past experience has shown that the supporting agencies \ organisations
either tend to be slipshod in the first or are less interested in the third
phase which means that the programme fails to tap the entrepreneurial
potential of the area or trained entrepreneurs do not receive the support
and counseling which they need most.
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Most of the existing support organisations meant for maintenance
operation are not for innovative functions. There is also an element of
cynicism. A re-orientation in the attitude of supporting organisations is
called forth.
Post investment on the part of institutions as also trainees and wrong
selection of target groups contributed largely to the failure of a number
of entrepreneurship development programmes.
Experience revealed that entrepreneurial failures are mostly due to
incompetence and poor management.
It is also said that there is an inherent inability to identify the needs of
instructions and differences of opinion prevailed amongst the trainees.
It is also stated that there is a low institutional commitment for local
support to the entrepreneurs. There is also a very low level of
involvement in the marketing of the products of the units.
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Non availability of various inputs i.e. raw materials, power etc. and,
infrastructure support combined with poor follow up by the primary
monetary institutions resulted in the failing the entrepreneurship
development programmes.It is also stated that there is ill planned training methodology
inconsistency in the programme design, its content sequence and
theme and the focus of the programme is not clear.
Training institution do not have much concern for the objectiveidentification and selection of entrepreneurs and the follow up after
training.
Some of the institutions are still debating whether to have proper
identification and selection of entrepreneurs for preparing successful
entrepreneurs.Those involved in and concerned with the selection and follow up
activities have either limited manpower support or a narrow linkage
with other support agencies.
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It is also said that there is no standard curricula even in terms of a
broad module being adopted by interventions.
A majority of institutions engaged in the entrepreneurship developmentprogrammes are themselves not convinced of what they are doing as the
task is delegated by the government. As a result the social objective
aimed at is not achieved.
Perpetual ambiguity in the objective of entrepreneur development
programmes seems to have percolated to the grass root level with a
significant deterioration in terms of content and interest.
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Entrepreneurs are not necessarily born they can be developed through
education, training and experience. Entrepreneurs talent exists in every
society and in all sections of the society. In India socio-economic
environment hinders the emergence of entrepreneurial talent. In Indiatremendous talent exists if it is properly harnessed, can help accelerate
the pace of socio-economic development, balanced regional growth, self
and gainful employment such as realisation on the part of planners and
policy formulators has resulted in the emergence of Entrepreneurship
Development programme, Development of entrepreneurs meansinculcating entrepreneurial skills required for setting up and operating
business units. Entrepreneurship Development is an organised and on
going process. It's basic purpose is to motivate person for entrepreneurial
career.
Entrepreneurial development programme is a process which involves the
various steps.
In the pertaining phase selection of persons with the required potential
in terms of knowledge attitudes and motivation.
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Creating of infrastructure for training programme such as NIESBUD
Designing techniques for training
Selection and training process
Survey of environmentVarious strategies to make entrepreneurship development more effective
Success lies in providing each of the development point in a integrated
manner. Any partial assistance either in the form of finance or trainingdone would not bring the desired result.
Various organisations are working to promote entrepreneurship
development programme. National Institute for Entrepreneurship and
small Business Development (NIESBUD) co-ordinates activities ofvarious institution or agencies engaged in entrepreneurship development
of particularly in small industries. Industrial activities include effective
training strategies and methodology, standardising model syllabi for
training group
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OBJECTIVES OF ENTREPRENEURSHIP DEVELOPMENT
PROGRAMMES
Following are the important objectives:-
Analyse the environmental set up relating to small industry and
small business.
Selection of product and projectDevelop and strengthen entrepreneurial qualities.
Understand procedure of small scale industries.
Develop wide vision about the business.
Develop passion for integrity and honesty.
Understand the need of entrepreneurial discipline.
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There is need to develop management education and industrial training
in modem times, management education is being viewed as an effective
supplement. Facilities should be provided on an increasing scale for
sending talented young men and women to business schools abroad. New industrial training congress well equipped may as well be
established. Quite often the entrepreneur transforms himself to a
manager.
The development of backward regions/areas constitutes a new
challenge. Programmes for their development be drawn up and should
be effectively implemented. Such programmes await new entrepreneurs
whose technical expertise and managerial competence would bring
about the desired development and fulfill social needs.
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LESSON NO. 3
ENTREPRENEURIAL VALUES AND ATTITUDES
ENTREPRENEURIAL VALUES
Values are generalised and organised conception influencing the
behaviour and nature of human beings. It is a set of beliefs about variousaspects of the world. Values provide standards that guide behaviour.
Values are also reflective of a culture and are widely shared by those
belonging to that culture. Accordingly, values are the inner most layer of
the self which provides the goal and direction to an individual. In terms
of entrepreneurship, it means the cognitive functioning ofentrepreneurship. Values are also responsible for the selectively
organised perception and inter action which an individual has with his
outside world or the environment.
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Akhorie and Mishra (1988) considered the following four values
prominent among entrepreneurs. These are directed towards
InnovativenessIndependence
Outstanding performance
Respect for work
These values are important to distinguish between entrepreneurs
and nonentrepreneurs. We can develop entrepreneurship in the
society by introducing these values and strengthening them
through organised training.
