Em Notes

Notes on Entrepreneurship Management
be repaired and expedients to be devised, three more implicit factors are deemed to be essential. These are:
1Moral qualitie~ for work judgment, perseverance and a knowledge about the business world.
0.1. 2Command over sufficient capital and Defi nition of Entrepreneur. 3Uncertainty of profits. Ans. The word' 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) Marshal also advocated the in similar way as "the director or a manager of a special class institution, also defined an entrepreneur significance of organization among the services of public musicalof business undertakers. th one who 'gets-up' entertainment, especially musical performance". In the early 16 century, it was applied on those who were engaged in military expeditions. It was extended to cover civil engineering activities th such as constructionInnovator Entrepreneur as an and fortification in the 1 7the century. It was only in the beginning of the 18 century that the word was used to refer to economic aspects. In this way , the evolution of the concept of entrepreneur is considered the first time in 1934, centuries. a crucial rolethe 'innovation' to the entrepreneur Joseph A. Schumpeter, for over more than four assigned Since then, of term 'entrepreneur' is used in various ways and various views. These views are broadly classified intoconsidered economic development in his magnum opus "Theory of Economic Development' Schumpeter three groups, namely, risk-bearer, organizer and innovator.change brought by entrepreneur by instating views. . as a discrete dynamic Now, we are discussing below each of these new combinations of production, Le. innovations. The introduction of new combination of factors of production, ,according to him, may occur in anyone of the following five forms: Entrepreneur as a Risk-Bearer 1The introduction of a new living in France, was Richard Cantillon, an Irish man product in the market.he first who introduced the term 'entrepreneur' and his 2The instituting of a new production technology which is century. He defined entrepreneur branch of unique risk-bearing function in economics in the early 18the not yet tested by experience in theas an agent manufacture concerned. who bUYS factors of production at certain prices in order to combine them into a product with a view to 3The opening of a new market into which the specific product has not previously entered. selling it at uncertain prices in future. He illustrated a farmer who pays out contractual incomes which are 4The discovery of a new source of supply of raw material. certain to carrying out ofand new form of organization of any industry by creating offurther statesposition or 5The the landlords the labourers and sells at prices that are 'uncertain'. He a monopoly that so do merchants also whoof it. certain payments in expectation of uncertain receipts. Thus, they too are 'riskthe breaking up make bearing' agents of production.
Knight also described entrepreneur to be a specialized group of persons who bear uncertainty. Uncertainty is def\ned as a risk which cannot be insured against and is incalculable. He, thus, draws a distinction between ordinary risk and uncertainty. A risk can be reduced through the insurance principle, where the distribution of the outcome in a group of instances is known. On .. the contrary, uncertainty is the risk which cannot be calculated. The entrepreneur, according to Knight, is the economic functionary who undertakes such responsibility of uncertainty which by its very nature cannot be insured, not capitalized nor salaried too. Entrepreneur as a Organiser Jean-Baptiste say, an aristocratic, industrialist, which his unpleasant practical experiences developed the concept of entrepreneur a little further which survived for almost two centuries. His definition associates entrepreneur with the functions of coordination, organization and supervision. According to him, an entrepreneur is one who combines the land of one, the labour of another and the capital of yet another and thus, produces a product. By selling the product in the market, he pays interest on capital rent on land and wages to labourers and what remains is his / her profit. Thus, say has made a clear distinction between the role of the capitalist as a financer and the entrepreneur as an organizer. He further elaborates that in the course of undertaking a number of complex operations like obstacles to be surmounted, anxieties to be suppressed, misfortunes to
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1Hard Work: Willingness to work hard distinguishes a successful entrepreneur from unsuccessful one. The entrepreneur '/'Jith his tedious, sweat -filled hours and perseverance revive their business even from on verge of failure. In nutshell, most of the successful entrepreneurs work hard endlessiy, especially in the beginning and the same becomes their whole life. 2Desire for High Achievement: The entrepreneurs have a strong desire to achieve high goals in business. This high achievement motive strengthened them to surmount the obstacles, suppress anxieties, repair misfortunes and devise expedients and only set up and run a successful business. 3Highly Optimistic: The successful entrepreneurs are not distribute by the present problems faced by them. They are optimistic for future that the situations will become favourable to business in future. Thus, they can run their enterprises successfully in future.
.4. Independence: One of the common characteristics of the successful entrepreneurs has been that they do not like to be guided by others and to follow their routine. They resist to be pigeonholded. They liked to be independent in the matters of their business. 1Foresight: The entrepreneurs have a good foresight to know about future business environment. In other words, they well visualize the likely changes to take place in market, consumer attitude, technological developments, etc. and take timely actions accordingly. 2Good Organiser: Different resources required for production are divorced from each other. It is the ability of the entrepreneurs that brings together all resources required for starting up an enterprise and then to produce goods. . 3Innovative: Production is meant to meet the customers' requirements. In view of the changing taste of customers from time to time, the entrepreneurs initiate research and innovative activities to produce goods to satisfy the customers' changing demands for the products. The research institutes / centres established by Tata, Birla, Kirloskar, etc. are examples of the innovative activities taken by the successful entrepreneurs in our country.
Schumpeter also made a distinction between an inventor and an innovator. An inventor is one who discovers new methods and new materials. And an innovator utilizes inventions and discoveries in order to make new combinations. In sum, the concept of the entrepreneur is intimately associated with the three elements -risk breaking, organizing and innovating. Thus, an entrepreneur can be defined as a person who tires to create something new, organies production and undertakes risks and handles economic uncertainty involved in enterprise. . 0.2. What are the Characteristics on an Entrepreneur. 0\ Ans. If we go through the business history of India, we come across the names of persons who have emerged as successful entrepreneurs. For example, Tata, Sirla, Modi, Dalmia, Kirlosker and others are well-known names of successful entrepreneurs in the country who started their business enterprises with small size and made good fortunes. Success or otherwise of a small enterprise is , to a great extent, attributed to the success or otherwise of the entrepreneur himself I herself. Then, the question is: What makes the entrepreneurs successful? Whether they had anything common in their personal characteristics? The scanning of their personal characteristics shows that there are certain characteristics of entrepreneurs which are found usually prominent in them. The principal ones are scanned and discussed here:
r----------~----An entrepr~neur be!ng the ~wrieroT T~~~~;~:;-;s a serv~~~~oe~~;--' '~ 3 Rit'k-b. ,,'. the enterprise assumes all nsks and , b '....k rid' the> . ,5 ea,lng rt . , , 'th ear any n" InVu.ve In ~ , unce am y InVOlveo :n runnmge t . en erpnse,
It'
en erpnse. _____ , ________________~_~ The ~ew~rd a~ entrepi~neur getsfor
4. Reward
IAmanager,getssalary as rew:='fd beanng risks Involved In the I for the services rendered by him in enterprise is profit which is highly the enterprise. Salary of a manager uncertain. is certain and fixed. Entrepreneur himself thinks over
what and how to produce goods to meet the changing demands of the customers. Hence, he acts as an innovator also called a 'change aQent'. An entrepreneur needs to possess qualities and qualifications like high achievement motive, originality in thinking, foresight, risk bearing ability and so on. But, what a manager does is simply to execute the plans prepared by the entrepreneur. Thus, a manager simply translates the entrepreneur's ideas into practice. On the contrary, a manager needs to possess distinct qualifications in terms of sound knowledge in management theory and practice.
5. Innovation
6. Qualifications
After going through the above points of distinctions, it is clear that an entrepreneur differs from a manager. 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 servant.
FUNCTION OF AN ENTREPRENEUR
An entrepreneur does perform all the functions necessary right from the genesis of an idea up to the DISTINCTION of an enterprise.ENTREPRENEUR ANDtheMANAGER 2. 009 manner. establishment BETWEEN AN These can be listed in A following sequential Sometimes, the two and scanning ofan entrepreneur and a manager are considered as synonym, Idea generation terms, namely, the best suitable idea. i.e. meaning the same. In fact, the objectives. are two economic concepts meaning two different meanings. Determination of the business two terms TheProduct analysisdistinction between the two are presented in following table.1. major points of and market research Determination of form of ownership I organization. Completion of promotional formalities. Table:1 Difference between an Entrepreneur and a Manager Raising necessary funds. Procuring machine and material Recruitment of men Point Entrepreneur Manager The main motive of an Undertaking the business operations. entrepreneur But, the main motive of a manager is to start a venture by setting up an is to render his services in an 1. enterprise. He understands the enterprise already set up by some venture for his personal one else. Motive Qratification. A manager is the servant in the enterprise owned by the 2. An entrepreneur is the owner of the enterprise
-.
