Introduction

An entrepreneur is one of the important segments of economic growth. He plays a vital role in the
economic development of a country. Economic development of a country depends primarily on its
entrepreneurs. Basically, an entrepreneur is a person who is responsible for setting up a business or an
enterprise. In fact, he is one who has the initiative skill for innovation and who looks for high
achievements. He is a catalytic agent of change and works for the good of people. He looks for
opportunities, identifies, opportunities and seizes opportunities mainly for economic gains.
Entrepreneurs are action oriented, highly motivated individuals who take risks to achieve goals.

Entrepreneurship involves mobilizing the resources and combining them to initiate change in
production. It is the purposeful activity of an individual or a group of individuals undertaken to
initiate, maintain or increase profit by production or distribution of economic goods and services.
It is very often associated with adventurism, risk bearing, innovating new idea in production,
new usage for men, money and materials, etc. It is the mental attitude of the entrepreneur to take
the calculated risks with a view to attain certain specific objectives.
Evolution of the concept of Entrepreneur

The world entrepreneur has been taken from the French language where it cradled and

originally meant to designate an organizer of musical or other entertainments. Oxford English

Dictionary (in 1897) also defined an entrepreneur in similar way as the director or a manager of a
public musical institution one who gets-up entertainment, especially musical performance. In the
early 16 century it was applied to persons engaged in military expeditions. It was extended to
cover constructions and other civil engineering activities in the 17 century. It was only in the 18
century that the word was used to refer to economic activities. Since then, the term entrepreneur
is used in various ways and various views. These views are broadly classified into three groups,
viz., risk-bearer, organizer and innovator.

Meaning and Definitions

The English term Entrepreneur has been derived from the French Verb enterprendre which
means to undertake. Entrepreneurship is an elusive concept which is difficult to define. Today,
the term entrepreneurship has several meanings which include, adventurism, risk taking, thrill seeking
and innovation. Entrepreneurs play a significant role in the economic development of a country.
Therefore, entrepreneurship development has now become vital and essential to the economic stability
of the developing countries like India, where the problem of unemployment of the educated youths
has been pausing a very severe and complex situation. An entrepreneur is a person who is able
to express and execute the urge, skill, motivation and innovative ability to establish a business or
industry of his own, either alone or in collaboration with his friends.
Definition of entrepreneurship

Entrepreneur in English is a term applied to a person who is willing to help launch a new venture
or enterprise and accept full responsibility for the outcome.
Jean-Baptiste Say, a French economist, is believed to have coined the word "entrepreneur" in the 19th
century - he defined an entrepreneur as "one who undertakes an enterprise, especially a contractor,
acting as intermediately between capital and lab our.
Entrepreneur may be defined as an individual or a group of individuals who tries to create something

new, who organizes production and undertakes risk involved in the establishment and operation of a
business enterprise. The term entrepreneur is not confined to those who start a new business and
extends to those who seek out new opportunities and then combine the factors of production to
exploit the perceived opportunities.
Thus, an entrepreneur is an economic leader who possesses the ability to recognize opportunities
for the successful introduction of a new product, new source of supply, new technique of
production, etc. and who assembles the necessary resources and organizes them into a going concern.
Definitions of Entrepreneurship
The term entrepreneurship is used in various ways with different meanings. Let us examine a few
definitions put forward by some scholars who have conducted elaborate studies and authoritarian
discussions on entrepreneurship. These definitions shall enable us to have an idea about the
multifarious meanings of the term.
Higgins, in his book, The Economic Development has said, Entrepreneur- ship is meant the
function of seeking investment and production opportunity,organising an enterprise to undertake a
new production process, raising capital, hiring lab our, arranging the supply of new materials, finding
site, introducing new technique and commodities, discovering new sources of raw materials and
selecting top managers of day to day operations of the enterprise.
Inference:
In this definition entrepreneurship is picturised as a function in which an economic activity is
dealt with, risk is undertaken willingly, something is created a new, and resources are organized and coordinate.
Jaffery A. Timmons has defined entrepreneurship as the ability to create and build something
from practically nothing. Fundamentally, a human creative activity, it is finding personal energy
by initiating, building and achieving an enterprise or organization rather than by just watching,
analyzing or describing one. It requires the ability to take calculated risk and to reduce the chance
of failure. It is the ability to build a founding team to complement to entrepreneurs skills and talents.
It is the knack for sensing an opportunity where others see chaos, contradictions and confusion. It

is the know-how to find, marshal and control resources and to make sure the venture does not run
out of money when it is needed most.
Entrepreneurship is the practical ability to create and build up something a new from nothingness.
Fundamentally it is an act of human creativity. It is a process of finding out personal an individual
energy to initiate and build up an enterprise or organization and thereby to realize a much longed
for objective. Merely, observing, analyzing or interpreting a process is not entrepreneurship. It requires
essentially the ability to face risk and to minimize its impact. Entrepreneurship can also be
regarded as the ability to organize a team which is capable to materialize the skills and the
innovative urge of the entrepreneur.
Entrepreneurship is also the dexterity smell out opportunity in situations where others find
confusions and contradictions. It can also be described as the know- how to seek out rare resources,
to utilize them intelligently and to make arrangements to save the enterprise from breakdown
due to the scarcity of finance. From the definitions referred to above, we can arrive at the
conclusion that entrepreneurship is a creative response to environment and a skill to identify an
economic opportunity and to exploit that opportunity in a most beneficial manner.

Entrepreneur Vs Entrepreneurship

Entrepreneur refers to: Entrepreneurship refers to:

Visualiser

Vision

Organizer

Organization

Initiator

Initiative

Innovator

Innovation

Imitator

Imitation

Motivator

Motivation

Planner

Planning

Decision-maker

Decision-making

Risk-bearer

Risk-bearing

The Essential Characteristics of Entrepreneurship

Being a concept having diversified dimensions, entrepreneurship must have some essential
characteristics which are summarized here under:
1. Innovative Urge:
Schumpter says that entrepreneurship is a creative activity. Therefore an entrepreneur should
introduce something a new in to the economy. Innovation means the introduction of a
production process which has not been applied so far in any particular manufacture branch or the
introduction of a product which is not so far familiar to consumers or the discovery of a new source
of a raw material or the revealing of a new market which has not been exploited so far or the finding
out of a new combination of production means. Entrepreneur comes across new possibilities of
profitability and attempts to exploit them.
An entrepreneur attempts to perform his activities in a new better way. A business man who performs
his activities in a traditional manner shall not become an entrepreneur. The outcome of the
activities of an entrepreneur who is forced to make decision under uncertainty, shall be unknown
and unpredictable. Therefore, the innovative attempts of an entrepreneur must have the willingness to
face risks, and to perform his duties without fear or flicker.
2. Strong desire to reap benefits.
Two desires act as the motivational forces behind the economic behavior are known as
entrepreneurship. They are
(i) The desire to earn profits, and
(ii) The desire for glory.
These two motivational forces depend greatly on the mental attitude of the entrepreneur. On the basis of
these motivational forces entrepreneurs can be classified into two categories; viz. entrepreneurs who
strive for earning private profits and entrepreneurs who desire to earn a respectable position in the
society. Psychologists view that the second type of entrepreneurs hold a more dignified position
with society than the entrepreneurs who belong to the first category.

3. Construction Skill
Frederick Harbison, the author of Entrepreneurial Organization Factor in Economic
Development, says that the inevitable characteristic of entrepreneurship is construction skill. An
entrepreneur must be able to build up an enterprise in strict accordance with the detailed and skilled
planning. Deviating from the view of Schumpter who argues that an entrepreneur should
essentially be an innovator, Harbison states an entrepreneur should inevitably be an organizational
architect. An entrepreneur must have the skill and expertise to synchronize and co-ordinate the
various factors of construction and build up the enterprise successfully. Just like an architect who
performs construction by using factors like stone, iron rods, cement, bricks etc. and in strict
accordance with a carefully prepared design, the entrepreneur carries out the construction of his
enterprise in strict accordance with a carefully planned project by using various factors like manpower, machines and equipment, capital etc.
4. Management Skill and Leadership Quality
B. F. Hoselitz, in his book, entitled Sociological aspects of Economic Growth, opines that
management skill and leadership quality are the two essential qualities that a successful
entrepreneur should possess. According to him Financial Skill has only a secondary importance. An
entrepreneur must be an efficient manager and an able leader at the same time. An entrepreneur
shall be able to delegate responsibilities to his subordinates in such a way as to materialize the proposed
objectives of his concern and to motivate them by his leadership so as to achieve the desired goal.

5. Individual, Psychological and Social Characteristics

In developing and under-developed societies an entrepreneur is often viewed with suspicion. The
portrait of an entrepreneur becomes defective in a society that views him as an individual who
exploits the society for his personal gains. This negative outlook is an impediment to

entrepreneurship and economic development through entrepreneurial development. An entrepreneur

must be able to bring about favorable variations in the inverse out look of the society by strength of
character, creating an image of a person who attributes more importance to social benefits than to
personal gains and also by putting on the outfit of a social benefactor. He can easily do so by
developing an attractive personality.
The psychological and sociological characteristics of entrepreneurship are almost equal. The
psychological need to reap benefits is inborn. Although this aim is purely individualistic, when it gians
the halo of social good, entre-preneurship becomes a success. Entrepreneurship becomes meaningful
when the common goal of social goods gets mixed up with the urge for profit earning. The status of
entrepreneurship is increased when its individualistic, psychological and sociological characteristics
becomes mutually complementary.
6. Economic activity
Entrepreneurship is primarily an economic function because it involves the creation and operation
of an enterprise. It is basically concerned with the production and distribution of goods and services.

7. Gap-filling Function
The gap between human needs and the available products and services gives rise to entrepreneurship. An
entrepreneur identifies this gap and takes necessary steps to fill the gap. He introduces new products and
services, new methods of production and distribution, new sources of inputs and new markets (both
domestic and international) for this purpose.

8. Risk-bearing
Risk in an inherent and inseparable element of entrepreneurship. An entrepreneur guarantees rent to the
landlord , wages to employees ,and interest to investors in the hope of earning profit. He assumes the
uncertainty of future. In the pursuit of profits there is every possibility of loss.

9. Dynamic Process

Entrepreneurship is a dynamic process. Entrepreneurs thrive on change in the environment which bring
useful opportunities for business. Flexibility is the hall mark of a successful entrepreneur.
Thus, entrepreneurship is a multi-dimensional concept. It is both an art as well as a science. An
entrepreneur should have good intelligence, clear-cut objectives, capacity to guard business secrets,
capacity to interact with people, technical knowledge, self-confidence, etc. for reaping a good harvest in
the field of business.