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ENTREPRENEURIALATTITUDE
Those who have imbibed the above mentioned values generally develop
common 'tendencies' to act in any given situation. For example, thosewho value innovativeness develop tendency to use imagination fop
sensing opportunities. In selecting a goal or line of action or means of
tackling a situation they show a tendency to take certain amount of risk.
The tendencies to act in response to stimulus is called attitude. A group
of persons may decide similar or different course of action (Or a given
situation depending upon similar or different attitudes. Accordingly, the
attitude is defined as "an enduring organisation of motivational,
emotional, perceptual and cognitive process with respect to some aspect
of individual's work". Attitudes that show the entrepreneurial pre-dispositions play a significant part in making a successful entrepreneur.
The genesis of such attitudes, however, can be traced to the Value
system.
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Akhori and Mishra have considered the following attitudes as
closely related to entrepreneurship:
y Tendency to take moderate risk.y An eye for economic opportunity.
y Imaginative.
y Initiative.
y Believe that they can change the environment.
y Enjoy freedom of expression.
y Analysing situation and planning action.
Satisfaction from successful completion of task.
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LESSON NO. 4
ACHIEVEMENT MOTIVATION WORK DONE BY D.
McCLELLAND (Also known as The Kakinada
Experiment)
The need for achievement plays an. important role making an
entrepreneur as successful. It is a spirit that activates anentrepreneur to strive for success. In simple terms, need for
achievement is the desire to do well. The empirical evidences
support the hypotheses that need for achievement contributes to
entrepreneurial success. Hence, thin is ft need for developing
achievement motivation for developing entrepreneurship in aneconomy.
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How to develop achievement motivation? David McClelland, a well-
known behavioural scientist of USA holds the view that achievement
motivation can be developed through. ft" and experience. For this,
McClelland conducted his experiments with groups of businessmen in
three countries, i.e., Malawi, India and Equator. He carried out a
separate full-fledged training programme in India to instill achievement
motivation in the minds of entrepreneurs. His successful experiment is
popularly known as 'Kakinada Experiment'. Following is a briefdescription of the Kakinada Experiment
Kakinada is an industrial town in Andhra Pradesh. The experiment
started in January 1964. The main objective of the experiment was to
break the barrier of limited aspirations by inducing achievement
motivation. A total of fifty-two persons were selected from business
and industrial community of the town. They were given an orientation
programme at Small Industry Extension Training Institute (SIET),
Hyderabad. The participants were grouped into three batches.
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The training programme was designed in such a way that it could help
the trainees improve imagination and enable them introspect their
motivation Accordingly, the programme included the following items in
its syllabi:
The individuals strived to attain concrete and regular feedback.
The participants sought models of achievement to emulate.
The participants thought of success and accordingly set plans and
goals.
The participants were encouraged to dunk and talk to themselves in a
positive manner.
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The impact of this training programme on the participants behaviour
was observed after a period of two years. The observations were
encouraging. It was found that those attended the programme
performed better than those did not.' The participants need for usingThematic Apperception Test (TAT) assessed achievement. In this TAT,
ambition related pictures were displayed to the trainees and then they
were asked to interpret the picture and what is happening in the picture.
Thereafter, all the themes related to achievement were counted and,
thus, the final score represented one's need for achievement.
McClelland reached to this conclusion that the training programme
positively influenced the entrepreneurial behaviour of the participants.
As regards caste, the traditional beliefs and imitation of western
culture, they did not determine one's behaviour as an entrepreneur.
That the need for achievement motivation can be developed more
especially in younger minds is well supported by the cross country
experiments.
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For example, a junior Achievement Programme' is started in the United
States of America with a view to instill achievement motivation in the
minds of younger generation.
Similarly, in United Kingdom, 'Young Enterprise" programme has been
started with the same objective of inducing achievement motivation in
younger minds.
The above said experiments / programmes have made us to realise that
entrepreneurship is to be developed from a very young age. Accordingly,
efforts have been made to develop a school curriculum that would result
in a high need for achievement among the students. For this purpose, the
success stories drawn from history and legends of the indigenous cultureare introduced in course curriculum to induce in young minds the 'need
for achievement 'and strong desire to do something good/great they grow
up. This is because the younger minds are mom susceptible to change.
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LESSON NO. 5
INTRAPRENEURIAL LEADERSHIP CHARACTERISTICS
Within this overall corporate environment, there are certain individual
characteristics identified for a person to be a successful entrepreneur.
As summarized in Table, these include understanding the environment,
being visionary and flexible, creating management options,
encouraging teamwork while employing a multidiscipline approach,
encouraging open discussion, building a coalition of supporters, and
persisting.
An entrepreneur needs to understand all aspects of the environment.Part of this ability is reflected in the individual's level of creativity.