Status
entrepreneur A manager as a servant does not bear any risk involved in the enterprise.
i. Innovating Entrepreneurs: An innovating entrepreneur is one who introduces new goods, inaugurates new method of production, discovers new
enterprise. It is important to note that such entrepreneurs can work only when a certain level of development is already achieved, and people look forward to change and 0.3. Discuss the types cf Entrepreneurs improvement. Ans. Clarene Danhof, on the basis of his study of the American Agriculture, classified entrepreneurs in the ii. manner that at the initial stage of economic development, entrepreneurs have less initiative and drive and Imitative Entrep'reneurs: as economk; development proceeds, they become more innovating and enthusiastic. Basing on this, he These classified entrepreneurs into four types. are characterized by readiness to adopt successful innovations inaugurated by innovating entrepreneurs. Imitative entrepreneurs do not innovate the changes themselves, they only imitate techniques and technology innovated by others. Such types of entrepreneurs are particularly suitable for the under-developed regions for bringing a mushroom drive of imitation of new combinations of factors of production already available in developed regions. Kilby has enumerate about 13 functions of an entrepreneur. While others can also add certain more functions to this list, the said functions appear to be major ones. For our convenience, we have classified all the entrepreneurial functions into three broad categories. i. Risk-bearing ii. Organisation iii. Innovation
Lifetimers: These entrepreneurs take business as an integral part to their life. Usually, the 'family enterprise and businesses which mainly depend on exercise of personal skili fall in this type I category of entrepreneuis. INTRA?RENEUR (Short notes) Of late, a new breed of entrepreneurs is seen in large industrial organizations. They are called 'intrapreneurs'. They emerge from within the confines of an existing enterprise. In big organizations, the top executives are encouraged to catch hold of new ideas and then convert these into products through research and development activities within the framework of organization. The concept of entrepreneurship has become very popular in developed cou ntries like America. It is found that an increasing number of intrapreneurs is leaving their jobs in big organizations and is starting own enterprises. Many of such intrapreneurs have become exceedingly successful in their ventures. What is more that they are causing a threat to the organizations they left. Such intrapreneurs breed to the innovative entrepreneurs who inaugurate new products.
Having understood the meanings of entrepreneur and intrapreneur, now the two can easily be distinguished fromiii. each other on the following bases: Fabian Entrepreneurs: Fabiar.l entrepreneurs are characterized by very great caution and skepticism in experimenting new change in the their enterprises. They imitate only when it becomes perfectly clear that failure to do so would result in a loss of the relative position in the enterprise. elf raises funds required for the enterprise. unds are not raised by the intrapreneur. An intrapreneur does not refusal to adopt opportunities in the enterprise. O iv. Drone Entrepreneurs: These are characterized by a fully bear the risk involved to make changes in production formulae even at the cost of severely reduced returns relative to other like producers. Such entrepreneurs may even suffer from lossess but they are not ready to make changes in their existing production methods.
Following are some more types of entrepreneurs listed by some other behavioural scientists: perates from outside. Solo Operators: These are the entrepreneurs who essentially work alone and, if needed at all, employ a few employees. In the beginning, most of the entrepreneurs start their enterprises like them.
Active Partners: Active partners are those entrepreneurs who start / carry on an enterprise as a joint venture. It is important that all of them actively participate in the operations of the business. Entrepreneurs who only contribute funds to the enterprise' but do not actively participate in business activity are called simply 'partner'. Investors: Such entrepreneurs with their competence and inventiveness invent new products. Their basic interest lies in research and innovative activities. Challengers: These are the entrepreneurs who plunge into industry because of the challenges it presents. When one challenge seems to be met, they begin to look for new challenges. Buyers: These are those entrepreneurs who do not like to bear much risk. Hence, in order to reduce risk involved in setting up a new enterprise, they like to buy the ongoing one.
In the opinion of A, H, Cole, "Entrepreneurship is the purposeful activity of an individual or a group of associated indi'Jiduals, undertaken to initja~e, initiate, maintain or aggrandize prOfit by production or disti'ibution of economic goods and services". According to Schumpeter, "Entrepreneurship is based on purposeful and systematic innovation. It included not only the independent business but also company directors and managers who actually carry out innovative functions".
In all above definitions, entrepreneurship refers to the functions performed by an entrepreneur in establishing an enterprise. Just as management is regarded as what managers do, entrepreneurship may be regarded as what entrepreneurs do. In other words, entrepreneurship is the act of being an entrepreneur. Entrepreneurship is a process involving various actions to be undertaken to establish an enterprise. it is, thus, process of giving birth to a new enterprise. Innovation and risk-bearing are regarded as the two basic elements involved in entrepreneurship. Let us understand what these two terms actually mean. Innovation: Innovation, i.e. doing something new or something different is a necessary condition to be called a person as an entrepreneur. The entrepreneurs are constantly on the look out to do something different and unique to meet the changing requirements of the customers. They may or may not be inventors of new products or new methods of production, but they possess the ability to foresee the possibility of making use of the inventions for their enterprises. Let some facts speak. In order to satisfy the changing preference of customers, now-a-days fruit juice is sold in small cartons (Mango Fruity) instead of bottles so that customers can carry it and throwaway the container after drinking the juice. Let us take another example. Lipton offers its tea in small packs known as 'PUDIYAS' to meet the requirements of its rural customers. You may have heard of Henry Ford the founder of the Ford Motor Company in the United States. Remember, Henry Ford himself did not invent the automobile. Foreseeing the people's desire to have passenger cars at somewhat lower rates, he applied new methods of mass production to offer passenger cars to the customers at affordable price. Since customers taste and preferences always keep on changing, hence the entrepreneur needs to apply invention after invention on Q.4. Discuss the Concept of Entrepreneurship & Theories. a continuous basis to meet the customers changing demands for products. Ans. Like other economic concepts, entrepreneurship has been a subject of much debate and discussions. It is an elusive concept. Hence, it is defined differently by different authors. While some call Risk Bearing: as 'risk a new enterprise always involves risk and trying for doing something new and entrepreneurshipStarting bearing', others view it "innovating' and yet others consider it 'thrill-seeking'. Let us different is also risky. The reason of entrepreneurship to The enterprise may earn profits or all about. consider some important definitions is not difficult to seek. understand what entrepreneurship isincur losses because of various factors like increasing competition, changes in customer preferences. shortage of raw material and so on. An entrepreneur, therefore, needs to be a risktaker, not risk avoider. His risk-bearing ability enables on Entrepreneurship held in or one venture to term 'entrepreneurship' ultimately helps In a Conferencehim even if he fails in one timeUnited States, the persist on and on which was defined as him succeed. The Japanies proverb applies to him: follows: "Entrepreneurship is the attempt to create value through recognition of business opportunity, the "Fall seven times, stand up eight" management of risk-taking appropriate to the opportunity and through the communicative and management skills to mobilize human, financial ~nd material resources necessary to bring a project to fruition". Though the term entrepreneur is often used interchangeably with entrepreneurship, yet they are conceptually different. The relationship between the two is just like the two sides of the same coin as depicted in the following table.
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TABLE: Relationship between Entrepreneur and Entrepreneurship 'Entrepreneur Person Organiser Innovator Riskbearer Motivator Creator Visualiser Leader Imitator Entrepreneurship Process Organisation Innovation Riskbearing Motivation Creation Vision Leadership Imitation
Thus, entrepreneurship is concerned with the performance and coordination of the entrepreneurial functions. This also means that entrepreneur precedes entrepreneurship. GROWTH OF ENTREPRENEURSHIP IN INDIA That a proper understanding of the growth of entrepreneurship'of any country would evolve within the context of the economic history of the particular country becomes the subject matter of this section. The growth of entrepreneurship in India is, therefore, presented into two sections, viz. Entrepreneurship during Pre-Independence and Post-Independence.