Common Entrepreneurial Traits (Qualities of a successful Entrepreneur)

Entrepreneur is an organizer who combines the various factors of production and produces a socially
valuable products and sells them in the market. He should be a pioneer, a captain of the industry. The
modern entrepreneur is one who detects and evaluates a new situation in his environment and directs the
making of such adjustments in the economic systems as he deems necessary. A successful entrepreneur
must possess the following traits:
1. Mental Ability: He should have good intelligence and ability to analyze business situations.
2. Clear-cut objectives: An entrepreneur should have clear cut objectives about the nature of business,
type of products, markets, profit etc.
3. Capacity to Guard Business Secrets: Secrecy is one of the important aspects of a successful
business. A good entrepreneur should have the capacity to guard business secrets.
4. Capacity to interact with people: One of the most important characteristics of an entrepreneur is his
capacity to interact with people. He should have sufficient maturity and to be tactful in dealing with,
suppliers, customers and those who deal with his business.
5. Effective communication: A good entrepreneur should be able to communicate his ideas, message
and information effectively to others.
6. Technical knowledge: In modern times, the system production, marketing, management of
personnel, finance etc. are all very complex. To cope with these, an entrepreneur should have sufficient
technical knowledge.

7. Self-confidence: Only one with self confidence and who is courageous enough to take risk can
succeed as an entrepreneur.
8. Motivator: As leader of business unit, he should be able to motivate the members to achieve the
business goals.
9. Decision-maker: An entrepreneur should have the capacity to analyze the various aspects of the
business and arriving at a decision.
10. Risk bearing: The entrepreneur will succeed only when he has the courage to take calculated risks.
11. Watching for opportunities: He, like a watch dog, looks for favorable business opportunity and
takes necessary action accordingly.
12. Persistence: Follows the saying try and try again, you will succeed at last. He is always tenacious
to make extreme efforts to get rid of the obstacles coming in the way of reaching the ultimate goal.
13. Quality conscious: He has always; put effort to excel better than the existing standards of
performance.
14. Efficient monitoring: Personality supervises the work to ensure that the work is accomplished
according to the standards set forth.
15. Concern for employees: He has to keep concern and take proper action to improve the welfare of
the employees working in his enterprise.
Types of entrepreneur
Social entrepreneur
A social entrepreneur is motivated by a desire to help, improve and
transform social, environmental, educational and economic conditions.Key traits and characteristics of
highly effective social entrepreneurs include ambition and a lack of acceptance of the status quo or
accepting the world "as it is". The social entrepreneur is driven by an emotional desire to address some

of the big social and economic conditions in the world, for example, poverty and educational
deprivation, rather than by the desire for profit. Social entrepreneurs seek to
develop innovative solutions to global problems that can be copied by others to enact change. Social
entrepreneurs act within a market aiming to create social value through the improvement of goods and
services offered to the community. Their main aim is to help offer a better service improving the
community as a whole and are predominately run as non profit schemes.

Serial entrepreneur
A serial entrepreneur is one who continuously comes up with new ideas and starts new businesses. In
the media, the serial entrepreneur is represented as possessing a higher propensity for risk, innovation
and achievement.

Lifestyle entrepreneur
A lifestyle entrepreneur places passion before profit when launching a business in order to combine
personal interests and talent with the ability to earn a living. Many entrepreneurs may be primarily
motivated by the intention to make their business profitable in order to sell to shareholders. In contrast,
a lifestyle entrepreneur intentionally chooses a business model intended to develop and grow their
business in order to make a long-term, sustainable and viable living working in a field where they have
a particular interest, passion, talent, knowledge or high degree of expertise A lifestyle entrepreneur may
decide to become self-employed in order to achieve greater personal freedom, more family time and
more time working on projects or business goals that inspire them. A lifestyle entrepreneur may
combine a hobby with a profession or they may specifically decide not to expand their business in
order to remain in control of their venture. Common goals held by the lifestyle entrepreneur include
earning a living doing something that they love, earning a living in a way that facilitates selfemployment, achieving a good work/life balance and owning a business without shareholders Many
lifestyle entrepreneurs are very dedicated to their business and may work within the creative
industries or tourism industry, where a passion before profit approach to entrepreneurship often
prevails. While many entrepreneurs may launch their business with a clear exit strategy, a lifestyle
entrepreneur may deliberately and consciously choose to keep their venture fully within their own

control. Lifestyle entrepreneurship is becoming increasing popular as technology provides small

business owners with the digital platforms needed to reach a large global market lifestyle
entrepreneurs, typically those between 25 and 40 years old, are sometimes referred to as Treps.

Cooperative entrepreneur
A cooperative entrepreneur doesn't just work alone, but rather collaborates with other cooperative
entrepreneurs to develop projects, particularly cooperative projects. Each cooperative entrepreneur
might bring different skill sets to the table, but collectively they share in the risk and success of the
venture.

In the initial stages of economic development the motivation of the entrepreneurs to take imitative was
completely less. As development started gathering momentum the innovative urge and enthusiasm of
entrepreneurs also began to rise up. Business environments began to speed up the emergence of
enterprises. During the study programme about the agricultural sector of America, danhof classified
entrepreneurs as follows.
1. Innovative entrepreneurs- adventurous entrepreneurs who attempt to put attractive
possibilities in to practice are included under this type. They utilize achance introduce a new
technique or a new product. They mobilize sufficient capital to start an enterprise befitting to
this possibility. They also gather various production factors and select appropriate managers
who are capable to run the enterprise forward. The type of entrepreneur defined by Schumpter
can be included in this category. This type of entrepreneurs introduced and new production
techniques and find out new markets for their products.
The lack of this type of this type of entrepreneurs , which is commonly found in developed
countries, is the main reason for the economic backwardness of the developing countries. The
backwardness of the industrial tradition of the developing countries paves way to the scarcity of
innovative entrepreneurs.
2. Initiative Entrepreneurs: - This type of entrepreneurs attempt to imitate innovative
entrepreneurs. They imitate the techniques and the activities of others. The entrepreneurs of the
developing countries belong to this type. The imitating trend of this type of entrepreneurs

becomes suitable to taste and aptitude of the consumers because they (the consumers) prefer
foreign goods.
3. Fabian Entrepreneurs : - Entrepreneurs who attribute prefer to customs ,religions, Traditions
and past habits, come under this category. Being shy and lazy this entrepreneurs are very
cautious to accept changes and they view changes with suspicion. Being reluctant to face risk,
they continuously follow the foot steps of their predecessors.
4. Drone entrepreneurs :- These entrepreneurs are unwillingly to make any change in the
production system, even if the causes losses repeatedly. They do not dare to derive from
traditional lines. They never try to rise in accordance with the opportunities or to accept the
warnings given by time even their products have lost marketability and the activities have been
proved to be uneconomical. And the enterprise has been thrown out of the market, this type of
entrepreneurs does not dare to react.
The following is a list of entrepreneurs who are not included in the definitions formulated by
Danhof:
1. Individual Entrepreneurs and Institutional Entrepreneurs
Majority of entrepreneurs belonging to the small scale industry sector are individual entrepreneurs.
Entrepreneurs of this type are found in plenty in any country. They enjoy the benefits of flexibility, quick
decision-making and the patronage of governments.
Individual enterprises are not able to grow or develop beyond a limit. So, it becomes necessary to
institutionalize enterprises when entrepreneurial skills are to be co-ordianted, it becomes necessary for a
team of entrepreneurs to work unitedly and the enterprise gains an institutional nature. The institutional
nature of the enterprise becomes helpful in creating good results in deciding the course of the business, in
expanding the activities and also in increasing the capital amount. Entrepreneurs working in the
corporate business sector
are institutional entrepreneurs.
2. Inherited Entrepreneurs
Sometimes people become entrepreneurs when they inherit family business.This type of entrepreneurs is
found in plenty in India. Entrepreneurs of large scale business concerns like Tata, Birla, Dalmia etc.,
belong to this category.
3. Technological Entrepreneurs
Educated young men and youths self-employment began to pour into the
business sector at a time when the problem of unemployment began to poise a severe threat to the
society, and technical and scientific advancements started creating changes in the economic

structure of the nation. These young men are being inspired by the golden opportunities to
commercially exploit scientific inventions. When the Governments and the financial institutions
came forward to assist these entrepreneurs have started contributing heavily to the growth of national
economy, entrepreneurship has been accepted as one of the main objective of the Government.
4. Instigated Entrepreneurs
Persons who have become entrepreneurs due to the pressure exerted on them by circumstances are
termed as instigated entrepreneurs. Traditional money lenders are forced to enter into business on
account of the decline of money lending activity, the severity of Government policies and the growth of
banking. The problem of unemployment has also instigated several youths of our country to earn their
livelihood by trying their luck at the business field.In addition to the above types; entrepreneurs are also
classified as entrepreneurs
of the first generation (or new entrepreneurs), rural entrepreneurs, urban entrepreneurs, male
entrepreneurs, women entrepreneurs, small scale entrepreneurs, large scale entrepreneurs etc. In a
country like India where the economic system is planned, the Government itself has emerged as
the main entrepreneur.
Entrepreneurs are also classified on the basis of objectives, viz., (i) managing entrepreneur whose main
objective is safety, (ii) innovative entrepreneurs who are instigated by excitement, and (iii)
entrepreneurs who are fond of controlling power and who consider supremacy as the greatest gift.
Intrapreneureship
A dictionary meaning to word provides that " A person within a large corporation who takes direct
responsibility fortuning on idea into a profitable finished pdt. Through assertive risk taking and
innovation is an entrepreneurs" It is derived as INTTA ( Corporate ) + (Entre ) PRENEUR ]
The word intrapreneur is recently coined corporate counterpart to long existing term entrepreneur
this coinage is attributed to mgmt consultant Giffored Pinchot author of 1985 book entitled
intrapreneuring.
Entrepreneurship is a combination of entrepreneurship and mgmt skills. In simple word
intrapreneurship is a practice of entrepreneurship by employees with in an organization. The trend
today is such that every one who is capable of managing others business is himself indulging in
entrepreneurship. That is resulting in inadequency of mgmt staff. In the emergence of this
changing pattern , the concept of intrepreneurship is oreginated where the intrepreneur ( i.e.
Manager ) is made the head of a given business unit and asked to manage it for the organization
while employing innovative skills. As an example, when a company seeks for diversification

options, they can appoint one of their manager as an interpreneur to launch the business venture.
In short an intrapreneur think like an entrepreneur looking out for opportunities, which profits the
organisation.
Different between an Entrepreneur and an Intrapreneur
An entrepreneur takes substantial risk in being the owner and operator of business with
expectation of financial profit and other rewards that the business may generate . On the contrary ,
an intrapreneur is an indiridual employed by an organization for renumeration , which is based on
financial success of the unit he is responsible for. Intrapreneur share the same traits as entrepreneur
such as conviction, zeal and insight. As the intrepreneur continues to express his ideas vigorously,
it will revel the gap between the philosophy of the orgn and the employee. If the orgn supports him
in pursuing his ideas, he succeed. If not, he is likely to leave the orgn and set up his own business.
Entreprepneur is a key person who envisages new opportunities, new techniques, new lines of
potion, new pdts and coordinates all others activities for profit motives on the other hand,
intrepreneur are entrepreneur who catch hold of a new idea for pdt. Service or process and work to
bring this idea to fruition with in the framework of the organization. Intrepreneur with their
introvation and dedicated efforts are perceived as valuable asset by the orgn, inspiring others.
They serve as champions to others in those organizations.
The entrepreneur is typically a visionary who spots an opportunity in the mkt place and has the
passion and contract base to set the wheels in motion. The intrapreneur has passion and drive but
also has operational skills of running the "Clockwise" of the business to enable a good idea to be
turned into commercial reality. He is the inside "entrepreneur".
Intrapreneurship Vs Entrepreneurship
1

Entrepreneur can be found anywhere whereas intrapreneurs are found, rather encouraged within
the confines of the orgn.

