Definitions : Entrepreneur

Entreprende – to undertake

An entrepreneur is a person who is responsible for setting up an enterprise. 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 puts up new Greenfield projects that actually creates wealth, opens up employment opportunities and fosters other sectors.

The entrepreneur is a critical factor in the socio-economic change. He is the key man who envisages new opportunities, new techniques, new line of production, new products and co-ordinates all other activities. 1. J. B. Say

An entrepreneur is the economic agent who unites all means of production, the labour force of the one and the capital or land of others and who finds in the value of the products which results from their employment, the reconstitution of the entire capital that he utilises and the value of the wages, the interest and the rent which he pays as well as profit belonging to himself.

2. The New Encyclopaedia defines an Entrepreneur as

An individual who bears the risk of operating a business in the face of uncertainty about the future conditions.

3. Joseph A. Schumpeter

The entrepreneur in an advanced economy is an individual who introduces something new in the economy – a method of production not yet tested by experience in the branch of manufacture concerned, a product with which consumers are not yet familiar, new source of raw material or of new markets and the like.

The function of an entrepreneur is to reform or revolutionise the pattern of production by exploiting an invention or more generally an untried technological possibility for producing a new commodity.

4. Peter Drucker defines

An entrepreneur as one who always searches for change, responds to it, and exploits it as an opportunity. Entrepreneurs innovate.

‘Innovation is the specific tool of entrepreneurs, the means by which they exploit changes as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practised. Entrepreneurs need to search purposefully for the sources of innovation, the changes and their symptoms that indicate opportunities for successful innovation. And they need to know and to apply the principles of successful innovation.’

(Systematic innovation consists in the purposeful and organised search for changes and in the systematic analysis of the opportunities such changes might offer scope for economic and social innovation.)

5. Francis walker

The true entrepreneur is one who is endowed with more than a average capacities in the task of organising and coordinating the various other factors of production. He should be a pioneer, a captain of industry.

6. A good entrepreneur is one who is capable of

inspiring confidence in people, and has the ability to motivate them to work with him in fulfilling the economic goals set by him.

New Concept of Entrepreneur :

The term ‘entrepreneur’ has been defined as 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. He conceives of an industrial enterprise for the purpose, displays considerable initiative, grit and determination in bringing his project to fruition, and in this process, performs one or more of the following:

a. Perceives opportunities for profitable investments,

b. Explores the prospects of starting such a manufacturing enterprise,

c. Obtains necessary industrial licenses,d. Arranges initial capital,e. Provides personal guarantees to the financial

institutions,f. Promises to meet the shortfalls in the capital,

andg. Supplies technical know-how.

Not entrepreneur in strict sense: Copy Imitation

Not entrepreneur

Drug peddler Bootlegger Black marketer Brothel keeper

Definition – Entrepreneurship

It refers to a process of action an entrepreneur undertakes to establish his/her enterprise. It is a creative and innovative response to the environment.

Difference :

Entrepreneur EntrepreneurshipRefers to a person:

Visualiser Creator Organiser Innovator Technician Initiator Decision-maker Planner Leader Motivator Programmer Risk-taker Communicator Administrator

Refers to a process: Vision Creation Organization Innovation Technology Initiative Decision Planning Leadership Motivation Action Risk-taking Communication Administration

Entrepreneur v/s Professional Manager

According to the Sachar Committee on Company Law “ A Professional Manager is an individual who

a. Belongs to the profession of law, accountancy, medicine, engineering or architecture, or

b. Is a member of a recognised professional body or institutional body or institution exercising supervisory jurisdiction over its members, or

c. Is a holder of a degree or diploma in management from any recognised university and possesses not less than five years’ experience in an executive capacity in a company, corporation or a body corporate or in the government, or possess minimum of ten years’ experience in an executive capacity in a company, corporation or a body corporate or in the government.

Professional Manager EntrepreneurA Professional Manager is one who specialises in the work of planning, organising, leading and controlling the efforts of others. He does so through systematic use of classified knowledge and principles. He subscribes to the standards of practice and code of ethics established by a recognised body.

An entrepreneur has great motivation to manage his business successfully. He is keenly devoted to develop business through innovation and is satisfied when his efforts give him positive results. He is the investor, risk-bearer, manager and controller. The entrepreneur may appoint a manager and delegate some of his functions.The entrepreneur lays down broad policy for business, assumes risk and makes the business a going concern.

The entrepreneur may be a manager but a paid manager cannot acquire the position of an entrepreneur.