In this theory of economic development, David Ricardo identified only three factors of production. namely, machinery, capital and labour , among whom the entire prcduce is distributed as rent, profit and wages respectively. R:cardo appreciated the virtues of profit in capital accumulation. According to him, profit leads to saving of wealth which ultimately goes to capital formation. Thus, in both the classical theories of economic development, there is no room for entrepreneurship. And, economic development seems to be automatic and self -regulated. Thus, the attitude of classical economists was very cold towards the role of entrepreneurship in economic development. They took the attitude: "the firm is shadowy entity, and entrepreneur even shadower -or at least is shady when he is not shadowy" The economic history of the presently developed countries, for example. America, Russia and . Japan tends to support the fact that the economy is an effect for which entrepreneurship is the cause. The crucial role played by the entrepreneurs in the development of the Western countries has made the people of u.nder developed countries too much conscious of the significance of entrepreneurship for economic development, it is necessary to increase entrepreneurship both qualitatively and quantitatively in the country. It is only active and enthusiastic entrepreneurs who fully explore tne potentialities of the country's available resources -labour, technology and capital. Schumpeter visualized the entrepreneurs as the key figure in economic development because of his role in introducing innovations. Parson and Smelser described entrepreneurship as one of the two necessary conditions for economic development, the to other being the increased output of a capital. Harbison includes entrepreneurs among the prime movers of innovations and Sayigh simply describes entrepreneurship as a necessary dynamic force. It is also opined that development does not occur spontaneously as a natural consequence when economic conditions are in some sense 'right': a catalyst or agent is needed, and this requires an entrepreneurial ability. It is this ability that he perceives opportunities which either others do not see or care about. Essentially, the entrepreneur searches for change, sees need and then brings together the manpower, material and capital required to respond the Q.5. what is sees. Akio Morita, the President of Sony who adopted the opportunity What he the role of Entrepreneurship in Economic Development. company's products to create Walkman Personal-Stereo and India's Gulshan Kumar of T-Series who skimmed the audio-cassette starved Ans. The word development is used such many ways that its vast Indian market are the clearest examples ofin so able entrepreneurs. precise connotation is often baffling. Nevertheless, economic development essentially means a process of upward change whereby the real per capita income of a country increases over a long period of time. Then, a simple but meaningful question arises what causes economic development? This question has absorbed the attention of The role of entrepreneurship in economic development varies from economy to economy depending light on an scholars of socio-economic change for decades. In this section, we attempt to shed upon its material resources, industrial climate and the responsiveness of the political system to the important aspect of that larger question, the phenomenon of entrepreneurship. The one major issue we entrepreneurial function. The entrepreneurs contribute more in favourable opportunity conditions than itin address here is what is the significance of entrepreneurship for economic development? Does add an the economies with relatively less favourable opportunity conditions. important independent influence to that of other factors widely agreed to promote economic development? Viewed from opportunity point of view the underdeveloped regions, due to the paucity of funds, lack of skilled labourSmith, the foremost classical economist, assigned no significance lessentrepreneurial role in Adam and non -existence of a minimum social and economic overheads, are to conducive to the emergence particularly of innovativemonumental work such regions, entrepreneurship does not emerge economic development in his enterperneurs. In 'An Enquiry into the Nature and Causes of the Wealth out of industrial background with well developed institutions to support and encourage it. Therefore, of Nations', published in 1976. Smith extolled the rate of capital formation as an important determinant entrepreneurs in such regions may not problem of economic development was ergo largelyinnovations of the of economic development. The be an "innovator" but an "imitator" who would copy the the ability introduced by the "innovative" entrepreneursinof thecountry. According toIn these areas, according to people to save more and invest more any developed regions. him ability to save is governed by McClelland's concept productivity to aspect fo entrepreneurship, some people withdue to achievement improvement in of personality the increase in the dexterity of every worker high division of labour. motivation come forward to person as the entrepreneurialhis own interest who stationary inertia ,pursue it to his Smith regarged every behave in an best judge of way to change the should be left to as-they wouldown be satisfied with the presenthim, each individual in the society. 'invisi hie hand' in pursing his I her not advantage. According to status that they have is led by an interest. He always advocated the policy of Iiassez -faire in economic affairs.
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Under the conditions of paucity of funds, and the problem of imperfect market in underdeveloped regions, the entrepreneurs are bound to launch their eriterprises on a small -scale. As imit.ation requires lesser funds that innovation, it is realized that such regions should have more imit:ative entrepreneurs. And it is also felt that imitation of inno'Jat:ons introduced in developed regions on a massive scaie can bring about rapid economic development in under -developed regions also. But, it does not mean that such imitation requires in any way lesser ability on the part of entrepreneurs. In this regard, Berna opines : "It involves often what has aptly been called 'subjective innovation', that is, the ability to do things which have not been done before by the particular industrialists, even though unknown to him, the problem may have been solved in the same way by the others. "These imitative entrepreneurs constitute the main sprig of development of underdeveloped regions. Further, India which itself is an under-developed country aims at decentralized industrial structure to militate the regional imbalances in levels of economic development, small -scale entrepreneurship in such industrial structure plays an important role to achieve balanced regional development. It is unequivocally believed that small-scale industries provide immediate large scale employment, ensure a more equitable distribution of national income and also facilitate an effective resourced mobilization of capital and skill which might otherwise remain unutilized. Lastly, the establishment of Entrepreneurship Development Institutes and alike by the Indian Government dUring the last decades is a good testimony to her strong realization about the premium mobile role of entrepreneurship played in economic development. The important role that entrepreneurship plays in the economic development of an economy can now be put in a more systematic and orderly manner as follows: 1. Entrepreneurship promotes capital formation by mobilizing the idle saving of the public. 2. It provides immediate large -scale employment. Thus, it helps reduce the unemployment problem in the country, Le. the root of all socio -economic problems. 3. It promotes balanced regional development. 4. It helps reduce the concentration of economic power. 5. It stimulates the equitable redistribution of wealth, income and even political power in the interest of the country. 6. It encourages effective resource mobilization of capital and skill which might otherwise remain unutilized and idle. 7. It also induces backward and forward linkages which stimulate the process of economic development in the country. 8. Last but no means the least, it also promotes country's export trade Le., an important ingredient to economic development.
entrepreneur is defined as "an enterprise owned and controlled by a \vomen having a minimum financial interest of 51 percent of the capita! and giving at least 51 percent of the employment generated in the enterprise to women". However, this definitio~l is subject to cr!t!cisrn mainly on the condition of employing more than 50 percent women workers in the enterprises owned and run by the women.