Creativity, perhaps at its lowest level in large organizations, generally
tends to decrease with age and education. To establish a successful
entrepreneurial venture, the individual must be
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INTRAPRENEURIAL LEADERSHIP
CHARACTERISTICS
y Understands the environment.y Visionary and flexible.
y Creates management options.
y Encourages teamwork.
y Encourages open discussion.
y Builds a coalition of supporters.
y Persists.
creative and have a broad understanding of the internal and external
environments of the corporation. The person who is going to establish asuccessful new intrapreneurial venture must also be a visionary leader a
person who dreams great dreams.
Although there are many definitions of leadership the one that best
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Although there are many definitions of leadership, the one that best
describes that needed for Intrapreneurship is: "A leader is like a gardener.
When you want a tomato, you take a seed, put it in fertile soil, and
carefully water under tender care. You don't manufacture tomatoes, you
grow them." Another good definition is that "leader ship is the ability to
dream great things and communicate these in such a way that people say
yes to being a part of ' the dream." Martin Luther King, Jr. said, "I have a
dream," and articulated that dream in such a way that thousands
followed, in spite of overwhelming obstacles. To establish a successfulnew venture, the intrapreneurial leader must have a dream and overcome
all the obstacles to achieve it by selling the dream to others.
The third needed characteristic is that the intrapreneur must be flexible
and create management options. An intrapreneur does not "mind thestore," but is open to and even encourages change. By challenging the
beliefs and assumptions of the corporation, an intrapreneur has the
opportunity to create something new in the organizational structure.
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The intrapreneur must possess a fourth characteristic: the ability to
encourage teamwork and use a multi disciplined approach. This also
violates the organizational practices and structures taught in mostbusiness schools and apparent in established corporate plans. Every new
company formation requires a broad range of business skills:
engineering, production, marketing, and finance. In forming a new
venture, recruiting those in the organization usually requires crossing
established departmental structure and reporting systems. To minimizethe negative effect of any disruption caused, the intrapreneur must be a
good diplomat.
Open discussion must be encouraged to develop a good team for creating
something new. Many corporate managers have forgotten the frank, open
discussion and disagreements that were a part of their educational
process. Instead, they spend time building protective barriers and
insulating themselves in their corporate empires.
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A successful new intrapreneurial venture can be formed only when the
team involved feels the freedom to disagree and to critique an idea in
an effort to reach the best solution. The degree of openness among the
team depends on the degree of openness of the intrapreneur.
Openness leads also to the establishment of a strong coalition of
supporters and encouragers. The intrapreneur must encourage and
affirm each team member, particularly during difficult times. This
encouragement is very important, as the usual motivators of career
paths and job security are not operational in establishing a new
intrapreneurial venture. A good intrapreneur makes everyone a hero,
Last, but not least, is persistence. Throughout the establishment of anynew intrapreneurial venture, frustration and obstacles will occur. Only
through the intrapreneur's persistence will a new venture be created
and successful commercialization result.
ESTABLISHING INTRAPRENEURSHIP IN THE
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ESTABLISHING INTRAPRENEURSHIP IN THE
ORGANIZATION
An organization desiring to establish an intrapreneurial environment
must implement a procedure for its establishment. Although this can be
done internally, frequently an organization finds it easier to use someone
outside to facilitate the process. This is particularly true when the
organization's environment is very traditional and has a record of little
change and few new products being introduced. The first step in thisprocess is to secure a commitment to intrapreneurship in the organization
by top, upper, and middle management levels. Without top management
commitment, the organization will never be able to go through all the
cultural changes necessary for implementation. Once the top
management of the organization has committed to intrapreneurship for asufficient period of time (1 to 3 years), the concept is introduced
throughout the organization. This is accomplished most effectively
through seminars, where the aspects of intrapreneurship are introduced
and strategies are developed to transform the organizational culture into
an intrapreneurial one General guidelines need to be established for
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an intrapreneurial one. General guidelines need to be established for
intrapreneurial venture development. Once the initial framework is
established and the concept embraced, intrapreneurial leaders need to
be identified, selected, and trained. This training needs to focus on
obtaining resources within the organization, identifying viable
opportunities and their markets, and developing the appropriate
business plan.
Second, ideas and general areas that top management are interested insupporting should be identified, along with the amount of risk money
that is available to develop the concept further. Overall program
expectations and the target results of each intrapreneurial venture
should be established. As much as possible, these should specify the
time frame, volume, and profitability requirements for the new venture,and the impact of the organization. Along with the intrapreneurial
training, a mentor/sponsor system needs to be established. Without
sponsors or champions, there is little hope that the culture of the
organization can be transformed into an intrapreneurial one.
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Third, a company needs to use technology to make itself more flexible.
Technology has been used successfully for the past decade by small
companies that act like they are big ones. How else could a small firm
like Value Quest Ltd. compete against very large money managementfirms except through a state-of-the art personal computer and access to
large data banks? Similarly, large companies can use technology to make
themselves responsive and flexible like smaller firms.
Fourth, the organization can firmly establish an intrapreneurial culture by
using a group of interested managers to train and share their experiences.
The training sessions should be conducted one day per month for a
specified period of time. Informational items about intrapreneurship in
general and about the specifics of the company's activities in developingideas into marketable products or services that are the basis of new
business venture units should be well publicized. This will require the
intrapreneurial team to develop a business plan, obtain customer reaction
and some initial intentions to buy, and learn how to coexist within the
organizational structure.
