1.

INTRODUCTION TO ENTREPRENEURSHIP
1. State and discuss various barriers to entrepreneurship. Also state the factors, which can
reduce the effect of barriers.
Ans : Barriers to Entrepreneurship : Every business activity involves some problems; the
entrepreneur is not an exception. An entrepreneur has to face many problems from the concept
searching till delivering the goods/services to the consumers. Many entrepreneurs fail to sustain
their enterprise due to some factors (barriers). Following are some of those barriers :

1) Lack of viable concept (business idea) : Viable means practically possible. Entrepreneur
converts creative ideas into a saleable product or service. But, he must be very careful while
selecting his project. He should select a simple, yet most appropriate project from a number
of projects. If the project is selected properly, half the work is done. Improper selection may lead
him to trouble. In short, an entrepreneur must take due care while selecting his project.

2) Lack of market knowledge : Market knowledge refers to knowledge about customers, their
needs and wants; the substitute products, their price, quality and features; gap between
demand and supply and so on. An entrepreneur must have knowledge of all these. The world
has become a small village due to technological development. Moreover, due to globalization and
liberalization, many business enterprises have entered our country. Today, an entrepreneurs
customers are not limited to an area or a town; they may be scattered across the world. If an
entrepreneur does not keep himself updated, he may be out of the market.

3) Lack of technical skills : Technological change plays an important role in economic

development of a country. Inventions and innovations have improved the global economy. A
good entrepreneur always looks for introducing changes in the pattern of production. i.e. he
always tries to find out better methods and techniques of production for improving the
quality of product and for satisfying the consumers. If an entrepreneur is not interested in
exploring new ideas, technology and production methods, he cannot develop necessary
technical skills and cannot sustain in todays competition.

4) Lack of seed capital : Seed capital means owners (entrepreneurs) contribution in the
project. Capital is the most important factor of production. Sufficient fund must be available at
right time, especially, in non-backward areas, financial assistance is only available after the
business starts. In absence of adequate fund, various resources cannot be collected.

5) Time pressure and distractions : It is said that delay is dangerous. This is true in case of an
entrepreneur. Setting up an enterprise involves a number of activities such as project
preparation, procurement of land and finance, recruiting staff, installation of machines and
equipments etc. Delay may occur at any stage, which ultimately, affects production and
profitability.

6) Government policies : An entrepreneur has to work within the framework of various acts,
rules & regulations and procedures prescribed by the government. Sometimes rules &
regulations are very rigid; too much time is required to follow them. They restrict the activity
and freedom of entrepreneurs. Even frequent changes take place in policies related to SME
when the ruling party changes. Any unfavorable change in policy can badly affect the
entrepreneur and his business.

7) Social stigma (socio-economic constraints) : Social stigma means rigid mentality of

society. An entrepreneur is affected by various socio-economic factors such as the level of
education, technical knowledge, family background, income, nature of area (developed or
developing), where he is living. All these things mould his personality accordingly. It is seen
that a person having high level of education or having a family business can manage his business
successfully.

8) Lack of motivation : Motivation is a very important factor in entrepreneurship. We all require

one or other motivation for doing something. When an individual starts a new business, he is
very enthusiastic and aiming for success. But, when he faces actual challenges of real
business, he may lose his motivation. Loss of motivation leads to loss of interest. Such a
person gradually withdraws from the business. Sometimes, complacency (self-satisfaction) can
also cause loss of motivation. When a person is self-satisfied, he does not have any motivation
to do something new. As a result, he stops giving efforts. Continuous motivation is necessary to
grow. Complacency becomes a barrier to growth.

9) Lack of business know-how : Doing business is not a childs play. It needs deep study and
experience of various aspects of business e.g. target market, technology to be adopted,
managing finance and people etc. An entrepreneur may have a very good and innovative
product or technique, but if he does not know how to make it profitable, his business may fail.

10) Monopoly and protectionism : When there is monopoly of a company in a particular area, it
becomes difficult for new companies to enter into that area. On the other hand, protectionism
refers to restricting foreign companies to enter local market by price fixing, limiting
production quota, blocking import, heavy custom duties, creating foreign exchange
problem etc. All these things can choke ones business.