In nutshell, women entrepreneurs are those women who think of a business enterprise, initiate it, organize and combine the factors of production operate the enterprise and undertake risks and handle economic uncertainty involved in running a business enterprise. Growth of Women Entrepreneurship: Woman in India constitute around half of the country's population. Hence, they are regarded as the "better half of the society". In the official proclamation, they are at par with men. But, in real life, the truth prevails otherwise. Our society is still male-dominated and women are not treated as equal partners both inside and outside four walls of the house. In fact, they are treated as abla, i.e., weak and dependent on mean. As such, the Indian women enjoy a disadvantageous status in the society. Some facts be given are The much low literary rate (40%), low work participation rate (28%) and low urban population share (10%) of women as compared to 60%, 52% and 18% respectively of their male counterparts well confirm their disadvantageous position in the society. Our age old socio-cultural traditions and taboos arresting the women within four walls of their houses also make their conditions more disadvantageous. These factors combinedly serve as non-conductive conditions for the emergence and development of women entrepreneurship in the country. Given these unfavorable conditions, the development of women entrepreneurship is expectedly low in the country. This is well indicated by a dismally low level of women (5.2% in total self-employed persons in the country. Further women entrepreneurs in India accounted for 9.01% of the total 11.70 million entrepreneurs during 1988 -89. A cross country comparison reveals that emergence and development of entrepreneurship is largely caused by the availability of supporting conditions in a country. To quote, with improving supporting conditions, the share of women owned enterprises in the United States has risen from th 7.1 % in 1977 to 32% in 1990. It is likely to reach to 50% by the turn of the 20 century. In India, women entry into business is a new phenomenon. Women entry into business, or say entrepreneurship is traced out as an extension of their kitchen activities mainly to 3 Ps, viz., Pickles, Powder and Pappad. Women in India plunged into business for both pull and push factors. Pull factors imply the factors which encourage women to start an occupation or venture with an urge to do something independently. Push factors refer to those factors, which compel women to take up their own business to tide it is clear that entrepreneurship serves as a catalyst of economic development. On the whole, Thus,over their economic difficulties and responsibilities. the role of entrepreneurship in economic development of a country can best be put as "an economy is the effect for which entrepreneurship is the cause". With growing awareness about business and spread of education among women over the period, women have started shifting from 3 Ps to engross to 3 modern E's viz., Engineering, Electronics and Energy. They 0.6. Discuss the concept of women entrepreneurs. have excelled in these activities. Women entrepreneurs manufacturing solar cookers in Gujarat, small foundries in Maharashtra may be defined as a in Orissa have of women who doubt organize Ans. Women entrepreneursand T. V. capacitors woman or group proved beyond initiate ,that given the opportunities, they can excel In terms of Schumpeterian concept Morarji (Shipping Corporation). Smt. and run a business enterprise. their male counterparts. Smt Sumati of innovative entrepreneurs, Yamutai Kirloskar (Mahila Udyog Limited), smt. activity are called "women entrepreneurs". The women who innovate, imitate or adopt a businessNeena Malhotra (Exports) and Smt. Shahnaz Hussain (Beauty Clinic) are some exemplary names of successful and accomplished women entrepreneurs in Government of India has defined women entrepreneurs based on women participation in equity and our country. employment of a business enterprise. Accordingly, a women
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In l;ldia, Kerla is a state with highest literacy (including women literary) reflecting a Congenial atmosphere for the emergence and development of women entrepreneurship in the State. According to a study, the number of women's industrial units in Kerla was 358 in 1981, which rose to 782 ill March 1984. These 782 units included 592 proprietary concerns, 43 partnership firms, 42 charitable institutions, 03 joint stock companies and 102 co -operative societies covering a wide range of activities. On the whole, proper education of women in Kerla resulted in high motivation among them to enter into business. The financial , marketing and training assistance provided by the State Government also helped motivate women to assume entrepreneurial career. Women's desire to work at the plae of residence, difficulty of getting jobs in the public and private sectors and the desire for social recognition also motivated woen in Kerla for self employment. Like Kerla, an increasing number of women are entering the business in the. State of, Maharashtra also.
Q. 7. What are the Problems of Women Entrepreneurs
Ans. Women entrepreneurs encounter two sets of problems, viz, general problems of entrepreneurs and problems specific to women entrepreneurs. These are discussed as follows: 1. Problems of Finance: Finance is regarded as "life-blood" for any enterprise, be it big or small. However, women entrepreneurs suffer from shortage of finance on two counts. Firstly, women do not generally have property on their names to use them as collateral for obtaining funds from external Sources. Thus, their access to the external sources of funds is limited. Secondly, the banks also consider women less credit worthy and discourage women borrowers on the belief that they can at any time leave their business. Given such situation, women entrepreneurs are bound to rely on their own savings, if any and loans from friends and relatives who are expectedly meager and negligible. Thus, women enterprises fail due to the shortage of finance. 2. Scarcity of Raw Material: Most of the women enterprises are plagued by the scarcity of raw material and necessary inputs. Added to this are the high prices of raw materials, on the one hand, and getting raw material at the minimum of discount on the other. The failure of many women cooperatives in 1971 engaged in basket making is an example how the scarcity of raw material sounds the death-knell of enterprises run by women. 3. Stiff Competition: Women entrepreneurs do not have organizational set up to pump in a lot of money for canvassing and advertisement. Thus, they have to face a stiff competition for marketing their products with both organized sector and their male counterparts. Such a competition ultimately results in the liquidation of women enterprises.
4. Limited Mobility: Unlike men, women mobility in india i3 highly limited due to various reasons. A single Woman asking for room is stili looked upon suspicion. Cumbersome exercise involved in starti ng an enterprise coupled with the officials' humiliating attitude towards women compels them to give up idea of starting an enterprise. 5. Family Ties: In India, it is mainly a woman's duty to look after the children and other members of the family. Man plays a secondary role only. In case of married women, she has to strike a fine balance between her business and family. Her total involvement in family leaves little or no energy and time to devote for business. Support and approval of husbands seem necessary condition for women's entry into business. Accordingly, the educational level and family background of husbands positively influence women's entry into business activities. 6. Lack of Education: In India, around three fifths (60%) of women are still illiterate. Literacy is the root cause of socioeconomic problems. Due to the lack of education and that too qualitative education, women are not aware of business, technology and market knowledge. Also, lack of education causes low achievement motivation among women. Thus, lack of education creates problems for women in the setting up and running of business enterprises. 7. Male -Dominated Society: Male Ghauvinism is still the order of the day in India. The Constitution of India speaks of equality between sexes. But, in practice, women are looked upon as able, I.e. weak in all respects. Women suffer from male reservations about a woman's role, ability and capacity and are treated accordingly. In nutshell, in the male dominated India society, women are not treated equal to men. This, in tum, serves as a barrier to women entry into business. 8. Low Risk -Bearing Ability: Women in India lead. a protected life. They are less educated and economically not self dependent. All these reduce their ability to bear risk involved in running an enterprise. Risk bearing is an essential requisite of a successful entrepreneur. In addition to above, problems, inadequate infra structural facilities, shortage of power, high cost of production, social attitude, low need for achievement and socia-economic constraints also hold the women back from entering into business. DEVELOPMENT OF WOMEN ENTREPRENEURS -RECENT TRENDS Days are gone when women in India remained confined to within four walls of their homes and their immense strength and potential remained unrecognized and unaccounted for. Now, they are increasingly participating in all spheres of activities. The fact remains that the citadels of excellence in academic, politics, administration, business and industry are no longer the prerogatives of men in India. The general consensus that is emerging in all discussions relating to
the development of women is that promotion of women entrepreneurs should form an integraI part of all development efforts, Te experience of the United States where the share of women Owned enterprises is continuously on increase strengthens the view that the future of small -scale industries depends veri much on the entry of women into industry. Several national and international organizations and agencies have appreciated the need for and importance of developing women entrepreneurs in recent years. A brief review of it is given here. With a view to develop better half of the society, the United Nations declared the decade 1975 -85 as the decade for Women. The UNIDO preparatory Meeting on the Role of Women in Industrialization in Developing Countries held at Vienna during 6-10 February, 1978 identified several constraints such as social, attitudinal and institutional barriers, inadequate employment opportunities, inappropriate and inadequate training, insufficient information and so on which held women back from participating in industrial activities. The World Confe"rence of the United Nations Decade for Women held at th Copenhagen in Denmark on 30 June, 1980 also adopted a programme aimed at promoting full and equal opportunities and treatment of women in employment and their access to non-traditional skilled trades. The First National Conference of Women Entrepreneurs held at New Delhi in November 1981 advocated the need for developing women entrepreneurs for the overall development of the country. It called for priority to women in allotment of land, sheds, sanction of power, licensing, etc. The Second International Conference of Women Entrepreneurs organized by the National Alliance of young Entrepreneurs (NAYE) held in 1989 at New Delhi also adopted certain declarations involving women's participation in industry. The Government of India has been assigning increasing importance to the development of women entrepreneurs in the country in recent years. The Sixth Five Year Plan, for example, proposed for promoti ng female employment in women owned industries. The Government moved a step forward in the Seventh Five Year Plan by including a special chapter on Integration of Women in Development. The chapter suggested: To treat women as specific target groups in all development programmes. To devise and diversify vocational training facilities for women to suit their varied needs and skills. To promote appropriate technologies to improve their efficiency and productivity. To provide assistance for marketing their products. To involve women in decision making process.
0.8. What is Meaning of Rural Entrepreneurship. Ans. Like entrepreneurship, rural entrepreneurship also conjures different meanings to different people. Without going into semantics, rural entrepreneurship can simply be defined as entrepreneurship emerging in rural areas is rural entrepreneurship. In other words establishing industrial units in the rural aieas refers to rural entrepreneurship. Or say, rural entrepreneurship implies rural industrialization.