While entrepreneur face hurdles in the form of ridicule and setback from the society in general ;
intrapreneurs have to face rivalry within the organisation they work.

Entrepreneurs find it difficult to arrange resources while these are readily available to
intrapreneurs.

Distingu

Manager

Entrepreneur

Intrapreneur

Primary

Salary, Promotion,

Independent chance

Independent chance to be

focus

Traditional

to

creative. Tomake towards

Corporate rewards

Creative.

organizational and personal

Opportunity

success.

ising
factor

To make more
money.
Skills

Managing qualities

Creativity,

Blend of managerial and

required

like leadership,

Innovative, risk

entrepreneurial skill.

organizing, planning

taking, Visionary

etc.

passion dedication
and determination.

Time focus Short term to meet

Survival and

To meet self imposed

dead lines from top

achieving long term

deadlines.

mgt

growth.

Activity

Delegated by top

Delegated to oneself extreme

delegation

management

Amount of

Conservative

High

Minimizes mistakes

Deals with mistake

Readily available

Needs to arrange

Moderate

risk bearing
Failure and
Mistakes
Availability
of Resources
Decision

Agrees with top level

Follows a

Get help from other to achieve

management

dream

dreams

Entrepreneur and Enterprises

The enterprise is the basic unit of an economic organization. It produces goods and services worth than
the resources used. Enterprise is an undertaking, especially one which involves activity, courage, energy.
It involves the willingness to assume risks in undertaking an economic activity. It also involves
innovation. It always involves risk-taking and decision-making. Thus, entrepreneur and enterprise are
inter-linked, enterprise being the offshoot of an entrepreneur. Its success is dependent on the
entrepreneur. Entrepreneur is the fourth factor of enterprise.

Four Factors of an Enterprise

Entrepreneur

Labour

Enterprise

Capital

Land

Entrepreneur Vs Manager:
An entrepreneur is different from a manager. The main points of difference
between the two are described below:
Points
1. Motive-

2. Status -

3. Risk-bearing

Entrepreneur
The main motive of an entrepreneur is

Manager
But, the main motive of a manager is to

to start a venture by setting up an

render his services in an enterprise

enterprise. He understands the venture

already set up by someone

for his personal gratification.

else.

An entrepreneur is the owner of the

A manager is the servant in.

enterprise

the enterprise owned by the entrepreneur.

An entrepreneur being the owner of the

A Manager as a servant does

enterprise assumes all risks and

not bear any risk involved in the

uncertainty involved in running the

enterprise.

enterprise.
4. Rewards

The reward an entrepreneur gets for

A manger gets salary as

bearing risks involved in the enterprise

reward for the services rendered by him

is profit which is highly uncertain.

in the enterprise. Salary of a manager is

certain and fixed.

5. Innovation

6. Qualifications-

7. Action

Entrepreneur himself thinks over what

But, what a manager does is simply to

and how to produce demands of the

execute the plans prepared by the

customers Hence, he acts as an

entrepreneur thus, a manager simply

innovator also called a change-agent

translates the entrepreneurs ideas into

An entrepreneur needs to possess

practice.
On the contrary, a manager needs to

qualities and qualifications like high

possess distinct qualifications in terms of

achievement motive, originality in

sound knowledge in management theory

thinking, foresight, risk bearing ability

and practice.

and so on.
Delegates action, Supervising and

Gets hands dirty. May upset employees

reporting take most of energy.

by suddenly doing their work.

After going through the above points of distinctions, it is clear that an entrepreneur differs from a
manger. At times, an entrepreneur can be a manager also, but a manager cannot be an entrepreneur.
After all, an entrepreneur is a owner, but a manager is a servants

Role of an Entrepreneur in Economic Development with special reference to developing economies

like India.

The entrepreneur who is a business leader looks for ideas and puts them into effect in fostering

economic growth and development. Entrepreneurship is one of the most important input in the economic
development of a country. The entrepreneur acts as a trigger head to give spark to economic activities by
his entrepreneurial decisions. He plays a pivotal role not only in the development of industrial sector of a
country but also in the development of farm and service sector. The major roles played by an
entrepreneur in the economic development of an economy are discussed in a systematic and orderly
manner as follows.

1. Contribution to GDP: Increase in the Gross Domestic Product or GDP is the most common
definition of economic development. You are aware that income is generated in the process of
production. So, entrepreneurs generate income via organisation of production be it agriculture,
manufacturing or services.You are also aware that income generated is distributed among the factors of
production where land gets rent, labour gets wages and salaries,capital gets interest and the residual
income accrues to the entrepreneur in the form of profits. As rent and interest accrue to those few who
have land and capital respectively whereas larger masses are destined to earn their incomes via wage
employment, the biggest contribution of the entrepreneurship lies in capital formation and generation of
employment. This is what we turn our attention to.
2. Capital Formation: The entrepreneurial decision, in effect, is an investment decision that augments
the productive capacity of the economy and hence results in capital formation.
In fact, GDP and capital formation are related to each other via Capital Output Ratio (COR); more
precisely Incremental Capital Output Ratio (ICOR) that measures the percentage increase in capital
formation required obtaining a percentage increase in GDP. So, if a country desires to grow @ 10.0 %
p.a.and its ICOR is 2.6, then it must ensure capital formation @ 26.0% p.a.Entrepreneurs, by investing
their own savings and informally mobilising the savings of their friends and relatives contribute to the
process of capital formation. These informal funding supplements the funds made available by the
formal means of raising resources from banks, financial institutions and capital markets.
3.Generation of Employment: Everynew business is a source of employment to people with different
abilities, skills and qualifications. As such entrepreneurship becomes a source of livelihood to those
who do neither have capital to earn interest on nor have the land to earn rent . In fact, what they earn is
not only a livelihood or means of sustenance but also a lifestyle for themselves and their families as
well as personal job satisfaction. As such entrepreneurs touch the lives of many,directly as well as
indirectly.

4. Generation of Business
Opportunities for Others: Every new business creates opportunities for the suppliers of inputs (this is
referred to as backward linkages) and the marketers of the output (what is referred to as forward
linkages). As a pen manufacturer you would create opportunities for refill manufacturers as well as
wholesalers and retailers of stationery products. These immediate linkages induce further linkages. For
example greater opportunities for refill manufacturers would mean expansion of business for ink
manufacturers. In general, there are greater opportunities for transporters, advertisers, and, so on.So,
via a chain-reaction, entrepreneurship provides a spur to the level of economic activity.
5. Improvement in Economic Efficiency: You are aware that efficiency means to have greater output
from the same input. Entrepreneurs improve economic efficiency by,a. Improving processes, reducing
wastes, increasing yield ,and,b. Bringing about technical progress that is, by altering labour-capital
ratios. You are aware that if labour is provided with good implements (capital), its productivity
increases.

(6) Promotes Balanced Regional Development:

Entrepreneurs help to remove regional disparities through setting up of industries in less developed and
backward areas. The growth of industries and business in these areas lead to a large number of public
benefits like road transport, health, education, entertainment, etc. Setting up of more industries leads to
more development of backward regions and thereby promotes balanced regional development.

(7) Reduces Concentration of Economic Power:

Economic power is the natural outcome of industrial and business activity. Industrial developments
normally lead to concentration of economic power in the hands of a few individuals which results in the
growth of monopolies. In order to redress this problem a large number of entrepreneurs need to be
developed, which will help reduce the concentration of economic power amongst the population.

(7) Promotes Country's Export Trade:

Entrepreneurs help in promoting a country's export-trade, which is an important ingredient of economic
development. They produce goods and services in large scale for the purpose earning huge amount of
foreign exchange from export in order to combat the import dues requirement. Hence import substitution
and export promotion ensure economic independence and development.

(9) Facilitates Overall Development:

Entrepreneurs act as catalytic agent for change which results in chain reaction. Once an enterprise is
established, the process of industrialization is set in motion. This unit will generate demand for various
types of units required by it and there will be so many other units which require the output of this unit.
This leads to overall development of an area due to increase in demand and setting up of more and more
units. In this way, the entrepreneurs multiply their entrepreneurial activities, thus creating an
environment of enthusiasm and conveying an impetus for overall development of the area.

Entrepreneurial culture

An entrepreneurial culture is an environment where someone is motivated to innovate, create

and take risks. In a business, an entrepreneurial culture means that employees are encouraged to
brainstorm new ideas or products. When work time is dedicated to these activities, it is called
intrapreneurship.
Some communities foster an entrepreneurial culture as well. Silicon Valley, part of the San Francisco
Bay area, is famous as a launching pad for startup technology companies. Families may promote
entrepreneurship as well. Parents who encourage their children to take risks and teach them the value of
self-employment may raise kids who become future entrepreneurs.
The culture of any entrepreneurial business starts from the first day. It is a reflection of the values the
entrepreneur brings into the business. Culture, being a vital part of every entrepreneurial venture, acts
as a means to institutionalise the values of its founders. Culture serves to socialise new employees and
they learn to treat customers, each other and many other things, such as how to fit in and be successful
within the business.

Normally, smaller organisations are able to retain this culture of entrepreneurship. In bigger
organisations, the moment you start to grow, complexity also grows and chaos emerges. And to put
chaos to rest, process comes into function.
Now, when we start creating processes for everything, minimal thinking is required; the thrust is to
eliminate mistakes. Then a market shifts happens due to competition, technology, socio-economic
factors, and then the already-created process makes entire system bureaucratic as companies are unable
to adapt the culture quickly.
Therefore if companies are trying to create entrepreneurial ethnicity, they need to focus on three things:
Creating a culture of Self Discipline: People with this quality dont require any guidance about whats
to be done. They will mostly act wisely and will do what is right.
Freedom: The moment you bring people with self discipline, you can give more freedom, which will
turn into an approval-free organisation.
Push responsibility further down: There are myths in the organisation that the more control we put on
ourselves, the more efficient we become and if people have power they will misuse it. But thats not
true.
The entrepreneurial nature of the organisation plays an important role in the success of a business. So it
is important to sustain it by hiring the right person for the right position. It is essential to carefully
screen prospective employees to ensure that they will fit within the culture.