Entrepreneurial Environment

a. Political b. Economicc. Sociald. Technologicale. Legalf. Cultural

a. Political i. Political Atmosphere

ii. Quality of Leadershipb. Economic

i. Economic Policiesii. Labour

iii. Tradeiv. Tariffsv. Incentives

vi. Subsidiesc. Social

i. Consumerii. Labour

iii. Attitudesiv. Opinionsv. Motives

d. Technological i. Competition & Risk

ii. Efficiencyiii. Productivityiv. Profitability

e. Legal i. Rules & Regulations

f. Cultural i. Structure

ii. Aspirations & Values

Environment for Entrepreneurship

Entrepreneurs appear to have been motivated by a combination and interaction of the following factors of environment:

1. Socio-economic environment2. Family background3. Standard of education and technical

knowledge4. Financial Stability5. Political stability and government’s policy6. Caste and religious affiliation7. Availability of supporting facilities8. Achievement motivation, and9. Personality and personal skill

The environmental factors may be summarised as follows:

1. Entrepreneurship is not influenced by a single factor but is the outcome of the interaction and combination of various environmental factors.

2. By changing the environment, society can be recreated.

3. It is the ‘desire to make money’ that drives one to start an industry rather than the amount one owns.

4. Encouraging government policy and social recognition influence a person to become an entrepreneur.

5. Modify the educational system so as to produce more job-creators rather than job-seekers.

Classification of Industries

Indicators Capital Invested Output Volume No. of Employees employed Raw Material Consumption Production Capacity

Home Industries Cottage Industries

Small Scale Industries Tiny Industries

Medium Scale Industries Large Scale Industries

Cottage Industry:

Manufacturing activity is carried out by the owner himself along with his family members & relatives or at the most with a maximum of 9 employees.

Small Scale Industry Large Scale Industry

Low Capital High Capital Low financial resources High financial resourcesSmall Scale operations Large Scale operationsTraditionally managed Professionally managedSole proprietorship/Partnership

Company form

Limited local coverage Wide area coverageLabour intensive Capital intensiveAutocratic leadership Participative leadershipLess Legal formalities Complex Legal

formalitiesFlexible structure Rigid structureHigh Government assistance

Normal Government assistance

Low output volume High output volumeLow managerial skills High managerial skills

Advantages:

Small Scale Industry Large Scale Industry

Provide employment opportunities

High bargaining power, low ordering cost, High Discount, bulk purchase

Promoting local talent, resources and local self sufficiency

Expertise knowledge back up

Removes regional discrepancies

Wide distribution channels

Integration with large sector

Integration with Technical, financial, marketing and managerial economies

Classification of Industries

a. Use Based Classification :

i. Basic Industries

Which provide essential input for the development of the other industries and the economy. E.g. iron & steel industry forms a basis for the development of the engineering industry. Fertilizer for agriculture, coal, oil & electricity, cement etc.

ii. Capital Goods Industries

Which produce machinery, equipment or tools. A capital good is one which is instrumental in producing other goods & services. Capital goods do not directly serve any consumption requirement. They are used to produce consumer goods and service.e.g.Hand tools and machine toolsSpecialized equipmentsElectric MotorsHeavy Vehicles etc.

iii. Intermediate Goods Industries

Those which manufacture goods that have already undergone manufacturing process but which form input for other industries as material for further processing, part or component.e.g.Cotton SpinningTyers & TubesManmade fibersBolts, nuts, screws, springMetal etc

iv. Consumer Goods Industries

The output of which serve the final consumption requirement.

a. Consumer Durable-Serve the consumer over a relatively long periods.

b. Consumer Non-durable-Goods which are used up at once or within a relatively short periods.

b. Based on Ownership

i. Central Governmentii. State Government

iii. Statutory Corporationsiv. Government Departmentsv. Private Sector

vi. Joint Sector

c. Size of Industries

i. Tiny - 5 lakhii. Small - 5-100 lakh

iii. Medium - 100 –500 lakhiv. Large - 5 – 100 Crorev. Very Large - Over 100 Crore

d. Input Based Classification

i. Agro-based

-Which uses agricultural product as the major input, like sugar, jute textiles etc.,

ii. Forest-based

- Which use forest products as their major inputs, like plywood, paper industry

iii. Marine-based

- Which depend mostly on marine products like fish etc.,

iv. Metal-based

- Which are based on metals like, engineering industries

v. Chemical-base

- Industries like fertilizers, pesticides, paints and varnishes, drugs & medicines etc. –as chemicals are their major or basic inputs.