Let us know, for the sake of our knowledge, the meaning of rural industry. Rural industries are generally associated with agriculture. According to the Khadi and Village Industries Commission (KVIC), "village industry or rural industry means any industry located in rural area, population of which does not exceed 10,000 or such other figure which produces any goods ro renders any services with or without use of power and in which the fixed capital investment per head of an artisan or a worker does not exceed a thousand rupees." The definition of village industry has been recently modified by the government so as to enlarge its scope. Accordingly, any industry located in rural area, village or town with a population of 20,000 and below and an investment of RS.3 crores in plant and machinery is classified as a Village industry. As a result of widening of the scope of village industries, 41 new village industries have been added making a total of 101 as against 70 industries earlier. All the village industries have been grouped into seven major categories as follows: (i) Mineral -based industry (ii) . Forest based industry (iii) Agro based industry (iv) Polymer and chemical-based industry (v) Engineering and non -conventional industry (vi) Textile industry (including khadi), and
In her recent Industrial Policy 1991, the Government of India further stressed the need for conducting special entrepreneurship development programmes for women with a view to encourage women to enter industry. Product and process oriented courses enabling women to start small-scale industries are also recommended in the policy statement. There are several institutional arrangements both at the centre and the state levels like nationalized banks, state financial corporations, state industrial corporations, district industry centres and voluntary agencies like FICCI's Ladies organization (FLO), National Alliance of Young ~ntrepreneurs (NAYE) which have been engaged in protecting and developing women entrepreneurs in the country. Added to these are national and international women associations set up with a purpose to create a congenial environment for developing women entrepreneurship in rural and urban areas.
5. Rural industries also help protect and promote the art and creativity, Le. the age - 01 d rich heritage of the country. 6. Rural industrialization fosters economic development in rurai areas. This curbs rural urban rnigration, on the one hand, and also lessens tile disproportionate growth in the cities, reduces growth of siuITIS social tensions, and atmospheric pollution, on the other. 7. Last but no means the least, rural industries being environment friendly lead to development without destruction Le. the most desideratum of the time.
(vii) Service industry. Having understood the meanings of rural entrepreneurship and rural industry, let us move on to appreciate the need for and significance of rural entrepreneurship in India. NEED FOR RURAL ENTREPRENEURSHIP The need for rural entrepreneurship for developing industries in the rural areas in imbued with multiplicity of justifications as listed below: 1. Rural industries being labour intensive, have high potential in employment generation. Thus, they serve as an antedote to the widespread problems of disguised unemployment or under employment stalking the rural territory. 2. By providing employment, these industries have also high potential for income generation in the rural areas. These, thus, help in reducing disparities in income between rural and urban areas. 3. These industrfes encourage dispersal of economic activities in the rural areas and thus, promote balanced regional development. 4. Development of industries in the rural areas also helps build up village republics.
The Ninth Five Year Plan includes the following development strategies for the Village and Small Scale Industries (VSI) sector. (i) The small scale and village industries will be provided incentives and support to facilitate their growth and employment. It will be ensured that foreign investment does not displace such industries. . (ii) Credit facilities to small scale industries will be increased. For this, the financial institutions will be motivated to offer factoring services to the SSls in addition to the present system of discounting bills. (iii) The investment limit for the SSI sector will be revised to Rs.3 crore to take account of inflation and also to enable this sector the achievement of minimum economics of scale and upgradation of technology so as to withstand emerging emerging competition. (iv) Technology development and upgradation in the VSI sector, especially in the case of small scale industries, handlooms, power looms, coir -handicrafts, wool, etc., will receive special attention. (v) Special attention will be paid to sericulture to improve the quality of raw silk by introducing better silk worm breeding practices.
Q. 9. HOW TO DEVELOP RURAL ENTREPRENEURSHIP?
Ans. Establishing an industry and, thereby developing entrepreneurship is not one man activity. In fact, it involves multi pronged activities. Though the answer to the question how to develop entrepreneurship lies in the solutions of the problems faced in this regard, yet the following measures are suggested for developing entrepreneurship n the rural areas in the country. 1Raw material is a must for any industry. However, the non availability of raw materials accompanied by their prohibitive cost have weakened the viability of these industries. Past experience bears evidence that rural industries with employment potential can not be su stained for long unless a strong raw material base is created in rural areas itself. Therefore, an urgent policy is called for to strengthen the raw material base in rural areas. 2Finance is considered as lubricant for setting up an running an industry. Funds, therefore, need to be made available on time at soft terms and conditions to those who really need it. 3In order to solve the problem of marketing for rural industries, common production -cum marketing centres need to be set up and developed with modern infrastructural facilities, pa rticularly, in the areas having good production and growth potential. This would help in promoting export business, on the one hand, and bringing the buyers and sellers is close interaction avoiding middleman in between them, on the other. Legislative measures have to be taken to make the government purchases compulsory from rural industries. 4One peculiarity of rural entrepreneurs is that most of them join their entrepreneurial career not by choice but by chance. Lack of aptitude and competency on the part of such en trepreneurs makes the units sick. Hence, there is a need to develop entrepreneurial
attitude and competencies among the prospective entrepreneurs through the training interventions like Entrepreneurship Development Programmes (EDP) VVome:l Entrepreneurship Development Programmes and TRYSEM. 1One effective '""lay to inculcate the entrepreneurial acumen and attitude may be imparting entrepreneurial education in the schools, colleges, and universities. That younger minds are more susceptive to be moulded is well evidenced by the popularly known 'Kakinda Experiments' in Andhra Pradesh. 2Sometimes the real problem in setting up industries is not the non availability of facilities, but non awareness of facilities whatever are available. The need is, therefore, to disseminate information about all what is a available to provide to the entrepreneurs to facilitate them in setting up industries. 3Proper provisions need to be made to impart the institutional training to orient the entrepreneurs in specific products and trades so that the local resources can be harnessed properly. 4Our accumulated experience bears ample evidences to the fact that the non governmental organizations, popularly known as NGO's can prove instrumental in developing rural entrepreneurship in the country. The role of NGO's in developing entrepreneurship is, therefore, discussed separately.
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2. Intermediate NGOs: These NGOs procure funds from various agencies, import training, and conduct workshops for target work force. SEWA and AWAKe are examples of inte:mediate NGOs. 3. Grass Root Level NGOs: These NGOs are those who conduct field activities by establishing direct contact with the grass root people (needy). Examples of such NGOs are R UDSETls, ANARDE Foundation (Gujarat). Indian Institute of Youth Welfare (IIYW) of M aharashtra etc.
NGOs AND RURAL ENTREPRENEURSHIP There is no denying of the fact that development of entrepreneurship has emerged as a national movement due to its strengths to solve the twin problems of unemployment and poverty. In fact, the need for development of spirit of enterprise among the target population intensified more during the nineties with the failure of the trickle down theory to percolate the development benefits to the masses at grass root level. It is against this back ground, several self employment and anti poverty programmes like PMRY, TRYSEM etc., involving some entrepreneurial qualities were introduced by the government as a tool of bottom up mode of development. However, these programmes executed by the Government agencies proved ineffective due to their weaknesses of one type or other. Such a situation necessitated the NGOs to come out of their traditional bounds like health, sanitation, education, family planning environment protection etc., to join a noble mission to entrepreneurise the lesser known target groups. The government agencies engaged in this activity strengthened the NGOs by co-opting and collaborating with them to reach the lower rungs of the society. Today, we have several NGOs contributing to entrepreneurship development in the country. The major ones are National Alliance of Young Entrepreneurs (NAYE), World Assembly of Small and Medium Entrepreneurs (WASME), Xavier Institute for Social Studies (XISS), SEWA of Ahmedabad, 'Y Self Employment of Calcutta, AWAKE (Association of Women Entrepreneurs of Karnataka), and Rural Development and Self Employment Training Institute (RUDSETls) based in Karnataka.
The NGOs involved n entrepreneurship development can be classified into three types: 1. Primary Level NGOs: The NGOs who mobilize their own resources, operate at international level and execute developmental activities themselves or through intermediate fall within this category. ACTIONAID, OXFAM, Christian Children Fund etc. are prominent examples of the primary level NGOs in India.
The training imparted to the needy by the NGOs can be classified into three broad types: 1Stimulation: Conducting EDPs and other training programmes for the target people with a view to stimulate enterprising attitude among them. 2Counseling: Providing counseling and consultancy services to the needy ones how to prepare a project, feasibility report, purchase of plant and machinery and performing other procedural activities. 3Assistance: Assisting the target group in marketing their products and securing finance from financial intuitions.
Q.1 O. Need for financial planning.