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Fifth, the organization needs to develop ways to get closer to its
customers.8 This can be done by tapping the database, hiring from
smaller rivals, and helping the retailer (see Table). Pepsi Co., Inc., is
spending about $20 million to create electronic profiles of about 9million Pizza Hut customers. Dannon is sharing its research with retailers
and tailoring much of its marketing effort to the individual chains.
Sixth, an organization that wants to become more entrepreneurial must
learn to be more productive with fewer resources. This has already
occurred in many companies that have downsized. Top heavy
organizations are out of date in todays hyper competitive environment.
To accommodate the large cutbacks in middle management, much more
control has to be given to subordinates at all levels in the organization.Not surprisingly, the span of control may become as high as 30 to I in
divisions of such companies. The concept of "lean and mean" needs to
exist if intrapreneurship is to prevail.
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METHODS FOR GETTING CLOSER TO THE CUSTOMER
How Big Marketers Can Act as Deftly as Small Companies ...
Tap the database Use purchase data to customize incentives and directmail based on demographics, location, product
preference, and price.
Hire from They excel at "guerrilla marketing"using local
promotions to get smaller rivals closer to customers
and break through advertising clutter.Help your retailer Create store specific marketing programs as Dannon
does for retailers selling its yogurt will win retailer
loyalty, differentiate your product, and bad local
sales.
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and Small Marketers Can Outwit the Giants
Find the missed Small marketers can often focus on a
relatively neglected product-suchopportunities astduct tape or dental floss and take
share from a bigger
player or increase sales in a tired
category.
Apply the Smaller marketers can get a big payoff
when top executives pay personal
personal touch attention to customers' letters, retailers
queries, and sales staff's
suggestions.Embrace technology The cost of database technology is
dropping, making direct-mail
marketing a viable tactic for small
marketers with tight budgets.
Seventh, the organization needs to establish a strong support structure for
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, g g pp
intrapreneurship. This is particularly important, since intrapreneurship is
usually a secondary activity in the organization. Since intrapreneurial
activities do not immediately affect the bottom line, they can be easily
overlooked and receive little funding and support. To be successful, these
ventures require flexible, innovative behavior, with the intrapreneurs
having total authority over expenditures and access to sufficient funds.
When the intrapreneur has to justify expenses on a daily basis, it is really
not a new internal venture but merely an operational extension of thefunding source.
Eighth, the support must also involve tying the rewards to the
performance of the intrapreneurial unit. This encourages the team
members to work harder and compete more effectively, since they willbenefit directly from their efforts. Because the intrapreneurial venture is
a part of the larger organization and not a totally independent unit, the
equity portion of the compensation is particularly difficult to handle.
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Finally, the organization needs to implement an evaluation system that
allows successful intrapreneurial units to expand and unsuccessful ones
to be eliminated. Just as occurs in an entrepreneurial firm, when a good
job is done, an intrapreneurial unit should be allowed to expand to fillmarket demands as warranted. The organization can establish constraints
to ensure that this expansion does not run contrary to the corporate
mission statement. Similarly, inefficient intrapreneurial venture units
should not be allowed to exist just because of vested interests.T
o have asuccessful intrapreneurial environment, the organization must allow
some ventures to fail even as it allows more successful ones to expand.
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LESSON NO. 6
IDENTIFICATION OF BUSINESS OPPORTUNITIES
INTRODUCTION
yStudy government rules and regulations regarding different business
opportunities.y Extensive study of promising investment opportunity.
y SWOT analysis of business potential (strength, weakness, opportunities
and threats)
yMarket survey.
SOURCES OF BUSINESS OR PRODUCT IDEAS
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SOURCES OF BUSINESS OR PRODUCT IDEAS
y Market characteristics.
y Import and Exportsy Emerging new technology and scientific know how
y Social and Economic Trends
y Product profile
y Changes in consumption pattern
y Revival of sick units
y Trade fairs and Trade journals
IDENTIFYING A BUSINESS OPPORTUNITY
Two major characteristics of a business opportunity should be
highlighted.
Good and wide market scope i.e. gap between present or likely demand
and supply.
An attractive, acceptable and reliable return on investment
B i t it d t b l d f th i i t f
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Business opportunity need to be analysed from the view points of
production, commercial, managerial, potential and prospective demand
for the product, technical viability etc.
STEPS IN IDENTIFICATION OF BUSINESS OPPORTUNITY
Identification of opportunity involves following steps.
Preliminary evaluation
Selection of product or service
Conduct a market survey
Contactual programmes to collect sufficient information about
proposed venture Succeeding in the market
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PRELIMINARY EVALUATION
As soon as entrepreneur realise regarding business opportunity, he has to
evaluate investment opportunities against set of specific criteria to selectthose project ideas which are commercially feasible. The criterias are:
y Is opportunity compatible with the promoter.
y
Is opportunity compatible with government regulations and priorities.y Whether raw materials are easily available.
y What is the size of the potential market.
y Whether cost justifies the project.
y What is the risk inherent in the project.