An entrepreneurial culture is also about sustaining autonomy and respecting employees by maintaining
consistent communication about the entrepreneurial vision for the company.
Creating an entrepreneurial culture creates a business that will continue to grow, provided changes are
adapted and new opportunities are actively pursued in the market.
So, how is an entrepreneurial culture put in place?
In an organization with an entrepreneurial culture, work is more a priority than the job; it becomes a
lifestyle. Employees work like a team, share issues or problems facing the company and together try to
resolve whatever comes in between the growth of the company and themselves. Employers need to
place the following benchmarks in order to create harmony at the workplace:

 Respecting everyone: This is a very simple premise, which threads through each and every
complicated issue that can arise within a company. Respect and trust provide the necessary base for a
vibrant and sustainable corporate culture.

Better Communication. Employers should create an environment where people can interact with each
other, support each other and recognise each others efforts and achievements. Positive rewards should
be given for positive behaviour. Sharing information with employees makes them aware of the
direction of the company and they feel a kind of involvement with the place they work for.

Forge comradeship. Make time for people to get to know each other and the company. Like an annual
off-site meeting to build team spirit and discuss where the company is headed. At such events, one can
also distribute and share the business plan and discuss issues and ideas raised by strategies.

People without self-discipline or who do not fit in the culture should be asked to leave as early as
possible.

Managers should not go through emotional turmoil in making sure that everybody is satisfied. They
should be incentivised to construct ace teams. A person who has done great work in the past and is not
suited for a role anymore should be given a kind severance package.
Sustaining Entrepreneurial Culture: Once the company has a group of trusted and informed employees,
dont let the culture thats evolving just be. It needs to be watched so that it grows as intended. The
trick is standing back, but not too far back. In maintaining the culture, consider these rules:
Let the team build itself. Within that secure, open environment, let employees grow together without
being made to.
Involve yourself without controlling.
Dont forget the little things. Culture is made up of many small actions that, when put together, create
something larger than the sum of the parts. There are many things a CEO can do to make employees
feel a part of the company. Some are just common courtesies: hallway conversations, saying hello in
the morning, opening doors, asking after peoples families and partners. Others are little extras, such as

flowers to say thank you and happy-birthday e-mail messages. Eating lunch with employees, helping
spouses find jobs and participating in team events shows that the CEO is involved with the employees.

Business planning process

"Business planning is usually conducted when starting a new organization or a new major venture, for
example, new product, service or program. Essentially, a business plan is a combination of a marketing
plan, strategic plan, operational/management plan and a financial plan. Far more important than the
plan document is the planning processes itself.

What is a business Plan

A business plan is a formal statement of a set of business goals, the reasons they are believed
attainable, and the plan for reaching those goals. It may also contain background information about the
organization or team attempting to reach those goals.
Business plans may also target changes in perception and branding by the customer, client,
taxpayer, or larger community. When the existing business is to assume a major change or when
planning a new venture, a 3 to 5 year business plan is required, since investors will look for their
annual return in that time frame a business plan serves several purposes.
1. Enable the entrepreneur to think through the in a logical and structured way and to setout stages in
achievement of business objective.

2. Enable the entrepreneur to plot progress against the plan.

3. Ensure that resources needed to carry out the strategy and time when they are required are both
identified.
4. preparing the business plan ensures that the entrepreneur has thought through through the crucial
aspects of the venture.
5. IT is a mean of making all employees aware of the business direction (Assuming that key features of
business direction are conveyed to the employee.
6. This is an imp. Document for discussion with prospective investors and lenders of finance.

A good business plan would document short term & long term goals of the business and set specific
tasks for achieving these goals. Business planning is the ongoing process & it should be updated
regularly to assist in forward planning. The very process of researching and writing the business plan
should update clearly ideas and identify gaps in management information about their businesses,
competitors and the market.

BUSINESS PLANNING PROCESS

As discussed above, a successful entrepreneur lays down a step by step that he /she follows while
starting anew business, This business plan acts a guiding tool to the entrepreneur and is dynamic in
nature- and needs continuous review and updating so that the plan remains viable even in the changing
business situations. The various steps involved in the business planning process are.
1. Idea Generation
2. Environmental scanning
3. Feasibility analysis
4. Drawing up a functional plan
5. Project report preparation
6. Evaluation, control and review.

1. Idea Generation- It is the first preliminary stage of business planning process. It involves
generation of new concepts, ideas, products or services to satisfy the existing demand, latent demand
and future demand of the market. The various sources of new idea are:
Consumers
Existing companies
Research and development
Dealers , retailers

The various method of generating new ideas are

Brainstorming
Group discussion
Data collection through questionnaire from consumers existing companies, dealers, retailers Invitation

of ideas through advertisement , mails internet

Value addition to current product/ services
Market research
Screening of the new ideas should be undertaken so that promising new ideas are identified and
impractical ideas are eliminated.
2. Environmental Scanning- Once a promising idea emerges through the idea generation phase, the next
step is environmental scanning which is carried out to analyze the prospective strength, weakness
Opportunities and threats of business enterprises. Hence before getting into finer details of setting up
business, it is advisable to scan the environment- both internal and external and collect information
about the possible opportunities threats, from the external environment and strength and weakness from
internal environments The various variable to be scanned are in terms of socio- cultural, economic,
governmental technological and demographic changes taking place in the external environment and
availability of raw material, machinery, finance, human resource, etc with the entrepreneur. The various
sources from which information can be gathered are informal sources (family, friends
colleagues,etc)and formal sources (magazines, newspapers, government departments, seminars,
suppliers ,dealers , competitors).The objective for a successful environmental scanning should be to
maximize information and hence entrepreneur should collect information from as many resources as
possible and then analyze them to understand whether the given information would be supportive/
obstructive to the business venture.
The Economic variable The Indicator
Internal Environment Feasibility study
Sociocultural Appraisal

It assess the various trends in terms of social and cultural norms. Hence it
includes the various values, beliefs, fashion statements, attitudes etc, of the
individual in the society for a given set of time. It can help in
understanding the flexibility / rigidity of the population and hence, can be
used to predict the accessibility of new products. And services in that
geographical area.

Technological Appraisal

It asses the various technological know- how available IT also indicates the
various modern technologies expected in the near future & and their

Economic Appraisal

receptiveness by the industry

It assess the overall economic status of the nation, overall growth rate,
growth rate of the industry in which the prospective business enterprise
falls, inflation rate, etc

Demographic Appraisal

It assess the pattern and distribution of population in particular

geographical region. It includes studying population trends, income
distribution, education profile, age,etc.

Government Appraisal

It assess the various legislation and policies related to business that are in
force for a particular industry in a country. It also assess the overall
industrial policy, taxation, subsidies, incentives, grants, export/ import
Policy , financial institutions and their norms and procedure

Raw Material

It assess the availability of raw material available now and what would be available

in the near future. Efforts should be made to even find alternative sources of curren
new material.

Production

It assess the requirement of various machineries, tools and techniques that are
available or would be available in the near future.

Finance

It assess the total requirement of finance. It also indicates the sources of finance tha
can be approached for funding.

Market

It assess the demand of the market.

Human Resource

It assess the availability of labor and the completion for labor in the market

External environment

This study is undertaken to find out whether the proposed project( considering the above
environment appraisal ) would be feasible or not. Feasibility study is carried out to assess
the feasibility of the project itself in particular environment. Hence through feasibility
study we can dependent on environment appraisal. yet, it has its own dimensions/
variables.
The various dimensions/ variables are discussed below.

Market Feasibility

 Technical/ Operational Feasibility

Financial Feasibility

Market Feasibility
Market analysis is conducted for the following reasons
To estimate the aggregate demand of the proposed product/service in future.
To estimate the aggregate demand of the proposed product/ service in future.
Hence, market analysis is concerned with broadly two variables.
1. Present/future aggregate demand of the proposed product service.
2. Excepted market share of the proposed business enterprise.
The demand analysis and market share is based on a number of factors like consumption
pattern, availability of substitute goods/services, type of competition, etc.
The following steps are involved in market feasibility analysis:
1. Setting objectives for the market feasibility: This is the first step for market feasibility
analysis-a preliminary discussion with consumers, retailers distributers, competitors,
suppliers, etc.is carried out to understand the consumer preferences ,existing, latent and
potential demands, strategy of competitors and practices of distributors,retailer,etc the
objective of formal study needs to be comprehensive enough so that it is able to generate
the desired answer to the following question:
1. Who are the consumer and customers-present and prospective?
2. What is the present and future demand?
3. How is the demand distributed seasonally (for example, air conditioner are required
from may to September in most part of India?
4. What is the demand distributed geographically?
5. What much price is the consumer willing to pay?
5. What is the marketing mix of competitors?
6.What marketing mix would the consumer accept?

2. Primary data collection: Primary data collection is undertaken through market survey.
Market survey can be census survey (collected data from the entire targeted population)or
it could be a sample survey (drawing a sample unit from a targeted population and
collecting data from them).the method for data collection (census or sample survey)
depends on time and cost constraints plus degree of accuracy required from the primary

Secondary Data Collection

Census of India publication which provides statistical data on population distribution

household size, demographic characteristic large age, education etc.

National sample survey reports issued by cabinet secretariat, government of India. They

provide information on various economic and social aspects.

Plan reports issued by the planning commission.
UNDP Reports: world statistics on population,HRD India.
Central statistical organization provides demographic information of national income and

agricultural and industrial statistics.

Economic survey in a annual publication issued by the ministry of finance which
provides data on industrial production, prices exports ,imports national income etc.
Demand Forecasting
After gathering the primary and secondary data, demand forecasting is done to estimate
the future demand. the various method of demand forecasting are given below:
Qualitative Methods: These are the judgmental methods in which experts translate the
information collected from the primary and secondary data into qualitative estimates.
Jury of Executive Method: In this method, a group of experts give their views on
excepted future demand their judgment are combined and their mean frequency gives the
demand estimates.
Delphi Method: This method involves collecting information/opinion from a group of
experts eho dont interact face-to-face. a questionnaire for demand estimation is mailed to
them and their asked to express their views. responses received from them are
summarized and sent back to each of the experts along with questions to probe further the

reasons fro views expressed in the first round. this is repeated until all experts converge
to a common demand estimate.
Time Series Projection method: They are based on the historical time series which is
the past tend of demand.
Trend Projection method: This method is very popular and involves extra polating the
past trend on to the future.
Exponential smoothing Method: In this method, forecast is modified in the light of
observed errors.
Moving Average Method: According to this method, the forecasts for the next period
represent a simple average or weighted arithmetic average.