Cottage Industries :

o Those industries and crafts which are carried on, in the home of the artisan.

o Assisted by family members.o No power is used.o Tools and instruments used are simple.o E.g. hand-spinning, handloom-weaving,

toy-making, rope-making, wood-work etc.

Small Scale Industries :

o Factory-type industries having investment in plant & Machinery does not exceed Rs. 100 lakh.

o Mostly use power and small machineso Employ small number of workers.o Include Ancillary Industries having

investment in plant & machinery does not exceed Rs. 75 lakh.

o Manufactures parts, components, intermediate products, render services like repairs etc.

o Also includes Tiny Industries in which investment in plant and machinery is worth below Rs. 5 lakh regardless of the location.

Traditional Small Industries:

Khadi and other village industries, Handloom industrySericultureHandicrafts etc.

Modern small Industries :Using power and employing labour and with

investment in plant & machinery not exceeding Rs. 60 lakhs.

Village Industries Any industry with a capital investment up to Rs.

15000 per artisan and located in a village with a population below 10000 and produces any goods or renders any services with or without the use of power and in which the fixed capital investment in plant & machinery, land and building per artisan or worker does not exceed Rs. 15,000.

Investment Limits :

The definitions of small scale industries has undergone changes over the years in terms of investment limits in the following manner:

Year Investment limit (Rs.)

Additional conditions

1950 Up to Rs. 5 lakh in fixed assets

<50 persons with power<100 without power

1960 Up to Rs. 5 lakh in plant & machinery

No condition

1966 7.5 “1975 10 “1980 20 “1985 35 “1991 60 “1997 100 “2006 200-Service

500-Manufacturing

Project:

A Project is a specific activity on which money is spent in expectation of returns.

Specific starting pointSpecific end pointSpecific Objectives

A project has a specific geographic location and would serve a group of population.

Every project has three basic attributes.

1. The Input: What project will consume.

Raw Materials, Energy, Manpower, Financial Resources, Organisational Set-up

2. The Out put: What project will generate.

Production of Goods, Services, Financial Output

3. The Social Cost Benefit Characteristics.

The sacrifice, which the society will be called upon to make and the benefits, which will accrue to the society.

Scouting for Project Ideas:

1. Analyse the Performance of Existing Industries

2. Examine the Inputs & Outputs of Various

Industries

3. Review Imports & Exports

4. Study Plan Outlays and Government Guidelines

5. Guidelines to Industries

6. Look at the Suggestions of Financial Institutions

and Developmental Agencies

7. Investigate Local Materials & Resources

8. Analyse Economic and Social Trends

9. Study New Technological Developments

10.Draw Clues from Consumption Abroad

11.Explore the Possibility of Reviving Sick Units

12.Identify Unfulfilled Psychological Needs

13.Attend Trade Fairs

14.Stimulate Creativity for Generating New Product

Ideas.

Facets of Project Analysis

Market Analysis Technical Analysis Financial Analysis Economic Analysis Ecological Analysis

Market Analysis:

Is concerned primarily with two questions: What would be the aggregate demand of the

proposed product/service in future? What would be the market share the project

under appraisal?

The kind of information required are : Consumption trends in the past and the

present consumption level Past and present supply position Production possibilities and constraints Imports and exports Structure of competition Cost structure Elasticity of demand Consumer behaviour, intentions, motivations,

attitudes, preferences, and requirements Distribution channels and marketing policies

in use Administrative, technical, and legal

constraints

Technical Analysis:

The questions raised in technical analysis are: Whether the preliminary tests and studies have

been done or provided for? Whether the availability of raw materials, power

and other inputs has been established? Whether the selected scale of operation is optimal? Whether the production process chosen is suitable? Whether the equipment and machines chosen are

appropriate? Whether the auxiliary equipments and

supplementary engineering works have been proved for?

Whether provision has been made for the treatment of effluents?

Whether the proposed layout of the site, buildings, and plant is sound?

Whether work schedule have been realistically drawn up?

Whether the technology proposed to be employed is appropriate from the social point of view?

Financial Analysis:

The aspects, which have to be looked into, are: Investment outlay and cost of project Cost of capital Projected profitability Break-even point Cash flows of the project Investment worthwhile ness judged in terms

of various criteria of merit Projected financial position Level of risk

Economic Analysis:

Also referred to as social cost benefit analysis, is concerned with judging a project from the larger social point of view. The questions sought to be answered are:

What are the direct economic benefits and costs of the project measured in terms of shadow (efficiency) prices and not in terms of market prices?