SELECTION OF PRODUCT OR SERVICE
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SELECTION OF PRODUCT OR SERVICE
Entrepreneur should identify the product, which he wish to manufacture.
While deciding about the, product following points should beconsidered:
y Potential demand for the product or service.
y Estimated volume of demand for the product
y Assess potential of existing competitor and estimate about probable
competitors.
y Study the scope for future demand.
y Infrastructural facilities power, transport etc.
y Current status of technology and scientific development in the field.y Availability of raw material and required labour.
y Government policies, legislation, controls.
y Environmental factor.
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y Degree of profitability for the product.
y Information regarding particular line of product.
y Locational advantage of the product.
y If product belongs to an ancillary unit and serves as majorcomponent for the parent industry. It provides a ready demand hence
selection of this type of product entails easy marketability.
y Selection of a product would also be assessed in favour of
availability of skilled and unskilled labour.y Study the various characteristic of the proposed product to be
produced.
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CONDUCT A MARKET SURVEY OR PURPOSE OF MARKET SURVEY
Market survey with reference to the availability of raw material,
equipments, marketing and distribution and consumer behaviour shouldbe conducted.
y Raw material availability:
y
Equipment, availability:y Marketing and Distribution:
y Consumer Behaviour.
CONTACT PROGRAMMES TO COLLECT SUFFICIENT
INFORMATION ABOUT PROPOSED VENTURE
Entrepreneur often need information and guidance, particularly in the
initial stages, on product potential, raw materials, policies, facilities,
procedures, finance formalities, incentives etc. It can be collected
through State Government agencies.
C i h l d l l i b h l f l i
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Contact with central and state level agencies set can be helpful in
collecting sufficient information about proposed venture. Industrial
Finance Corporation of India (IFCI) in collaboration with Industrial
Development Bank of India (IDBI) Industrial Credit and InvestmentCorporation of India (ICICI), state organisations and banks, have set up a
network of state level technical consultancy agencies. They offer a
package of professional and consultancy services to stimulate industrial
growth.
Entrepreneurship development programmes of 6 weeks duration are
designed to impart following information:
How to develop entrepreneurial capabilities. Identify viable projects for potential entrepreneurs.
Impart managerial skills.
Help and secure necessary financial and infrastructural related
assistance.
Th h i l l i l i h f h
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These technical consultancy agencies also monitor the progress of the
unit.
SUCCEEDING IN THE MARKET
There is no way your business will earn money and profit unless
customers buy product or service. The secret formulae for an
entrepreneurs success is to produce what customers will buy.
Following are the important characteristics, which help the entrepreneurto succeed in the market.
Study people and their needs before starting any project.
Identify unsatisfied needs.
Design product in such a way that it should satisfy the customer
better than the competitors product. Ensure that what customer feet about the product which
entrepreneur is offering.
Always look for newer and more effective ways of reaching a
customer.
Entrepreneurs must have clear vision goals and objectives well
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Entrepreneurs must have clear vision, goals and objectives, well
defined mission, and employees participation about the proposed
project.
Constant feed back of results as well as setting and adherence of high
standards gives an organisation a cutting edge over others. Planning,
foresight and analysis are also important qualities.
The process of systematic market research is used to develop products
or process and to provide value for money to the customers. This helps
to gain the market share.
Another important characteristic for successful business is acommitment to innovation which is vital in keeping ahead of the
competition and perhaps the most difficult one to achieve yet most of
the organisations just do not give due importance for the same.
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DEFINITION
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DEFINITION
The American Marketing Association (AMA) defines marketing research
as "the systematic gathering, recording and analyzing of data about
problems relating to the marketing of goods and services".
Richard D. Crisp defines Marketing Research as "the systematic
objectives and exhaustible search for the study of facts relevant to any
problem in the field of marketing".
Clark and Clark defines Marketing Research as "Marketing Research is
the careful and objective study of product design, markets and such
transfer activities as physical distribution, warehousing, advertising and
sales management.Marketing Research is a continuous process of investigation,
recommendation and follow up of marketing problems, which is
conducted by the marketing researcher. The Entrepreneur obtains the
information from the researcher and makes sound decisions.
PURPOSE OR OBJECTIVES
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PURPOSE OR OBJECTIVES
The contributions of market research are considerable. It facilitates both
the decision making and the operational tasks of an entrepreneur. Itcontributes towards achieving both consumer satisfaction and sales
profitability.
The purpose of conducting. Marketing Research are to:
Help in the selection of a right course of action.
Identify various opportunities or problems.
Evaluate the need of the customers.
Analyse the probable market for the product
Briefly study the competitors and the substitute products.
Identify the best sources of distributing the products. Estimate future sales and expected share of the market.
Study the acceptance of the product, package, price, colour, etc. by
the consumers
Analyse the effectiveness of advertisement.
Assess the sales representatives efficiency.