Technical/Operational feasibility
Technical/operational analysis is done to assess the operational ability of the proposed
business enterprise. the cost and availability of technology may be of critical importance
to a feasibility of a project or it may not be an issue at all. For example, a hospital might
need the latest techniques to stave off competition.
Key question to be answered to stave off competition:
a. what are the technological need of the proposed business?
b. what other equipment does the proposed business need?
c .from where will this technology and equipment be obtained?
d. From where can be technology and raw material be obtained?
e. What would be the equipment and technology cost?
Technical/operational analysis collects data on the following parameters:

Material Availability
Material requirements Planning
Plant location
Plant capacity
Machinery and equipment
Plant layout

a. Material Availability: It is imperative to assess the availability of the raw material

required for production goods/services. the feasibility study of raw material should make
an account of the following variables:

The availability of quality and quantity of raw material

The factors on which the availability of raw material is dependent
Price sensitivity (elasticity)of raw material
Perishable time of raw material

b. Material Requirement planning is undertaken to analyze the quantity of material that

would be let the production run smoothly. It would be dependent on material availability
variables mentioned above.
c. Analysis of Choice of Technology: It is done to identify whether the product developed
at the idea of generation stage is technologically feasible or not, it answer question such
as:
Whether a technology for the product exists or not?
If technology exists in more than one form, then which technology would be more
profitable to the company?
The choice of technology would be affected by:

Capacity of plant
Amount of investment
Availability of technology
Production cost
Latest developments
Quantity of planned production
Effects of environments
d. Plant Location: Plant location refers to fairly broad area where the enterprise is to be
established like city, industrial zone or costal area .plant location is the physical layout of
the business and is affected by process of production ,safety of personnel, minimum
production cost ,scope of expansion, proper space utilization, etc
The choice of the location is affected by the following:

Proximity to raw material and markets

Availability of infrastructure like power, transportation, water means of communication
Favorable government policies

 Order factor like climatic condition, availability of power etc, can affected the decision of
plant location
e. Machineries and Equipment: these are the dependent on production technology, plant
capacity, investment cost of buying, maintenance and running cost
Financial Feasibility
Once marketing, operational and organizational analysis has been done successfully
,finally ,financial feasibility is done to assess financial issue of proposed business venture
.following cost of estimates have to be done:
a) Cost of Land and Building: depending
b) Cost of plant and machinery: It includes estimates of the cost of plant and machines,
their running and maintenance.
C) Preliminary cost estimation is made to assess how much cost would be required in
conducting the market survey, preparing feasibility report, expenses in registration amd
incorporation, procuring machinery etc.
d) Working capital estimates for running the business are also made.
e)Cost of production which would include raw material cost, labor cost, overhead
expenses, utilities like power, water, fuel etc
f) provision for contingency need to be made to cover certain expenses which can emerge
due to change in external environment. For example, increase of prices of raw materials
goes up if the price of diesel is revised.
h) Profitability projections are made on the following parameters:
I.
II.
III.
IV.

Cost of production
Sales expenses
Administrative expenses
Expenses sales

Summation of all above gives gross profit.

Based on the above information, the following projections are made:
1) Break-even point
2) Cash flow projections
3) Balance sheet statement.

Drawing functional Plan

After the feasibility study one can go into the details of drawing up functional plans
which would determine strategies for all operational areas: Marketing finance, HR &
production.
Marketing Plan
Marketing Plan lays down the strategies of marketing which can lead to the success of
business. These strategies are in the terms of marketing mix(product, place, price,
promotion).From the market feasibility study and marketing research, potential/ present
demands of customers are determine4dwhichhelp in understanding the profile of
customers and help in laying down the strategies for segmentation of market,
identification of target market and laying down strategies for target market.

Production / operation plan

Production plan is drawn up for business for business enterprise for manufacturing
sector whereas operational plan are drawn up for business for business enterprise for
service sector. The production / operation plan should include the strategies for the
following parameter.
1.
2.
3.
4.
5.
6.
7.
8.

Location and reasons for selecting the location.

Physical layout
Cost and availability of machinery, equipments an draw material.
List of suppliers
Quality management
Production scheduling, capacity management and inventory management
Cost of manufacturing / running the operations
Changes in above in case of expansion of business.

Organizational Plan
Organizational Plan defines the type of ownership: it could be single proprietary,
partnership company, private limited or public limited. It also proposes an organizational
structure and human resource management practices that would govern the successful
running of the proposed business enterprise.

Financial Plan
Financial Plan indicates the financial requirement of proposed business enterprise such as
1. Cost incurred in the smooth functioning of all financial plan(marketing, operations and
2.
3.
4.
5.

human resource)
Projected Cash flow
Projected income statement
Projected break-even point
Projected balance sheet

Project report preparation

After environmental scanning and feasibility analysis, the project report business plan has
to be prepared. The business plan is a written document that describes step-by-step
strategies involved in running of business.

Sample Outline of a Business Plan

I.
II.
III.
IV.

Cover Sheet (name of the company, address, )

Table of content
Executive Summary(2-3 pages)
The Business
A Description, history (including past performance)

1. Form of business (if incorporated, show where)

2. Location of headquarter
3. Principals or owners
B Objectives of owners or managers
1. Projections & forecast
2.Current and proposed Capital structure
C Funding required
1. Equity

2...Debt
D Timing and use of funds
1. When capital needed
2. How funds will be used
v. The product or service
A. Description of brand names, prices
B. Comparison with competitive products or services (e.g. competitive advantage,
weakness)
C. Research and Development
VI Marketing Plan
A. Overall strategy and tactics including risks and pitfalls
B. Size and history of market including trends (growth vs. flat)
C. profiles of customers and end users: preferences and need
D. Strengths and weakness of competitors
E. Product lines
F. Advertising and promotions
G. Pricing
H. Distribution channel: distributors, dealers , retailers etc
I. Regulatory Requirements
VII. Productions and Operations
A.
1.
2.
B.

Description of operations(all facets from raw material to finished product)

Workforce (management, rank)
Principal suppliers
Facilities and equipment
1. Existing
2. Required
C. Material, labor and supplies used

Financial information
A.
B.
1.
2.
3.
4.
5.

For existing companies , provide a summary of historical financial data

Projected financial statements for thee to five years
Cash flow statements
Income statements
Balance sheets
Breakeven analysis
Significant financial assumptions (interest rates, profit margin etc.)
IX Supporting Documents

A.
B.
C.
D.
E.

Management biographies and resumes

Organizational chart
Historical financial statements for past three to five years
Employment contracts
Articles of incorporation

Evaluations, Control & Review

As stated earlier, it is imperative to continuously review and evaluate all aspects of the
business. This is because completion in todays globalized world is high and
technological changes are taking place at much faster rates. For example HLL had come
up with new strategy: anew product every month. Hence it is dynamic business
environment, it is important to evaluate, control and review the business periodically.

ADVANTAGES OF BUSINESS PLANNING

Potential benefits realized from the development of business plan include Improved understanding of opportunities, problems and weakness
Greater control over organization
A valuable source of information about your business that may be required by third
parties.
Improved use of your company resources
Increased employee motivation

 Increased profits and sustained growth

Estimating and financing fund requirement

You know that production is the outcome of five factors of production viz., land, labour,
capital, entrepreneurship and organisation.These factors are mutually dependent on each
other. The availability of all the five factors in proper proportions is very necessary to
produce the desired level of production. Having prepared the project report, the time
comes when the entrepreneur needs to decide on the need for and sources of finance as
per his/her projections made in the project report. What follows in this unit is therefore, to
learn why finance is needed, what the various sources of finance are and other aspects of
the entire gamut of financing of a small-scale enterprise.
Need for Financial Planning
Finance is one of the important prerequisites to start an enterprise. In fact, it is the
availability of finance that facilitates an entrepreneur to bring together land, labour,
machinery and raw material to combine them to produce goods. The significance of
finance in production is elucidated like a lubricant to the process of production. There are
others also who hold even the metaphorical views that finance is the life-blood of
enterprise. The trite phrase whoever has the gold makes the rulealso underlines the
every significance of finance for small enterprises, in particular, and industry, in general.
Financing enterprises whether large or small is a critical element for success in
business. Instances are gallore to cite that many enterprises, though potentially
successful, failed because they were under-capitalized. Therefore, what follows is that
every enterprise should clearly chalk-out its future financial requirements in its very
beginning itself. The decisions taken by the entrepreneur well in advance regarding the
future financial aspects of his/her enterprise is called financial planning. In other
words, financial planning deals with futurity of present decision in terms of financial

aspects of an enterprise. In short, financial planning is a financial forecast made for the
enterprise in the beginning itself.
In a financial plan/financial forecast, the entrepreneur should clearly answer the
following two questions:
1. How much money is needed?
2. Where will money come form?

Loans from Financial Institutions:

Industrial Development Bank of India (IDBI):

The IDBI was established on July 1, 1964 under the Act of Parliament as the principal
financial institution in the country. Initially, it was set up as wholly owned subsidiary
of the Reserve Bank of India. In February 1976, the IDBI was made an autonomous
institution and its ownership passed on from the Reserve Bank of India to the Government
of India. The IDBI provides assistance to the small-scale industries through its scheme
of refinance and, to a limited extent, through its bills rediscounting scheme. The IDBI has
shown its particular interest in the development of small scale industries. of refinance and,
to a limited extent, through its bills rediscounting scheme.
The IDBI has shown its particular interest in the development of small scale industries.

Industrial Finance Corporation of India Limited (IFCI):

The Government of India set up the Industrial Finance Corporation of India
(IFCI) under IFCI Act in July 1948. In recent years, the IFCI has started new
Promotional Schemes, such as
a) Interest subsidy scheme for women entrepreneurs.
b) Consultancy fee subsidy schemes for providing marketing assistance to Small-scale
industries.
c) Encouraging the modernization of tiny, Small-scale ancillary units.
d) Control of pollution in the small and medium-scale industries.
Industrial Credit and Investment Corporation of India Limited (ICICI):
The ICICI was set up in January 1955 under the Indian companies Act with the primary
objective of developing small and medium industries in the private sector.

State Financial Corporations (SFCs)s:

In order to cater the financial requirements of a large number of small-scale units, the
State Finance Corporation Act was passed by the Parliament on September 28, 1951
under which the state Financial Corporations (SFCs) could be set up. The first SFC was
set up in Punjab in 1953. Today, there are
in all 18 SFCs in the country.

Small Industries Development Bank of India (SIDBI):

With a view to ensuring larger flow of financial and non-financial assistance to the smallscale sector, the government of India set up the Small Industries Development Bank of
India (SIDBI) under a special Act of the Parliament in October 1989 as a wholly-owned
subsidiary of the IDBI. The bank commenced its operations form April 2, 1990 with its
head office in Luck now.

SIDBI schemes are as follows:

1. Schemes for setting up SSI units-cost for projects not to exceed Rs 300 Lakhs.
2. Composite loan scheme (cottage, tiny and village industries)-the loan limit not to
exceed Rs 50,000.within repayable 7-81/2years.
3. Scheme for SC/ST and physically handicapped persons- loan limit not to exceed Rs
50,000 This schemes is meant for cottage, tiny and village industries.
4 .Schemes for professionals-the cost for projector not to exceed Rs10lakhs and cost of
land and building not to exceed 50% of total outlay.
5. Scheme for marketing activities:
a. Schemes for marketing organizations-cost of project not to exceed Rs25 lakhs. Down
payment of at least 50% of value of good purchased.
b. Schemes for the purchase of mobile sales vans-loan limit not to exceed Rs 3 lakhs per
vehicle.
6. Schemes for tourism related activities-cost of project not to exceed Rs45 lakhs.