What would be the impact f the project on the distribution of income in the society?

What would be the impact of the project on the level of savings and investment in the society?

What would be the contribution of the project towards the fulfilment of certain merit wants like self-sufficiency, employment, and social order?

Ecological Analysis:

Ecological analysis should be done particularly for major projects, which have significant ecological implications like power plants and irrigation schemes, and environmental – polluting industries (like bulk drugs, chemicals, and leather processing). The key questions raised in ecological analysis are :

What is the likely damage caused by the project to the environment?

What is the cost of restoration measures required to ensure that the damage to the environment is contained within acceptable limits?

Market & Demand Analysis

Key Steps:

1. Situational Analysis and Specification of objectives

2. Collection of Secondary information3. Conduct of market survey4. Characterisation of the market5. Demand Forecasting6. Market Planning

1. Situational Analysis and Specification of objectives

To get a “feel” for the relationship between the product and its market.

2. Collection of Secondary information

General Sources of Secondary Information:a. Census of Indiab. National sample survey reportsc. Plan Reportsd. Statistical Abstract of the Indian Unione. India Year Bookf. Statistical Year Bookg. Economic Surveyh. Annual Survey of Industriesi. Guidelines to Industriesj. Annual Reports of the Development Wing,

Ministry of Commerce and Industryk. Annual Bulletin of Statistics of Exports

and Importsl. Techno-Economic Surveym. Industry Potential Surveysn. The Stock Exchange Directory

o. Monthly Studies of Production of Selected Industries

p. Monthly Bulletin of Reserve Bank of Indiaq. Publications of Advertising Agenciesr. Other Publications

3. Conduct of Market SurveyThe information sought may relate to one or

more of the following. Total Demand and rate of growth of demand Demand in different segments of the market Income and price elasticity of demand Motives for buying Purchasing plans and intentions Satisfaction with existing products Unsatisfied needs Attitudes toward various products Distributive trade practices & preferences Socio –economic characteristics of buyers

4. Characterisation of the Market Effective demand in the past & present Breakdown of demand Price Methods of distribution and sales promotion Consumers Supply and Competition Government Policy

5. Demand Forecasting

6. Market Planning Pricing Distribution Promotion Service

Technical Analysis

Technical Analysis is concerned primarily with:

Material inputs and utilities Manufacturing process / technology Product Mix Plant Capacity Location and site Machineries and equipments Structures and civil works Project charts and layouts Work schedule

1. Material inputs and Utilities

May be classified into four broad categories;

a. Raw MaterialsI. Agricultural products

II. Mineral ProductsIII. Livestock and forest productsIV. Marine products

b. Processed Industrial Materials and components

Base metals, semi-processed materials, manufactured parts, components, sub-assemblies

c. Auxiliary materials and factory supplies

Chemicals, additives, packaging materials, paints, varnishes, oils, grease, cleaning materials etc.

d. Utilities – Power, water, steam, fuel etc.

2. Manufacturing Process / Technology

a. Choice of Technology

Plant Capacity Principal Inputs Investment outlay and production cost Use by other units Product mix Latest developments Ease of operation

b. Acquiring Technology Technology licensing Outright purchase Joint venture arrangement

c. Appropriateness of Technology

3. Product Mix4. Plant Capacity

Technology requirement Input Constraints Investment Cost Market Conditions Resources of the firm Government policy

5. Location and Site

Proximity to Raw materials and markets Availability of infrastructure Government Policy Other Factors

6. Machineries and Equipments

a. Plant (Process) Equipmentsb. Mechanicalc. Electricald. Instrumentse. Controlsf. Internal Transportation Systemg. Others

Constraints in selecting M / E Procurement of Plant & Machinery

7. Structures and Civil Works

Site Preparation and Development Buildings and Structures Outdoor Works

8. Project Charts & Layouts

a. General Functional Layoutb. Material Flow Diagramc. Production Line Diagramd. Transport Layoute. Utility Consumption layoutf. Communication Layoutg. Organisational Layouth. Plant Layout

9. Work Schedule

Reflects the plan of work concerning installation as well as initial operation.