TECHNIQUES OF MARKET SURVEY
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TECHNIQUES OF MARKET SURVEY
The following techniques can be adopted for conducting market
research:
DeskResearchy Observation Method
y Experimentation
y Depth Interviewing
y Projective Techniques
MARKET RESEARCH PROCEDURE
Market Research procedure or process may broadly be as follows:
PROBLEM FORMULATION
It involves developing and understanding of the problem which requires
the attention of researchers. It may be either to identify the marketing problem area or to develop possible solutions or both. For Eg. The
researchers have to identify whether they have to conduct research on the
consumers, product, price, sales representatives, distribution channel
members, etc.
MARKET RESEARCH PROCEDURE
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MARKET RESEARCH PROCEDURE
Problem Formulation
Analysing the Sources
of Information
Preparation of Data
Collection Forms
Sample Designing
Collecting Data
Processing Data
Report Writing
ANALYSING THE SOURCES OF INFORMATION
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ANALYSING THE SOURCES OF INFORMATION
The information may be collected in terms of primary data or secondary
data. Primary sources provide data which are collected for some specificpurpose. They are collected from consumers, salesmen or dealers
through survey, observation, experimentation, etc.
The secondary source provide data which are collected not for specific
research objective of the company. These are readily available from other
sources like journals, government or private organisations, consumer
complaints, company records, etc.
Therefore, depending on the need, cost, time and usefulness, thecompany decides upon the source of information.
PREPARATION OF DATA COLLECTION FORMS
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PREPARATION OF DATA COLLECTION FORMS
A structured questionnaire has to be prepared which lists all relevant
question in a serial depending on the nature of information sought, thekind of respondents, data collection method used by the company, etc.
The questions should be framed in such a manner that it helps in cross
checking and comparison.
Questionnaires can be an open ended or closed ended questionnaire.
Openend questionnaire allows the respondent to answer in their own
words. It often reveals more answers because respondents are not
constrained in their answers. It is useful where explanations are required.
A closed end questionnaire gives options to the respondent, and, he can
make choice among the possible answers. Here, the respondent need not
think much as choices/options are given. It is easier for him to answer
the questions. It gives answers that are easy to interpret and tabulate. It
show how many people think in a certain way.
Mechanical Instruments like Eye Camera Psycho galvanometer Audio
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Mechanical Instruments like Eye Camera Psycho galvanometer, Audio
meter, etc can be used for conducting research where questions are not
asked, but the respondent is only observed.
SAMPLE DESIGNING
The researchers have to identify the respondents to be contacted & hence
a sample of respondents from the universe have to be selected, as it is not
easy to conduct an interview of the whole population.
A sample is a small number of items, parts or respondents chosen at
random from a large number and tending to have similar characteristics
nearly in the same proportion as in the universe i.e., the sample should berepresentative and proportionate.
Some of the sampling techniques are:
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RANDOM SAMPLE If a sample is drawn in such a manner that each
time an item is selected, each item in the population or universe has an
equal chance of being drawn, then the sample is a random sample.
Stratified sample When a universe or population is known to be
heterogeneous and when that heterogeneity has a bearing on the
characteristics being studies, the population may be divided into strata
and random samples of units drawn from each stratum. But to divide intostrata, some information regarding the population and its strata studied
should be available to the researcher.
SYSTEMATIC SAMPLE When a sample is obtained by drawing every
fifth item or every even item on a list, then the sample is systematic
sample. Here the first item selected is at random. The list of samples maybe from census, voters list, directory, etc.
CLUSTER SAMPLE it is a group or a block or an area of respondents
picked at random. It may be on the basis of area, age, income, colleges,
standard of living, etc.
COLLECTING DATA
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COLLECTING DATA
After the selection of sample, the researcher has to appoint people or
investigations to carry on investigation, They contact the respondents and
gather data according to the method suggested and direction given.
PROCESSING DATA
It involves tabulation, analysis and interpretation of data. In tabulation
the data collected are arranged in classes and are assigned weights or
grades.
In Analysing, the tabulated data are examined. The data of tables are com
and averages and percentages are computed by usage of statistical
techniques. This helps in understanding the data and in easyinterpretation.
In Interpretation, necessary conclusions are drawn according to the
problem formulated.
REPORT WRITING
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REPORT WRITING
A report contains analysis and conclusions based on the research data.
Depend on the quantity of report required, some reports may narrate the
whole report procedure where as others concentrate on the analysis andconclusions gives recommendations relevant to the research objective.
CONSTRUCTING THE RESEARCH PLAN
Data sources Secondary/Primary data
Research Approach Survey, observation, experimentation, depth
interview
Research Instruments Questionnaire or Mechanical instruments
Sampling plan Sampling unit, sample size and procedure
Contact Methods Telephone, mail, personal
LIMITATIONS OF MARKETING RESEARCH
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ONS O NG S C
In the fast changing Market environment the data collected becomes
historic and the research finding based on them becomes irrelevant i.e.
there will be time gap between collecting of information and actuallyputting it into practice.
It only provides a base for predicting future events and does not
guarantee any certainty in the happening of the event.
Some research conclusions may be of limitation as the tools and
techniques may not be suitable i.e., it is difficult to convert some answers
given in sentences into numerical terms.
Its use and effectiveness depends largely on the ability of the executivesto get the most value out of it.