7. Schemes for and restaurant projects-cost of project not to exceed Rs45 lakhs;
8. Schemes for infrastructure development:
a. Schemes for setting up industrial estates-cost of project not to exceed Rs300 lakhs
b. Schemes for the development, maintenance and construction of roads the loan limit is
needed based.

Venture CapitalVenture Capital is the fund/initial capital provided to businesses typically at a start-up
stage and many times for new/ untested ideas. Venture capital normally comes in where
the conventional sources of finance do not fit in. Venture capital funds are mutual funds
that manage venture capital money i.e. these funds aggregate money from several
investors who want to provide venture capital and deploy this money in venture capital
opportunities.
Where does venture capital come from?
Venture capital funds come from venture capital firms, which comprise professional
investors who understand the intricacies of financing and building newly formed
companies. The money that venture capital firms invest comes from a variety of sources,
including private and public pension funds, endowment funds, foundations, corporations
and wealthy individuals, both domestic and foreign. Those who invest money in venture
capital funds are considered limited partners, while the venture capitalists are the general
partners charged with managing the fund and working with the individual companies.The
general partners take a very active role in working with the company's founders and
executives to ensure the company is growing in a profitable way.
In exchange for their funding, venture capitalists expect a high return on their investment
as well as shares of the company. This means the relationship between the two parties can
be lengthy. Instead of working to pay back the loan immediately, the venture capitalists
work with the company five to 10 years before any money is repaid. At the end of the

investment, venture capitalists will sell their shares of the company back to the owners, or
through an initial public offering, for what they hope is significantly more than they
initially put in. The most recent available statistics found more than 450 active U.S.
venture capital firms that had each invested at least $5 million. The firms had an average
fund size of nearly $150 million.
Research from the National Venture Capital Association revealed that in 2012, venture
capitalists invested approximately $22 billion into nearly 2,749 companies, including
1,000 of which received funding for the first time. Among the more famous companies to
receive venture capital during their startup periods are Apple, Compaq, Microsoft and
Google.
Typically venture capital funds have a higher risk/ higher return profile as compared to
normal equity funds and whether you should invest in these would depend on your
specific risk profile and investment time-frame.

THE ROLE OF GOVERNMENT IN SUPPORTING

ENTREPRENEURSHIP
Small and Medium-sized Enterprises (SMEs) in market economies are the engine of
economic development. Owing to their private ownership, entrepreneurial spirit, their
flexibility and adaptability as well as their potential to react to challenges and changing
environments, SMEs contribute to sustainable growth and employment generation in a
significant manner.
SMEs have strategic importance for each national economy due a wide range of reasons.
Logically, the government shows such an interest in supporting entrepreneurship and
SMEs. There is no simpler way to create new job positions, increasing GDP and rising
standard of population than supporting entrepreneurship and encouraging and supporting
people who dare to start their own business. Every surviving and successful business
means new jobs and growth of GDP.

Therefore, designing a comprehensive, coherent and consistent approach of Council of

Ministers and entity governments to entrepreneurship and SMEs in the form of
government support strategy to entrepreneurship and SMEs is an absolute priority. There
are no doubts that governments should create different types of support institutions:
i)

To provide information on regulations, standards, taxation, customs duties, marketing

issues;
ii) To advise on business planning, marketing and accountancy, quality control and
assurance;
iii)To create incubator units providing the space and infrastructure for business beginners
and innovative companies, and helping them to solve technological problems, and to
search for know-how and promote innovation; and
iv) To help in looking for partners. In order to stimulate entrepreneurship and improve the
business environment for small enterprises.
Training
Basic training differs from product to product but will necessary involve
sharpening of entrepreneurial skills. Need based technical training is provided by the
Govt. & State Govt. technical Institutions.
There are a number of Government organizations as well as NGOs who conduct
EDPs and MDPs. These EDPs and MDPs and are conducted by MSME's, NIESBUD,
NSIC, IIE, NISIET, Entrepreneurship Development Institutes and other state government
developmental agencies.
Marketing Assistance
There are Governmental and non-governmental specialised agencies which
provide marketing assistance. Besides promotion of MSME products through exhibitions,

NSIC directly market the MSME produce in the domestic and overseas market. NSIC
also manages a single point registration scheme for manufacturers for Govt. purchase.
Units registered under this scheme get the benefits of free tender documents and
exemption from earnest money deposit and performance guarantee.

Promotional Schemes
Government accords the highest preference to development of MSME by framing and
implementing suitable policies and promote
Why Entrepreneurs Fail: Businesses must expand their business model in order to
be successful. They cannot stand on one leg (one approach) and continue to be profitable.
They must constantly be putting their energy into lead generating systems, making
connections, setting goals and, most importantly, building ladders to the public. If they
are not moving forward; they are moving backwards. There is no such thing as standing
still in business

District Industries Center (DIC)

District Industries Center (DIC) he 'District Industries Centre' (DICs) programme was
started by the central government in 1978 with the objective of providing a focal point for
promoting small, tiny, cottage and village industries in a particular area and to make
available to them all necessary services and facilities at one place. The finances for
setting up DICs in a state are contributed equally by the particular state government and
the central government. To facilitate the process of small enterprise development, DICs
have been entrusted with most of the administrative and financial powers. For purpose of
allotment of land, work sheds, raw materials etc., DICs functions under the 'Directorate
of Industries'. Each DIC is headed by a General Manager who is assisted by four
functional managers and three project managers
Objectives of District Industries Centre (DIC):

The important objectives of DICs are as follow :

i. Accelerate the overall efforts for industrialisation of the district.

ii. Rural industrialisation and development of rural industries and handicrafts.

iii. Attainment of economic equality in various regions of the district.

iv. Providing the benefit of the government schemes to the new entrepreneurs.

v. Centralisation of procedures required to start a new industrial unit and minimisation- of

the efforts and time required to obtain various permissions, licenses, registrations,
subsidies etc.
Functions of District Industries Centre (DIC):

i. Acts as the focal point of the industrialization of the district.

ii. Prepares the industrial profile of the district with respect to :

iii. Statistics and information about existing industrial units in the district in the large,
Medium, small as well as co-operative sectors.

iv. Opportunity guidance to entrepreneurs.

v. Compilation of information about local sources of raw materials and their availability.

vi. Manpower assessment with respect to skilled, semi-skilled workers.

vii. Assessment of availability of infrastructure facilities like quality testing, research and
development, transport, prototype development, warehouse etc.

viii. Organises entrepreneurship development training programs.

ix. Provides information about various government schemes, subsidies, grants and
assistance available from the other corporations set up for promotion of industries.

x. Gives SSI registration.

xi. Prepares techno-economic feasibility report.

xii. Advices the entrepreneurs on investments.

xiii. Acts as a link between the entrepreneurs and the lead bank of the district.

xiv. Implements government sponsored schemes for educated unemployed people like
PMRY scheme, Jawahar Rojgar Yojana, etc.

xv. Helps entrepreneurs in obtaining licenses from the Electricity Board, Water Supply
Board, No Objection Certificates etc.

xvi. Assist the entrepreneur to procure imported machinery and raw materials.

In short DIC is summarized through these five points.

1. In each district one agency to deal with all requirements of small and village
Industries. This is called District Industries Centre
2. The District Industries Centres have undertaken various programmes for
investment promotion at the grassroot level such as a organizing seminars
workshops, extending support for trade fairs and exhibitions organized by
various Industries associations.
3. All the services and support required by for MSME units under the single roof of
the District Industries Centre. The Centre has a separate wing to look-after the
special needs of cottage and house-hold industries as district from small
industries.
4. Administration
General Manager is the head of the District Industries Centre. The post of General
Manager is of Joint / Deputy Commissioner level. The General Manager has
senior officers to assist him, such as Manager (Raw Material), Manager (Credit),
Manage (Economic Investigation), Manager (Marketing ) Industrial Promotion
Officer(IPO) and Technical Officer cum Project Manager (PM)
General Manager
Accounts

Manager

Manager

Manager

Manager

Tech.Officer

Industrial

Officer

(Credit)

(RM)

(EI)

(Marketing )

& Manager

Promotion

Cl.-II

Cl.-II

Cl.-II

Cl.-II

Cl.-II

(Project)

Officer

Cl.-II

Cl.-II

5. Monitoring of DICs
The functioning of DICs and their achievement is monitored by Industries
Commissioner, Meeting of General Managers are organized frequently to evaluate
the performance and also help in resolving difficulties in implementation of
different schemes.To resolve the problems of industries/industrialists, there are
two types of committee at the district level viz.
1. District Industrial Executive Committee (DIEC)
DIEC is constituted for solving industry related problems And promoting
industrtial growth. District Colector is the Chairman of this Committee and
General Manager of DIC is the Member Secretary. The other members of the
DIEC are President of District Panchayat, DDO, MP, MLAs, Prominent persons
active in Industries in the district and members of all district level industries
associations.
2. Single Window Industrial Follow up Team (SWIFT)
Enterpreneurs face many difficulties when they start new industries. They have
to deal with many government agencies and get many clearances. SWIFT helps
them in guiding solving their problems at a single spot. This committee is
working under the District Collector, General Manager of DIC is the Member
Secretary and District Development Officer is Vice President of SWIFT. All
industries related officers in the district are members of this committee.

Women Entrepreneurs

The emergence of entrepreneurs in a society depends to a great extent on the

economic, social, religious, cultural and psychological factors existing on that
society. The number of women who have sought self-employment in advanced countries
after the world war has shown a tremendous increase. For example, in the United State of
America the ownership of 25% of all business is handled by women. In Canada and

France this percentage rate is 33 and 20 respectively. After 1980 the number of women
who could find out self-employment was almost three times of the number of men
who sought self-employment. Women entrepreneurs are exerting a significant impact
on all segments of the economic systems in countries like Canada, England, Germany,
Australia and the United States of America. The sectors selected by women are retail
trade, restaurants, hotels, education, cultural sector, insurance, construction etc.

The Concept of Women Entrepreneurship:

Women entrepreneurs may be defined as the woman or a group of women who
initiates, organizes and operates a business enterprise. Women are expected to, initiate
or adopt an economic activity to be called women entrepreneurs. The Government
of India has defined a woman entrepreneur as an enterprise owned and controlled by
a woman having a minimum financial interest of 51% of the capital and giving at
least 51% of the employment generated in the enterprise to women.
According to Frederick Harbison,like a male entrepreneur, a woman entrepreneur has
five functions:
1. Explore the prospects of starting new enterprises.
2. Undertaking of risks and the handling of economic and non-economic
uncertainties.
3. Introduction of new innovations or imitation of successful ones in existence.
4. Co-ordination, administration and control.
5. Supervision and providing leadership in all aspects of the business.
These functions are not of equal importance.