Ans. NEED FOR FINANCIAL PLANNING Financp. 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 rule" also underlines the very significance of finance for small enterprises, in particular, and industry, in general. Financing an enterprise -whether large or small is a critical element for success in business. Instances are galore 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 I her enterprise is called "financial panning". In a financial plan I financial forecast, the entrepreneur should clearly answer the following three questions: 1. How much money is needed? 2. Where will money come from? And 3. When does the money need to be available.
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three things into consideration: 1. There should be adequate money to pay the purchase considerations. 2. There should be sufficient capital at his! her disposal to support the business operations up to the three initial months of the enterprise. 3. Lastly, enough provision should be made to meet unexpected! unplanned business expenses. The general practice has been to provide for from 10 to 15 per cent of purchase consideration to cover such expenses. Thus, the total of these three amounts will constitute the total money needed to start the enterprise. Integral to total amount needed is to decide about its arrangement or sources. You know that in every business ! enterprise, capital is arranged from two sources internal and external. Internal sources refer to the owner's own money known as 'equity'. Particularly in the case fo small enterprises, the owner's money called equity is very thin. Therefore, an overwhelming portion of money needed is arranged from the external sources like the financial institutions and commercial banks, etc. There are two ways to classifying the financial needs of an enterprise: 1. On the basis of extent of permanence, the financial needs are classified into two types:
(a) Fixed Capital, and (b) Working Capital 2. On the basis of period of use, we can classify the financial needs into the following two types:
(a) Long term Capital! Finance, and (b) Short term Capital! Finance
The answers to these questions are given as follows : As regards the money needed, it can be estimated by developing a statement of various assets required by the enterprise. Yes, the structure of assets to be used will vary from enterprise to
enterprise depending upon the nature of the product to be produced or ser/ice to be rendered, as the case may be. While estimating the money needed, the entrepreneur should take the followina
Capital -This is a borrowed capital/ money that is to be repaid within one year. The sources of short-term finance include bank borrowings for working capital, deposits or borrowing from friends and relatives, etc.
Short~term
IF IN
mancla ee 5
d-1
Based on Period of Use
II
Based on Permanence
II I II
Short -term
Capital
Fig. 1 Classification of Financial Needs ffd8ffe000104a46494600010201012c012c0000ffe20c584943435f50524f46494c4500010100000c484c696e6f02 The theory of financial management suggests that, in order to ensure sound financial health of an enterprise, short term finance / funds should be utilized for acquiring current assets. Current assets, 1000006d6e74725247422058595a2007ce00020009000600310000616373704d5346540000000049454320735 for example, include the items like raw material, finished goods, semi finished goods, debtors, etc. Basically, these are the items which keep changing their shape. They can normally be converted into cash within a period of one year. On the other hand, long term finance should be used for 247420000000000000000000000000000f6d6000100000000d32d485020200000000000000000000000000000 acquiring assets which are of long nature. These are commonly termed as 'fixed assets'. The examples of fixed assets could be, land and building, plant and machinery, furniture etc. 00000000000000000000000000000000000000000000000000000000000000000011637072740000015000000 03364657363000001840000006c77747074000001f000000014626b707400000204000000147258595a000002 SOURCES OF FINANCE 18000000146758595a0000022c000000146258595a0000024000000014646d6e640000025400000070646d646 Let us understand what a they mean. We have already made domention in the previous section 1 that the various sources from which an enterprise can raise the required funds could broadly be classified into two sources. These are: 4000002c400000088767565640000034c0000008676696577000003d4000000246c756d69000003f800000014 Fixed Capital The money invested in some fixed assets or durable assets like land, building, machinery; equipment, furniture, etc., is known as fixed capital. These assets are required for permanent use, that is, for a long period of time. 1. Internal Sources 6d6561730000040c0000002474656368000004300000000c725452430000043c0000080c675452430000043c0 2. External Sources Working Capital -The money invested in current assets like raw material, finished goods, debtors, etc. 000080c625452430000043c0000080c7465787400000000436f70797269676874202863292031393938204865 is known as working capital. In other words, money required for day to day operations of business I enterprise is called "working capital'. 776c6574742d5061636b61726420436f6d70616e7900006465736300000000000000127352474220494543363 Long -term Capital -This is such money whose repayment is arranged for more than five years in future. The sources of long term finance could be owner's equity, term-loans from financial institutions, 13936362d322e31000000000000000000000012735247422049454336313936362d322e310000000000000000 credit facilities from the commercial banks, hire purchase facilities from specific organizations, etc. 00000000000000000000000000000000000000Fixed Capital
Working Capital
II
Long term Capital
some assets into funds. The cardinal principie of financial management also suggests that an entrepreneur should religiously plough back a good portion of his / her profits into the enterprise itself. However, the scope of raising funds from internal sources particularly in the case of small scale enterprises remains highly limited.
External Sources In short, funds raised from other than internal sources are from external sources. The external sources usually include the following:
1Deposits or borrowing from relatives and friends and others. 2Borrowings from the banks for working capital purposes. 3Credit facilities from the commercial banks. 4Term loans from financial institutions. 5Hire purchase or leasing facility from the National Small Industries, Corporation (NSIC) and State Small Industries Corporations (SSICs). 6Seed / Margin money, subsidies from the Government and the financial institutions. If we now lump both the sources together, these can broadly be classified as follows: 1Personal funds or Equity Capital. 2Loans from relatives and friends. 3Mortgage Loans 4Term-loans 5Subsidiaries.
Simply stated, loans taken for a definite period of time are called 'term loans' Based on period, loans are broadly classified into two types: 1Short-term Loans and 2Long term Loans. The term "Term Loans' is used for long loans. Therefore, let us discuss, in detail, long term loans.
Long Term Loans

These are the loans taken for a fairly long duration of time ranging from 5 years to 10 or 15 years. Long term have a cursory to meet the financial requirements of Let us loans are raised look at what these sources consist of. enterprise / company for acquiring the fixed assets which include the following :
Internal Sources 1Land and site development 2Building and civil works Under thi s and machinery are raised from within the enterprise itself. The internal sources of financing 3Plant source, funds could be owner'sexpenses 4Installation capital known as equity, deposits and loans given by the owner, the partners, the directors, as the case may be , to the enterprise. One source andraising funds internally may be personal 5Miscellaneous fixed assets comprising vehicles, furniture for fixtures, office equipment and so on. loan taken by the entrepreneurs on his / her personal assets like . Provident Fund, Life Insurance Policy, buildings, investments, etc. In addition to these, in case of a running enterprise, funds could also be raised through the retention of profits or conversion of
In case of units to be located in backward areas, another element of misceilaneous fixed cost includes expenditure to be incurred in infrastructure facilities like roads, railway sidings, water supply, power connection, etc. Term loans, or say, long term loans are also required for expansion of productive capacity by replacing or adding to the existing equipment. Source of Term Loans The following are the sources of raising term loans: 1. Issue of shares 2. Issue of Debentures 3. Loans from Financial Institutions 4. Loans from Commercial Banks 5. Public Deposits 6. Retention of Profits Look at Figure 3 for various sources adopted by enterprises for raising term(long) finance / loans. These are explained in the following pages: Shares Share is unit into which the total capital of a company is divided. As per Section 85 of the
The preference shares may be of various types such as cumulative and non cumulative, redeemable and irredeemable, participating and non participating and convertible and non convertible.
Equity Shares What is not preference share is equity share. In other words, equity shares are entitled to dividend and capital after the payment of dividend and capital on preference shares. Based on the types of shares, there are two types of capitals (i) Preference Share Capital and (ii) Equity Share Capital. SOURCES OF SHORT -TERM FINANCE Short term finance is obtained for a period up to one year. These are required to meet the day to day business requirements. In other words, short term finance is obtained to meet the working capital requirements of the enterprise. The sources of short term finance could be 1. Loans from Commercial Banks 2. Public Deposits 3. Trade Credit 4. Factoring 5. Discounting Bills of Exchange 6. Bank Overdraft and Cash Credit 7. Advances from Customers Companies Act, 1956, a public limited company can issue the following two kinds of shares: (a) 8. Accrual Accounts.