It is merely a tool for decision making and is not a substitute for
decisions. It does not provide complete answer to marketing problems as
the answers may be wague or irrelevant
LESSON NO 8
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LESSON NO. 8
PROJECT FORMULATION
INTRODUCTION
The basic necessity of an entrepreneur is to decide upon a project. The
right project selected will lead an enterprise to a great success, while the
wrong or infeasible project will lead to the complete downfall of an
enterprise. Hence, a project is the foundation stone of a venture.
A project, generally, has been identified as any programme of action.
Thus there are research projects, agricultural projects, sub projects andprojects related to market equipment, technology, production, location,
etc.
MEANING AND DEFINITION OF PROJECT
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A project is a scientifically evolved work plan devised to achieve a
specific objective within a specified period of time. It presupposescommitment to tasks to be performed with well defined objectives,
schedule and budgets. Each project differ in size, nature, objectives and
complexity.
Project management scholars emphasises that a project is an unique andnon-repetitive activity which aims at systematically co-ordinating inputs
in the direction of intended outputs. The Encyclopaedia of Management
defines a project as an organised unit dedicated to the attainment of a
goal, the successful completion of a developed project on time, withinbudget, in conformance with pre determined programme specifications.
Another school of thought looks upon a project as a combination of
interrelated activities to achieve a specific objective.
Several economists and bankers have defined a project in different ways.
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p j y
The World Bank defines a Project as "an approval for a capital
investment to develop facilities to provide goods and services". Harrison
defines a project as "a non-routine, non-repetitive, one off undertakingnormally with discrete time, financial and technical performance goals."
A project according to Little and Mirless is "any scheme or a part of a
scheme for' investing resources which can be reasonably analysed and
evaluated as an independent unit. It may be any item of investment
activity which can be separately evaluated.
Thus, a project is a well-planned activity that includes a correct
consideration of alternatives, identification of key issues, broad
participation, compactness and enforceability. It should be neat, clear andspecific, whose objective may be to create, expand or develop certain
facilities to increase the production of goods or services to the
community.
An other simple definition is that a project is speculative imagination. It
requires a persons ability to speculate and imagine the future.
PROJECT FORMULATION
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Project formulation is the systematic development of a project idea for
the eventual purpose of arriving at an investment decision. It involves a
step by step investigation and development of project idea. It is a processinvolving the joint efforts of a team of experts. Each member of the
project team should be fully familiar with the broad strategy, objectives
and others ingredients of the project.
PROJECT REPORT
A project report is a written document pertaining to any investment
proposal. It contains relevant data, on the basis of which the project has
been appraised and found relevant to the entrepreneur.T
his project reportcan be shown to the bankers ' or other financial institutions to acquire
financial assistance. The efficiency of the project is decided by other
organisations and suppliers on the basis of the project report. It is also
used by the entrepreneur to check if he is deviating from what was
decided earlier.
A project report is prepared by an expert after detailed study and analysis
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p j p p p y p y y
of the various aspects of' a project. It acts as a guide to management,
specially at the initial stage to know whether the technical, commercial,
financial and economic conditions are feasible or not.
Fig. Showing Project Report with its contents
Project Report
TechnicalEconomic
Production Managerial Financial
PREPARATION OF A PROJECT REPORT
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PREPARATION OF A PROJECT REPORT
A project report should consist of information on economic, technical,
financial, managerial and production aspects.
Before the actual preparation of Project Report, the first step an
entrepreneur should take is to choose an idea. This idea should not only
be good for the market, but also for the enterprise. It means that the idea
selected should be viable, profitable and socially good. The idea chosen
is obtained from various sources like customers, competitors,
distributors, company employees, journals, magazines and by research
and development project, every, report must present the information on.
Later, observations have to be made with regard to the availability of rawpopulation, water, air, land, flora and fauna, effects material, labour,
machinery, technology, demand in the market, etc. pollution, other
environmental descriptions, etc.
The next stage is the scanning of Business Environment. The amount or
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quantity investment required have to be scanned. The location of the
enterprise is also to be taken into consideration. The background and
skill of the entrepreneur, the extent of marketing, possible chances ofproducing a substitute etc. should be scanned.
Finally, project is to be selected for conducting a detail study, for
preparing a project report.
Choosing an
idea
Observation Scanning of
business
environment
Preparation of
project report
STEPS OR GUIDELINES IN THE PREPARATION OF A PROJECT REPORT
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S S O GU N S N ON O OJ C O
An entrepreneur, to get the projection. Information about all items of
operating consults Commission. There are certain guidelines given by the
Planning Commission for preparing a project report. The guidelinesgiven by the Planning Commissions utilities, labour, repair and
maintenance, setting or the steps in the preparation of a project report can
be summarised as follows expenses.
General Information
Preliminary Analysis of alternatives
Project Description
Marketing Plan
Capital Requirement and Costs
Operating Requirements and Costs Financial Analysis
Economic Analysis
Miscellaneous Aspects
LESSON NO. 9
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SELECTION OF PRODUCT
INTRODUCTION AND MEANING OF A PRODUCTPeople satisfy their needs and wants with goods and services. These
goods, or services, or goods plus services, or just an idea refers to a
product. Therefore, a Product refers to all the things offered to a market.