Risk taking and innovation are of paramount importance. Co-ordination and

supervision become increasingly important in improving the efficiency in the
operation of the undertaking.
Generally, it is fond that the same lady is performing all these functions.

Basic Problems Faced by Women Entrepreneurs:

1.Shortage of Funds:
In many developing countries like India, women entrepreneurs suffer from
inadequate capital. They lack access to external funds due to their inability to provide
tangible security. Very few women have property in their names. Male members in the
family do not like to take risk by investing capital in ventures run by women.
Similarly, banks have also taken negative attitude while providing finance for women
entrepreneurs. All these lead women entrepreneurs rely on personal savings and
loans from family friends. But there is a limit for the same.
2.Inefficient Arrangement for Marketing and Sale:
The women entrepreneurs are most often dependent on intermediaries who pocket
a major part of the profits. Although the middlemen exploit the women entrepreneurs, the
elimination of middlemen is difficult because it involves a lot of running about which
may be difficult for them. Further, women Entrepreneurship Development difficult to
capture the market and make their products popular.
3.Shortage of Raw Materials:

Women entrepreneurs find it difficult to procure raw materials and other necessary
inputs. On the one hand the prices of raw materials are very highand on the other they
are able to get these raw materials at the minimum of trade discounts.
4.Stiff Competition:
Many of the women enterprises have imperfect organizational set up. They have to face
severe competition from organized industries and male entrepreneurs.
5.High Cost:
Production Another problem which undermines the efficiency and restrict the
development of women enterprises is the high cost of production. Government
assistance in the form of grants and subsidies to some extent enables them to tide over
this difficulty.
6.Low Mobility:
One of the main handicaps for women entrepreneurs is mobility or travelling from place
to place. Women find it difficult to get accommodation in smaller towns. A single woman
asking for a room is still looked upon with suspicion.
7.Family Responsibilities:
In countries like India, it is mainly a womans duty to look after the children and
other members of the family. Here involvement in family leaves little energy and
time for business. Married women entrepreneurs have to make a fine balance between
business and home.
New Awareness Regarding Women Entrepreneurship:
Today increased awakening and motivation are being witnessed among women
entrepreneurs. The new industrial policy of India Government highlights the
significance and importance of the development of women entrepreneurship. The

policy envisages creative and manifold training programmers for women

entrepreneurs. These programmers are intended to motivate and instigate women
entrepreneurs to intitate small scale industries of their own. The object of this policy is to
raise the status of women in the social and economical fronts and thereby to unfit their
standard of living. Due to the aforesaid instigator programmes, the growth of
industrialization, the widespread popularity of technical education, democratic
awareness among people etc., the tradition bound Indian society is now wiling to accept
the need, importance and significance of women entrepreneurship. Women
entrepreneurship which has already tided over the gloomy period of crises, is now
heading forward to universal acceptance and success.

In the case of industrial

entrepreneurship, women entrepreneurs are either equivalent to their counterparts of

the other sex or times hold a higher position than that of men. Today women
entrepreneurs have proved that they are not mere housewives but invariably income
earners of their families. In this context it is worthwhile and significant to consider
the findings and recommendations accepted in a seminar held at Mysore in
November, 2001(.i.e. Yashaswini Program me) They are quoted as such, here under:
Women are not weak, instead, very strong. The industrial and business
opportunities available to them are plenty in number electronics, engineering,
manufacture plastic goods, production of food products (biscuits, cakes, pickles, etc.,)
rubber based industries, pharmaceuticals, small scale machine tools, knitting,
embroidery work, beauty parlors are some of them.Majority of the women
entrepreneurs belongs to middle class families and are having low technical
education and willing to become entrepreneurs. The need of the time is to identify this
prospective possibility, to give them appropriate training and to lead them to
entrepreneurship. Women entrepreneurship development is a solemn process of
transforming the creative ability of women, (who had hitherto been leading a closed life
of inactivity within the four walls of their houses) into promises and blessings to the
nation.
Why do entrepreneurs fail?

1. Lack of understanding their Target market- While most business fail due to variety
of reasons, I think one of the key reasons is that business owners dont understand their
target market. They might not even have the same. They fall in love with their product or
service and think everything else will be done automatically.
2. Consistently challenged- Most business seem to fail because new entrepreneurs think
if they open a store or build a site people will automatically visit. This is not the field of
dreams, you have to market your business consistently. You cannot place a
advertisement in the local newspaper or on a relevant site once. People need to see your
ad on a regular basis. A customer might not read or visit the site the month you place the
ad. You need to give the people chance to learn of and about your business.
3. Profit before prospects- Companies put profit ahead of their clients. Customer service
is lost in many of the industries. Without clients you have no profits. Customer wants
value and service.
4. A failure to communicate. Companies fail because they fail to communicate their
message to public. This is done by effective marketing and PR strategies which can be
executed easier and less expensive due to the web.
5. Make marketing your master- Marketing and sales are the only activities in the
business that generate revenue. Everything else (with the possible exception of
innovation)is merely expense. Therefore particularly in the formative stages of new
enterprise, failure to invest every possible penny into those critical cash generating
initiatives put your business in peril>remember there are three ways to make money: get
more customer, get them to spend more when they buy, and get them to buy more often.
6. Keep your eye on the prize- The hands down, number reason for business failure is
the one you never read about>entrepreneurs start a business because they have particular
skill, that invention, innovative ideas etc and they focus on delivering that product or
service the best ay they know how. In doing so, they forget why they went into business.
You start a business to make profit. If you are focused instead of your product or service,
you will in evitable make the wrong decision and that leads to failure.

7. Not keeping records- without recording keeping, the business owner has no idea how
much money the business is earning or losing. Keeping track of income and expenses
then analyzing results on a regular basis is essential for success of any business.

8. No guts No glory The biggest reason companies fail is that the owner is not truly
committed to succeeding in business>they like the idea of owning their own business and
are willinging to work long hours , when it involves making financial scarifies and
possibility using retirement money or selling a home so that you can continue to fund the
business when banks loans are not available, most give up. No guts no Glory.

9. Lack of education in marketing-A majority of small business failures on attribute to

an o
owners lack of education or experience in the marketing field Because larger corporations
are getting consumers attention by implementing great marketing techniques, most small
business owners are misinformed about the cost of marketing. They think that it takes a
lot of money to market their product or service effectively which simply is not true. They
rather live by the slogan If you build it, they will be.

Case study of successful entrepreneurial venture.

Abstract:
The case discusses the growth of the Shahnaz Husain Group, one of the largest
producers of ayurvedic and herbal products in the world. It begins with a personal profile
of Shahnaz Husain and her idea of producing and marketing ayurvedic products as a

substitute for chemical cosmetics, which, she believes, do more harm than good. It then
traces the growth of her brand from a niche product in the Indian market to a brand
retailed in most of the major stores around the world. The case focuses on the factors that
make Shahnaz Husain products what they are and examines Shahnaz's business style. It
also takes a look at the subsidiary and ancillary activities of the Group, like training
institutes, Ayurvedic massage centers and health resorts.
Introduction:
She captured the markets around the world and now she wants to conquer
space. In an innovative move, Shahnaz Husain has started work on formulations that
astronauts could carry with them in their extraterrestrial sojourns to protect their skin
from the ravages of space travel and slow down the ageing process. She has sent National
Aeronautics and Space Administration (NASA) free samples of her moisturizers, hoping
that they will be used on space expeditions.
Shahnaz Husain is one of India's most successful women entrepreneurs.Her company,
Shahnaz Husain Herbals is one of the largest manufacturers of herbal products in the
world. It formulates and markets over 400 products for various beauty and health needs
and has a strong presence across the globe, from the USA to Asia.
In 2002, the Shahnaz Husain Group, based in New Delhi, was worth $100
million. It employed about 4200 people in 650 salons spread across 104 countries. The
Group has seen a good growth rate in the 25 years that it has been in business. The
average growth rate in the initial years (late 1970s to the early 1980s) was 15-20%. In the
1990s the average growth rate was 19.4%. A number of awards, both national and
international have been conferred on Shahnaz Husain. Some of them are "The Arch of
Europe Gold Star for Quality", "One of the Leading Women Entrepreneurs of the World",
"The 2000 Millennium Medal of Honor", "Rajiv Gandhi Sadbhavana Award", etc.
The Making of an Entrepreneur:
Shahnaz Husain belongs to a royal Muslim family which migrated from
Samarkhand to India and later held high positions in the princely kingdoms of Bhopal

and Hyderabad before India's independence. Shahnaz received her schooling in an Irish
convent and because of the influence of her father, Chief Justice N.U. Beg, she developed
a love for poetry and English Literature. She thus had the advantage of growing up in a
traditional family and receiving a modern education. She was married at the age of 15
and was a mother by the next year. When her husband was posted in Teheran, Iran, she
developed an interest in beauty treatments and decided to study cosmetology.To support
the expenses of the training financially, she wrote articles for the Iran Tribune on various
topics under different names. In the course of her studies, she learnt of the harmful effects
of chemicals on the human body.Consequently, she turned her attention to Ayurveda
(Refer Exhibit III), which she believed was the ideal alternative to chemical cosmetics,
which not only harmed the human system but also led to the deterioration of the
environment in the long run. After leaving Teheran, she trained extensively in cosmetic
therapy for 10 years in some of the leading institutes of London, Paris, New York and
Copenhagen. On her return to India in 1977 she set up her own salon at her house in
Delhi with an initial investment of Rs 35000. In contrast to salons offering chemical
treatments, Shahnaz offered Ayurvedic products.

Entrepreneurship - The Shahnaz Husain Way:

Shahnaz Husain uses the Ayurvedic method of treatment, which uses natural
formulations to cure ailments. She is the pioneer and leader of Ayurvedic beauty products
in the world offering Natural Care and Cure. The Shahnaz Husain Group offers
exclusive salon treatments geared to individual needs as well as a number of commercial
formulations for the treatment of specific problems like acne, pimples, pigmentation,
dehydration, alopecia (hair loss), etc. According to the Group, ayurvedic products are

well suited to human skin and hair as they are non-toxic and have no harmful side effects.
The human body adapts well to the natural treatments of Ayurveda while it has an inbuilt
resistance toward chemical treatments...
The Turning Point:
The turning point in her business came when she represented India at the Festival of India
in 1980. Her team was given a counter in the perfumery section of Selfridges in London.
She managed to sell her entire consignment in 3 days and also broke the store's record for
cosmetics sales for the year...
Diversification:
The Group has diversified into Ayurvedic centers for Panchkarma, Dhara and
Kerala massage. It has also set up two Shahnaz Husain Ayurvedic Health Resorts, one
near Delhi and another in collaboration with the Hyakumata group of Japan in the US
island of Saipan. These resorts which can accommodate about 200 people at a time, aim
at providing urbanites treatments and programs designed to counteract the stress of
modern life. The Group has also been holding discussions with major five star hotels in
New Delhi and New York to set up health spas...
Training Future Entrepreneurs:
Seeing the need for internationally recognized institutes that offered professional
training in beauty, Shahnaz Husain set up Woman's World International. This was started
at a time when people who wanted to train in beauty treatments and therapy could only
get apprenticeship training...
Lessons on Entrepreneurship:
Shahnaz Husain has acquired worldwide recognition. Her dedication and
relentless hard work have paid off and she heads a Group which is the largest of its kind
in the world. "It is important to have a dream and to believe in the magic of your dreams"
says Shahnaz, who has been able to convert her own dream into a business worth millions

of dollars. Shahnaz believes that a true entrepreneur is a person who has independence of
spirit. "One should be innovative, dynamic and willing to try every avenue towards
success"...