Preference Shares, and (b) Equity Shares. Preference Shares These are the shares which carry a preferential right over equity shares with reference to dividend. They also carry a preferential right over equity shares with reference to the payment of capital at the time of winding up or repayment of capital. ffd8ffe000104a46494600010201012c012c0000ffe20c584943435f50524f46494c4500010100000 Source of Term Loans c484c696e6f021000006d6e74725247422058595a2007ce00020009000600310000616373704d53 46540000000049454320735247420000000000000000000000000000f6d6000100000000d32d48 502020000000000000000000000000000000000000000000000000000000000000000000000000 00000000000000000000001163707274000001500000003364657363000001840000006c777470 74000001f000000014626b707400000204000000147258595a00000218000000146758595a0000 ~ ~~~ 022c000000146258595a0000024000000014646d6e640000025400000070646d6464000002c400 000088767565640000034c0000008676696577000003d4000000246c756d69000003f8000000146 d6561730000040c0000002474656368000004300000000c725452430000043c0000080c6754524 Retention Institutions Share Debent 30000043c0000080c625452430000043c0000080c7465787400000000436f707972696768742028 Financial Commercial Deposits of Profits 63292031393938204865776c6574742d5061636b61726420436f6d70616e7900006465736300000 s ures 00000000012735247422049454336313936362d322e31000000000000000000000012735247422 049454336313936362d322e3100000000000000000000000000000000000000000000000000000 0 Fig.2 Sources of Raising Term (Long) Loans
Over Capitalisation Over capitalization si~Jnifies a situation when an enterprise possesses excess of assets in relation to its requirement. Such a situation has its beclring on earning capacity of the enterprise. in case of over capitalization, the actual earnings are lower than the expected ones. On account of lower rates of return, the enterprise becomes unable to pay its fixed obligations, i.e. interest and dividend, at prescribed rates. Thus, in case of over capitalization, the enterprise fails to pay a fair return on its capital investments. This point is more clarified with the help of the following example. Suppose, Cachar Paper Mill, Panchgram earned an annual profit of Rs.50,OOO on its total capital investment of RS.5,OO,OOO. If the expectation for return is 10%, this mill will be called property capitalized But, if the mill earns a profit of Rs.40,OOO only as against the general expectation of 10%, it will be said to be over capitalized because it will be in a position to give a return of 8% on its capital investments or capital employed. Thus, an enterprise is said to be over capitalized when its earnings are not large enough to yield a fair return on its capital employed, Le. on the amounts of shares and bonds. Now, one important question arises is what causes over capitalization in an enterprise? We turn to this aspect in the following paragraphs. Causes of Over Capitalisation: An enterprise may become over capitalized due to both internal and external factors. Following are the important reasons causing over capitalization in an enterprise.
These.are also depicted in Figure 3.
1Raising of more money by issue of shares and debentures than what the enterprise can profitably ffd8ffe000104a46494600010201012c012c0000ffe20c584943435f50524f46494 use. c4500010100000c484c696e6f021000006d6e74725247422058595a2007ce000 20009000600310000616373704d534654000000004945432073524742000000 2Borrowing of large money at a rate of interest fairly higher than the actual rate of return on its Public Deposit capital employed. 0000000000000000000000f6d6000100000000d32d4850202000000000000000 000000000000000000000000000000000000000000000000000000000000000 3Acquiring fixed assets on excessive amounts. 000000000000000001163707274000001500000003364657363000001840000 4Inadequate provisions for depreciation and replacement of fixed assets. --i Trade Credits 006c77747074000001f000000014626b707400000204000000147258595a0000 5Payment of dividend at a fairly high rate. 1:: 0218000000146758595a0000022c000000146258595a0000024000000014646 6High rates ofG)taxation imposed by the Government. o d6e640000025400000070646d6464000002c400000088767565640000034c000 J::U 7Over estimation of earnings for enterprise concern. Factoring f/)C _ ra 0008676696577000003d4000000246c756d69000003f8000000146d656173000 o .E 0040c0000002474656368000004300000000c725452430000043c0000080c675 Evil Effects oftJ>LL Over 452430000043c0000080c625452430000043c0000080c7465787400000000436 -Capitalisation : Over capitalization has the following evil effects on owners, Discounting of Bills 8 society: E enterprises and f70797269676874202863292031393938204865776c6574742d5061636b61726 j 4) ot 420436f6d70616e7900006465736300000000000000127352474220494543363 (/) Bank Overdraft 13936362d322e31000000000000000000000012735247422049454336313936 1. On Owners Because of a fall on dividends, the shareholders I owners lose heavily. Further, the 362d322e3100000000000000000000000000000000000000000000000000000 owners are not in a position to dispose of their shares at profitable prices due to fall in the market 0 Commercial Bank Accrued Accounts value of their shares. Thus, the' owners are the biggest losers in case of over capitalization of an enterprise. 2. On Enterprise In over capitalization, the market value of the ente.rprise's stock falls and it finds Advances from '-----I difficult to raise capital. Quite often, the enterprises resort to window dressing with questionable Customers practices. But this only aggravates the evil of over capitalization. The credit worthiness of the enterprise is adversely affected.
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Remedies for Over -Capitalisation: In order to rectify over capitalization, the enterprise may resort to the following remedies: 1To reduce the claims of shareholders, debenture holders and creditors. 2To reduce rte of interest on debentures and the rate of dividend on preference shares. 3To reduce the number of equity shares. 4If possible, to reduce the par value of stock. These all remedial measures leave sufficient funds with the enterprise. The enterprise can make use of these funds for the purpose of replacement of assets and expansion of business activity. These , in turn, help in increasing the earning capacity of the company and, thus, rectifying over capitalization in the enterprise. Under -Capitalisation Under capitalisation is just the reverse of over capitalisation. Properly speaking, an enterprise is said to be under capitalized when its actual capitalisation is lower than the proper capitalisation. In case of under capitalisation, the rate of dividend and the market value of shares are fairly higher than the market value of shares of similar enterprises. According to Gerstenberg, "An enterprise may be under capitalized when the rate of profit is exceptionally high in relation to the return enjoyed by similar situated enterprises in the same industry. The assets may be worth more than the values reflected in the books." Causes of Under Capitalisation: The causes of under-capitalization are: 1Under-estimation of initial rate of earnings. 2Utilization of high efficiency for exploiting every possibility available. 3Using lower rate of capitalisation 4Under estimation of required funds 5Retaining profits because of conservative dividend policy followed by the enterprise. 6Setting up of an enterprise in recessionary conditions. After the recession period is over, enterprises start earning profits at an unusually high rate. 7Because of excessive earnings, enterprises are exposed to a heavy incidence I burden of taxation. Effects of Under -Capitalisation -The effects of under capitalisation are:
1It encourages cut throat competition in the market. High profit earning capacities of under capitalized enterprises lure new entrepreneurs to plunge into the manufacturing. 2High rate of dividend given to the shareholders propels to the workers to demand for higher wages and salaries. 3Under capitalisation enables management to manipulate the value of shares of enterprises. 4The Government charges higher taxation.
Remedies for Under -Capitalisation -Under capitalisation may be rectified by taking the following remedial measures:
1. To split up the shares of the enterprise. 2. To issue bonus shares. 3. To increase the par value of shares /stock 4. To declare dividend payable in stock, if large surplus is available.