Hence, product is one of important component of marketing in respect ofwhich an entrepreneur is required to take crucial decisions in a company.
DEFINITION
A product may be defined as "a set of tangible, intangible and associated
Attributes capable of being exchanged for a value with ability to satisfyconsumer and business needs".
According to Alderson "Product is a bundle of utilities consisting of
various product features and accompanying services".
Schwartz defines, as "A product is something a firm markets that will
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satisfy Personal want or fill a business or commercial need and includes
all the factors that may contribute to consumer's satisfaction". For e.g..
While purchasing the tangible product i.e., a vehicle, we are alsopurchasing. The intangible services like free services, etc.
The associated attributes or peripheral factors may include reputation of
the manufacturer, the. Warranty, credit facilities, delivery terms, the
brand name. The courtesy of salesmen, etc. For e.g. Johnson & Johnsonoffers not just the soap or powder but also mothers love.
Criteria for selecting a product
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Internal factors External factors
1.Cost 1. Demand of consumers
2.Experience 2. Competition :-
3.Differentiation a. Pore4.Financial strength b. Monopoly
5.Functional departments c. Oligopoly
6.Personal factors of an entrepreneur 3. Suppliers
4. Technological improvement
5. Demographic factors:-- Size of population
- Trends in birth and death rate
- A distribution
- Educational group
- Geographical distribution
- Occupation6. Economic conditions
7. Neutral environment
8. Political and legal role
9.Socio-cultural factor
CRITERIA FOR SELECTING A PRODUCT
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1. INTERNAL FACTORS
The factors within the organisation are called as internal factors. Theselection product, to a great extent depends upon the internal factors.
They are:
Cost
Experience Differentiation
Financial strength
Functional Departments
Personal factors of an entrepreneur2. EXTERNAL FACTORS
The forces outside the organisation also effect the decision for
selecting a product by an entrepreneur.They are:-
(a) Demand of consumers
(b) Competition
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(b) Competition
Pure competition
Monopolistic competition
OligopolyPure monopoly
(c) SuppliersMarket structure No. of Sellers Size of sellers Control over Product Entry into
prices industry
i Pure competition Many Small None Homogeneous Easy
ii. Monopolistic Many Varies Depends on extent Differentiated Relatively
Competition of differentiation easy
iii. Oligopoly Small Large Considerable ( Prices Fairly Difficult
tend to be stable) homogeneous
iv. Pure monopoly One Varies Maximum control No close substitute Difficult
(d) Technological improvements
(e) Demographic Factors
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(e) Demographic Factors
y Size of population
y Trends in birth and death rate
y Age distributiony Educational groups
y Geographical distribution
y Occupation
(f) Economic condition(g) Natural Environment
(h) Political and Legal rules
ySocio-Cultural Factors
BARRIERS TO THE SUCCESSFUL DEVELOPMENT OF NEW
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PRODUCTS/ WHY DO NEW PRODUCTS FAIL
The failure of a new product are generally considered on the basis of itslack of ability to generate the expected profit. Some of the reasons for the
failure of a new product are as follows:
(1) TECHNICAL PROBLEMS:- Too complicated a product or poor
performance of a product that is not superior to any of the existingproducts may fail.
(2) POOR TIMING:- Introducing a product when it is not required also
leads to failure of a product.
(3) PROHIBITIVE COSTS OF DEVELOPMENT:- Many ideas are
screened before selecting one good idea, which becomes very expensive.
(4) NICHE AND FRAGMENTED MARKETING :-Entrepreneurs
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now a days try to concentrate only on selected market segment, rather
than mass market, which means lower sales and profit.
(5) DEVELOPMENT TIME :-Many individuals may be working on
similar ideas. Only those who can develop these ideas faster than the
competitors have a chance to succeed.
(6) COMPETITORS :-Generally competitors imitate a successfulproduct, thereby reducing the sale of the product.
(7) GOVERNMENTAL CONSTRAINTS :-The rules and
regulations imposed by the government are ever changing, whichbecomes difficult for an entrepreneur.
LESSON NO. 10
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GOVERNMENT POLICY ON WOMEN ENTREPRENEURSHIP
Policies concerning Indian women would be in accordance with the provisions of the Constitution of India. The Constitution guarantees
certain fundamental rights besides freedom of speech, protection of life,
liberty and prohibition of discrimination or denial of protection etc.
Indian women enjoy these rights in the same manner as Indian men. For
instance, Article 14 of the Constitution provides equality before law' and
Article 15 'Prohibits any discrimination'. There is only one specific
provision in Article 15(3) which empowers the state to make 'any special
provision for women and children'. This is in violation of fundamentalobligation of non discrimination among citizens, inter aIia of sex.
Consequently, this provision has enabled the State to make special
provision for women, particularly in the field of labour legislation like
the Factories Act, the Mines Act and so forth.
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In the Seventh Five Year Plan', the Chapter on Socio-Economic
P f W 1985 90 d f h