Case study of turnaround entrepreneurial venture

Abstract:
The case gives a comprehensive account of the decline of McDonald's in the 1990s, and
the events that led to the company's eventual turnaround in the early 2000s. McDonald's
is the leading fast food chain in the world. Set up as a small drive-in joint in 1937, the
company developed a highly successful system of franchising in the 1950s to expand
across the US and later, around the world. The USP of McDonald's was cheap fast food,
and the company's signature product, the Big Mac hamburger was considered an
American icon. However, in the late 1980s and 1990s, the company's growth began to
taper off. Analysts attributed this to a growing interest in a healthier lifestyle among
people, which made them shun fat-laden fast food, and also increasing competition.

By the late 1990s and the first two years of the early 2000s, the company's profits had
decreased drastically. In January 2003, McDonald's posted its first quarterly loss since it
went public in 1965. In 2003, under the leadership of Jim Cantalupo, the company
announced a turnaround plan aimed to restore the company's tarnished image and
crumbling operations. By mid-2004, it was generally acknowledged that McDonald's had
turned around.
Happy' Days Again
By the late 1990s, after years of declining earnings and poor customer ratings,
McDonald's Corp. (McDonalds), the largest fast food chain in the world, seemed to have
lost its claim to providing the 'Great American Meal'.
The company, which was once the favorite destination of fast food lovers around the
world, had been receiving low ratings on quality and customer satisfaction since the early
1990s. Its trademark Big Macs and Happy Meals were the target of law suits as critics
claimed that McDonald's was responsible for ruining America's health. Matters came to a

head in January 2003, when it posted a loss of $343.8 million for the last quarter of 2002,
making it the first quarterly loss for the company since it went public in 1965. Following
the announcement of the loss, the share price fell to an all-time low of $12 and
McDonald's seemed to have lost its magic. However, under the leadership of Jim
Cantalupo (Cantalupo), who was made CEO in early 2003, and Charlie Bell (Bell), the
president and COO, McDonald's managed a relatively quick turnaround.
In the quarter ended July 2004, the company announced a 25 percent increase in profits
over the corresponding quarter of the previous year, and sales reached a 17-year high.
Analysts and company insiders attributed this to the successful implementation of the
'Plan to Win' turnaround program that was adopted by the company in early 2003.
Discussing the company's progress, Bell said, "We are encouraged by this progress and
confident that our service, food, value and marketing initiatives will generate steady
improvements over the long term."4 Under the turnaround plan, McDonald's introduced
substantial system-wide changes that overhauled the company's products, operations
and marketing. The new plan eliminated the negative elements in the system, while
retaining and building on the positive aspects. The company moved quickly to tailor its
operations to the changing trends in the fast food industry, confounding critics who had
been skeptical about the come McDonald brothers, Richard and Maurice, started their
career in Hollywood, working on movie sets. Not finding this career rewarding, they
began to look for new business opportunities and decided to set up a restaurant.
They opened a drive-in restaurant in San Bernardino, California, in 1937. Drive-ins
were a new concept at that time. To eliminate the hassle of managing carhops (the
waiters who served customers) and of having to wash the crockery and cutlery, the
brothers introduced self-service and restricted their menu to items that could be eaten
without plates or cutlery. Thus, the menu was pared down from 25 items to just nine:
hamburger, cheeseburger, three soft-drink flavors, milk, coffee, potato chips and pie.
French fries and milkshakes were later added to the list. The brothers designed their
kitchen for mass production, with assembly line procedures. The restaurant was
octagonal, a deviation from the normal practice.

The prices were kept low - 15 cents for a burger, and 10 cents for fries. The critical
success factors in the business were speed, service and cleanliness. The concept of selfservice soon caught the imagination of the American public. By the mid-1950s, the
restaurant's revenues had risen to $350,000.
As word of their success spread, franchisees started showing interest. The first
franchisee was Neil Fox, a gasoline retailer, who set up his drive-in in Phoenix, Arizona
in 1952. His restaurant was located in a gleaming red and white tiled rectangular
building. Like the original restaurant, glass construction was used from counter to the
roof, and the kitchen was exposed to the customer's view. The most distinctive feature
of the building was its two bright yellow arches, which later evolved into a new symbol
for McDonald's. (Refer Figure I.) The franchising system, however, failed for two
reasons. The McDonald brothers observed very transparent business practices. This
encouraged imitators and created competitors. The franchisees also did not maintain the
McDonald's standards of cleanliness, customer service and product uniformity.
pany's ability to revive.
Through the decades, McDonald's had
promoted itself as the provider of the 'Great
American Meal'. However, by the 1990s, it
was clear that the company had lost its claim
to that title. Changing customer eating habits,
increased competition and complacence on
the part of the company and its franchisees,
were the main reasons for the difficulties
experienced by McDonald's in the 1990s.
(Refer Exhibit III on the Fast Food Industry)
Comparable store sales, a retail metric that
measures growth obtained from stores open
for at least one year, had stagnated in the
1990s and towards the end of the decade

began to decline...
The Golden Arches Rise Again
After McDonald's announced its first quarterly loss in 38 years in 2003, the board
realized that big changes were required in the company's strategy and direction.
The board ousted Greenberg and installed Cantalupo as the CEO. Cantalupo had led
McDonald's international expansion through the 1980s and 1990s and had been one of
the contenders in the CEO race won by Greenberg. In 2003, he was brought back from
retirement to lead the company's turnaround.
Soon after taking over, Cantalupo prepared the 'Plan to Win', which outlined
McDonald's strategy for the next three years. The Plan streamlined the company's
operations and aimed to create a McDonald's that was more geared to the new
conditions in the fast food industry...
Will New Formats Work?
Analysts said that the fast food industry was undergoing a transformation in the early
2000s. Hamburgers, fries and soda, which epitomized fast food, were being replaced by
sandwiches and salads. Given this, analysts believed that diversification was the only
option available to fast food chains to ensure their long-term success. Most fast food
chains were diversifying into other areas or developing new concepts to protect their
interests.

Case study of failed entrepreneurial venture

R Subramaniam was the Managing Director of Subhiksha, one of the largest retail
chains in India. He studied engineering in IIT Madras and then obtained a Post
Graduate Degree in Management from IIM Ahmedabad in 1989. He then joined Citi
Corp in 1989 and left the company soon. He then worked for Royal
Enfield in Chennai for two years from 1989 to 1991. After that, he chose to be an
entrepreneur and started the retail shop Subhiksha in 1997 with an investment of just 4
lakhs. The retail chain had more than 1600 outlets in 30 cities across India . It was
closed down in 2009 owing to financial mismanagement and a severe cash crunch.

An IIM A graduate, who wanted to join Ponds, ended up joining Citibank but quit the
bank after 15 days and then worked for two years at Enfield before he decided to start
on his own. His first venture, a financial services company called Viswapriya brought
him money but he was not satisfied as he was not occupied with work the way he
wanted. This obsession for being occupied led to Subhiksha, one of the largest retail
chains in India. He became the poster boy of Indian Retail as another of the retail
tycoon, Kishore Biyani of Big Baazaar, preferred to stay away from the all the clutter.

Alas! Today if you see Subhiksha or Subramanian in newspaper chances are high that it
will be preceded by words like closedown, non-payment or some of the recession
common jargons like cash-strapped or accounts discrepancy. Eminent business
personalities like Mr. Azim Premji of Wipro Group who used to praise this young man
for his business skill (he also invested money in the retail chain) is accusing him of
haste in business. ICICI Ventures and Subramanian are coming out in open against each
other. What actually happened with Subhiksha? I am just putting down the thoughts
which came to my mind.
What went wrong?
Product Mix: Subhiksha foray into drug retailing was challenging with its benefits in
the future. The general medical stores opposed this initiative since they were insecure
about their own sales. Drugs usually have margin of 17-20% but Subhiksha sold drugs
for a mere 7% margin.
Human Resource Issues:
A single head appointed to manage both IT and Marketing departments

 Most of the experts hired lacked retail experience. It pulled people from banking,
financial services, pharmaceutical, FMCG industries.
Operational Issues:
In order to maintain lower prices , Subhiksha concentrated on direct procurement to
avoid intermediaries.
During the initial phase, the chain managed procurement per-store basis wherein the
manager would replenish stocks at the end of each working day through cash
As the chain went on an expansion spree, it had established 14 central purchase
centers across the country and goods were sent to all the stores.

Information Technology:
No centralized system in place for procurement and inventory management.
In the year 2007, Subhiksha took a corrective step of implementing SAP-Enterprise
resource Planning (ERP) software but the project got stalled because the company ran
into deep trouble.
The plans to integrate all its stores via wireless communication to achieve
operational efficiency was also shelved due to lack of funds.
Marketing
With the growth in the number of SKUs, the chain moved to DIY format from notouch format
With the new format it was competing with the emerging supermarkets More,

Reliance Fresh
But the interior neighborhood has hampered its positioning as the limited parking
space did not consider it fit to be called a discount supermarket nor a proper
supermarket.

Finance
It was in financial trouble right from the beginning.
In 2000 during its first phase of expansion the first round of funding of INR 15 crore
from I-ventures was received
In 2004,it received the second round of funding
By the year 2006, the no of stores had reached to a 1000 mark
Expansion continued without sufficient capital backup with debt to equity ratio
being high .
By 2008, while major players were struggling to start new stores , Subhiksha
became the largest retail chain with 1480 stores stretched in 110 cities across the
country.
The expansion helped in the companys turnover with a continuous rise from INR
330 crore in 2005-2006 to INR 2,305 crore in 2007-2008 to a projected INR 4000 crore
in 2008-09.
The financial woes worsened when it was unable to pay around 15,000 employees
for over 6 months.

 No banks came to the rescue because of the economic downturn

The top executives had left the company and the security agency personnel
responsible left with no protection left for the various stores and warehouses leaving
around 600 of Subiksha stores ransacked.
The overambitious plans landed the company in a debt of INR 7 billion.