To anticipate problems To establish the phasing of investments To develop a plan of operations

Financial Analysis

Cost of Project Means of Financing Estimates of sales & production Cost of production Working capital requirement and its financing Estimates of working results Break-even point Projected cash flow statements Projected balance sheets

1. Cost of project

Land and site development Building and civil works Plant and machinery Technical know-how and engineering fees Expenses on foreign technicians and training

of Indian technicians abroad Miscellaneous fixed assets Preliminary and capital issue expenses Pre-operative expenses Provision for contingencies Margin money for working capital Initial cash losses

3. Means of finance

4. Estimates of Sales & Production

5. Cost of Production Material Cost Utilities Cost Labour Cost Factory overhead cost

6. Working capital requirements & its financing

7. Profitability Projections

a. Cost of Productionb. Total administrative expensesc. Total sales expensesd. Royalty and know-how payablee. Total cost of production (a+b+c+d)f. Expected salesg. Gross profit before interesth. Total financial expensesi. Depreciationj. Operating profit (g-h-i)k. Other incomel. Preliminary expenses written offm. Profit /loss before taxation (j+k-l)n. Provision for taxationo. Profit after tax (m-n)

Less dividend on - Preference capital- Equity capital

p. Retained profitq. Net cash accrual (p+i+l)

8. Break even point

9. Projected cash flow statements

10.Projected Balance sheets

Check List for Feasibility Report

1. Examination of public policy with respect to the Industry.

2. Broad specifications of outputs and alternative techniques of production.

3. Listing and description of alternative locations.

4. Preliminary estimates of sales revenue, capital costs and operating costs of different alternatives.

5. Preliminary analysis of profitability for different alternatives.

6. Marketing analysis.

7. Specification of product pattern and product prices.

8. Raw material investigation and specification of sources of raw material supply.

9. Estimation of material energy, flow balance and input prices.

10.Listing of major equipment by type, size and cost.

11.Listing of auxiliary equipment by type, size and cost.

12.Specification of sources of supply for equipment and process know-how.

13.Specification of site and completion of necessary investigation.

14.Listing of buildings, structures and yard facilities by type, size and cost.

15.Specification of supply sources, connection costs and other costs for transportation services, water supply and power.

16.Preparation of lay-out.

17.Specification of skill-wise labour requirements and labour costs.

18.Estimation of working capital requirements.

19.Phasing of activities and expenditure during construction.

20.Analysis of profitability.

21.Determination of measures for combating environmental problems.

22.Analysis of the past performance of the enterprise responsible for implementing and running the project with respect to project completion, capacity utilisation and profitability.

23.State of preparedness to implement the project rapidly.

Contents of a Project Report.

1. Objective and scope of the report.

2. Product characteristics ( Specifications, product uses and application, standards and quality)

3. Market position and trends (installed capacity, production and anticipated demand, export prospects and information on import and export, price structure and trends).

4. Raw materials (requirement of raw materials, prices, sources and properties of raw materials).

5. Manufacture (Processes of manufacture, selection of process, production schedule and production technique).

6. Plant and machinery (Equipment and machinery, instruments, laboratory equipments, electric load and water supply and the essential infrastructure).

7. Land and Building (Requirement of land area, building, construction schedule).

8. Financial implications (Fixed and working capital investment, project cost and profitability).

9. Marketing channels (Trading Practices and marketing strategy).

10.Personnel (Requirement of staff, labour and expenses on wage payments).

Entrepreneurs:

a. Phanendra Sama – www.redbus.in

i. Inspiring Leadership

(Will, Vision, Values, Skill)

ii. Innovative Strategies

iii. Distinct Identity ( Purpose, Value, Culture)

iv. Process Driven Implementation

v. Win-Win relationship with stake holders

b. Ashank Desai – Mastek

i. Risk Taking

ii. Look at Opportunities

iii. Find Right Business for you

iv. Being adaptive to Change – yourself & business

v. Build business for scalability

vi. Values and Vision

vii. You are responsible – be accountable

Enablers :

1. Education

2. Value

3. Relationship

Innovation : One should be Fast, Smart & Simple

To innovate product

Innovate Process

Innovate people.

Today’s requirement

1. Portability

2. Flexibility

Leverage Technology (to understand Future).

C. Sumant – Yatn Foundation

1. Comprehension

2. Analysis

3. Conceptualisation

4. Implementation

Emotional Attachment is must to make difference.

Manoj Sharma – uniqoteq, Finland

1. Risk Taker – from comfort zone to uncomfortable zone

2. Believing in oneself

3. No Degree – Dream

4. Courage – Not to give up.

5. Ready for change

6. Don’t listen to Negativity

Success – Creating environment for success for others.

Money is just like Soldiers.