11) Inhibitions due to patents : A patent is an exclusive right given by the government to an
inventor. Due to that, only inventor of patented item can manufacture or use it. Others cannot
manufacture or use it without the inventors permission. If an entrepreneur is not aware of that, he
may unknowingly copy someones patented work and may get into trouble.

Factors that may reduce the effect of barriers : Various barriers and their remedial factors are
as follows :

Barrier Remedial Factor(s)

Lack of viable concept Market contacts
Lack of market familiarity Market contacts, Local companies
Lack of technical skills Capable local manpower, Technical
education & support, Supplier
assistance
Lack of seed capital Supplier assistance & credit, Local
venture capitalists, Venture-savvy
bankers
Lack of business know-how Capable local advisors,
Entrepreneurial education
Complacency Entrepreneurial education,
Successful role models
Social stigma Successful role models
Time pressure & distractions ---
Legal constraints & Regulation ---
Protectionism, Monopoly and Patent ---
inhibitions

2. Explain the role of entrepreneurship in economic development of a country.

OR
State the importance or benefits of entrepreneurship for a country.
OR
Discuss how an entrepreneur contributes to the economic development of his country.
Ans : Role of entrepreneurship in economic development of a country : The process of
entrepreneurship is very important for the economic development of a country. According to
Schumpeter, an entrepreneur is a Key figure in economic development because of his/her
role of an innovator. We can understand the role of entrepreneurship in a nations economic
development from the following points :

1) Optimum utilization of factors of production : The process of entrepreneurship activates

factors of production. In absence of entrepreneurship, the factors of production remain idle
(unutilized). Entrepreneur gathers all the factors of production and utilizes them in the best
possible manner.

2) Development of backward areas : When a new enterprise starts in any backward/ tribal
area, it increases infrastructural facilities such as roads, communication, transportation,
electricity, drinking water, drainage etc. in that area. Ultimately, development of backward/tribal
area becomes possible. This helps in balanced regional development of the country.

3) Generation of employment opportunities : Unemployment is one of the major problems of

our country. When a new enterprise starts, or an existing enterprise expands, it generates
employment opportunities for unemployed people in and around the area. That helps to reduce
many socio-economic problems (such as consumption of alcohol, illiteracy, poverty,
superstitions, injustice to women or poor etc.).

4) Introduction of New Products/Services and New Technology : Research activities focus

upon developing new methods of doing work more efficiently - with latest tools and
equipments. That results into new products or services. People get better quality product and
satisfactory service at a reasonable price.

5) Creation of New Source and New Markets : Entrepreneurship brings new products / services
and develop new markets. It also finds out new sources of raw material and encourages R&D
activities.

6) Improvement in Standard of living : Generation of employment increases purchasing power

of people-especially the weaker sections of society. So, they can consume more products of
higher quality. Through innovation, entrepreneur brings new products / services, technology
and markets. Due to that, a large variety of goods and services become available, which
make life comfortable and luxurious. This improves peoples standard of living.

7) Contribution to Overall Growth and Development of Society : The process of

entrepreneurship helps various sections of society in following ways :
Consumers : by giving better quality products / services and variety at reasonable price
Investors : by providing investment opportunities and giving higher returns on their
investment.
Suppliers : by purchasing raw material, tools, equipments etc.
Government : by paying taxes etc.

8) Promotion of Capital Formation : Entrepreneurship leads to higher income, higher saving

and higher investment. It mobilizes idle saving of public. This leads to higher capital formation.

9) Increase in National Income : Entrepreneurship development leads to more number of

organizations, more production, more demand, generation of higher income, higher
investment and diversification of resources. All these lead to increase in national income.

10) Earning of Foreign Exchange : Innovative products, services and techniques promote
exports and increase foreign exchange earnings. Data shows that SSI contributes to almost
45-55% of Indian exports. If more encouragement is given to entrepreneurship, more foreign
exchange can be earned. It contributes to national income and economic development.

11) Increased Rate of Economic Growth : Entrepreneurship reduces concentration of power

in few hands (mainly top-notch industrialists/capitalists). It helps in equal distribution of wealth,
income and political power throughout the country. All these increase the rate of economic
growth of a country.

Thus, entrepreneurship is a catalyst for development. We can explain this thing in a better way
by the following statement :
Economy is the effect, for which, entrepreneurship is cause.