attempting commercial application of indigenous technology on adapting imported technology to wider domestic applications. Besides, many of the development banks and development finance institutions have also entered venture capital business in the recent years. Going purely by the number of venture capital firrns in India today, one could possibly argue that there exists a venture capital industry in the country. It augurs well for future industrial development of the country. The Government of India issued some guidelines on November 18, 1988 mainly to promote a broad framework for the operations of the venture capital companies in the country. The main features of these guidelines are that hereunder: Now, it is cleargiven both over capitalisation and under capitalisation are not desirable as both bear evil effects. Notwithstanding, over capitalisation is more dangerous. Under capitalisation is easily corrected 1All capitalisation Institutions, the SSI and other scheduled banks are indicative of sound financial but overIndia Financial not so easily. Further more, under capitalisation iseligible to float such a fund. 2Minimum size'of the fund should be enterprises. position and efficient management of theRs.10 crores. That is why under capitalisation is not considered 3In economic public issue, problem of adjusting to be more structure of an issued capital. as anthe event ofproblem but athe promoters share is the .capital than 40% of the enterprise. "Every 4Foreign holding will be allowed up to 25%. try to have comes from multilateral international financial enterprise should provided it a proper or fair organizations, developmental institutions or mutual funds. capitalisation. 5The NRls investment is allowed up to 74% in the capital on a non repatriable basis and up to 25 -40% on a repatriable basis. 6Debt -equity ratio should be limited to 1:1 :5. VENTURE CAPITAL (short Notes) 7Venture capital funds are not allowed to operate in money market operations, bill rediscounting, portfolio investments and financial consultancy services. Venture capital is a form of financing especially designed for funding high technology, high risk and 8The venture capitalist will pay tax at the rate of 20% on its dividend income and long term capital perceived high reward projects. While atax exemption on dividends subject to a maximum of proven gains. Sut, an investor is entitled to conventional financier seeks to fund projects with Rs.1 0,000 technologies havealreadytax at 20% onmarkets, a venture capitalist provides funds to the entrepreneurs and will and to pay established capital gains. pursuing new and hitherto unexplored avenues and ideas. Thus, venture capital helps the entrepreneurs translate their new ideas into commercial production. It especially helps in financing of high technology projects and helps translate research and development into production. International Finance Corporation, Washington (IFCW) defines venture capital as equity or equity featured capital EXPORT FINANCE new Notes) seeking investment in(Shortideas, new companies, new products, new processes or new services that offer the potential of high returns on investment. It may also include investment in turnaround Theterm'exportfinance refersto creditfacilities and techniques ofpaymentsatthepre-shipment and post situations. shipment stages. Export finance, whether short term or medium term, is provided exclusively by the Indian and foreign commercial banks which are the members of the Foreign Exchange Dealers' Association. The Reserve of the concept of venture capital is traced back to 1946 with provide refinance facilities The origin Bank of India and the Industrial Development Bank of India the establishment of the to the commercial banks. and Development of India (commonly known as EXIM Bank) also extends finance American Research Export Import SankCorporation of General Dohiot. In fact, there is not looking backto exporters Now, overseas joint a worldwide construction projects abroad. since then. and to it has become ventures and concept in the field of funding technology based products.
However, the concept of venture capital is of recent origin in India. InExport finance provided for industry had its formal shipment purposes are discussed in of the Finance India, the venture capital pre shipment and post introduction in the Budget Speech turn. Minister in 1988. Though extremely focused in its technology development objective, the introduction Pre shipment need for recognized the Finance a source of patient capital with the ability to participate in high risk projects in return for high rewards. Coincidentally, around the same time, the Industrial Credit and Investment Pre-shipment finance refers to the came forth with initiatives for the exporters before actual shipment of Corporation of India Limited (ICICI)financial assistance provided toaddressing technology incentive goods. One such initiative, is venture to the exporters was spun off into Technology Development projects. Pre-shipment financethe provided Capital Division, for the purposes like purchase of raw materials, their processing and converting into finished goods and since emerged For these purposes, and Information Company of India Limited (TDICI) which haspackaging them.as a significant player the following pre-shipment finance is made available: and a pioneer in the field of venture capital industry in the country.
1Packaging credit Immediately after the Budget Speech announcement , a cess of 5 percent was levied on all payments 2Advance against Incentives for import of technology I know how resulting in tlie creation of a sizable pool of funds. The venture 3Advance against Duty Drawback fund that was created out of this cess was to be administered by the Industrial Development Bank of India (lOBI) for providing financial assistance to industrial enterprises
5. Leading Clre granted by the banks under productive purpose and efficient 7.5 per Pre-shipment creditsand Motivating: Motivating them forconcessional rates of interest at performance should be his vital quality.up to a performing period of 6 months. an entrepreneur requires managerial cent. Credit can be extended While maximum the job of a manager skills, problem solving skill and a sense of time management. The entrepreneur will have to interact with many people and in diverse situation and will have to make right decision. Basically an Post -Shipment Finance entrepreneur must pOssess three fundamental skills. Post shipment finance may be defined as "any loan or advance granted or any other credit provided by a bank to an exporter of goods from India from the date of extending the credit after . shipment of goods to the (a) conceptual proceeds. "Thus post-shipment finance serves as bridge loan for the period date of realization of export Skills (b) Human Relations Skills between shipment of goods and the realization of proceeds. Such loan is usually provided for a maximum (c) Technical Skills period of 6 months. Interest is charged at the rate of 8.65 per cent. 6. Decision Making: Decision making is a process of action consciously chosen from available alternatives for thebut export business is more prone to A decision involvesto reduce If there is but in Business involves risk purpose of achieving a desired result. risks. With a view a choice. risk element one alternative, export business, theno decision is possible. A decisionCredit and Guarantee Corporation (ECGC) which Government set up the Export involves mental process at conscious level. The logical aspects are important. A decision is purposive. It is made to facilitate the attainment of some provides export assistance in the form of insurance cover and guarantees. There is also an Export objectives desired for benefit of the unit. Inspection Council of India (EICI) which extends financial assistance to the exporters for the quality control purposes.
HOW TO MANAGE THE SMALL ENTERPRISES? BASIC MANAGEMENT PRINCIPLES An entrepreneur has to perform the duty of a manager in a small enterprise. While initially establishing an enterprise, he is to function as an enterprise, he has to function as an entrepreneur but in the operational stage, he is expected to perform the role of a manager because effective management capabilities are the key factors to bring success. Major management tasks are: 1. Planning: It involves setting up a line of action such as marketing resource management, profit generation etc. It involves formulation of policies and strategies to implement the plan, which must specify what is aimed at and how to achieve it. As a manager he anticipates the future and discover alternative course of action with the help of tactical and strategic policies. He is involved in decision making the process by which a course of action in consciously chosen from available alternatives for the purchase of achieving desired result. 2. Organizing: Entrepreneurs will have to organize their efforts and actiVities, organizing is a process by which the structure and allocation of jobs is determined. The employer employee relationship, are to be established for maintaining higher worker productivity for economic goal and survival of the unit. 3. Coordinating: Coordination of physical resources needed at various stages like procurement of raw materials and consumables, managing financial resources, productive use of labour and application of appropriate marketing strategies etc, should be done very carefully. An entrepreneur at the helm of the enterprise is expected to function as a coordinator to bring positive results by utilizing whatever resources are in his possession by maximum utilization of the same. 4. Controlling: It means the process that measures current performance and guides it towards some predetermined goal. . Controlling involves systematic efforts to set performance and to keep periodical tract of actual performance. It helps to check the cost and wastages in any form resulting from any point within the organization.
MARKETING MANAGEMENT After a product is manufactured, the question arises, how the produce is to each consumer? The route can be very simple or complex depending on :
(a) Nature of the product (b) Location of the market (c) Price of the product (d) The availability of middlemen willing to handle it (e) The sales effort required (f) The resources and capabilities of the produce The channel management depends on : 1Tarms of contract 2Relationship with the middlemen and their cooperation 3Sufficient assistances are provided by the manufacturer to enable middlemen to market the products successfully. Marketing covers : (a) Pre-selling (Product Selling, Market Research, Marketing Plan formulations) (b) Selling (Product Introduction, negotiation, closing sales) (c) Post -Selling activities (after sales services, spare parts supply, warranty and guarantees)
(a) Product (b) Price (c) Place (d) Promotion (a) Product (i) Package / Brand Name (ii) Additional feature: size, colour, style, model etc. (iii) After sales service / guarantee / warranty (b) Price i) Same as competitors / cheaper / what will market bear ii) Cost plus overheads plus profit margin iii) High price, less discount iv) Credit terms (any secret deal) v) Buy one, get one or two free vi) Free Gifts, coupons, prizes vii) Cash Discounts (c) Place i) Agents / whole sellers / retailers ii) Merchandising iii) Mail Order iv) Direct Selling of any aggressive type
(d) Promotion
An entrepreneur must very deeply understand that effectiveness of the marketing effort of any product depends on the decisions made in each of the 4Ps of marketing and their effective combination to meet the needs of the consumer. The combination of the 4Ps which are also known as Marketing Mix are :
Different advertising media are: (a) Newspaper (b) Radio (c) Television (d) Hoarding and Neon Sings (e) Taxi, Bus and Train body panels (f) Bill Boards (g) Cinema slides and short film ads. (h) Direct mailing of literature (i) Demonstrations 0> Sales campaign . When sales budget is prepared, a certain amount may be fixed for this activity. An analysis of expenditures on advertising may be done annually to examine whether it was effective or not. A cost effectiveness may guide future policy of involvement in advertising. Impact of Advertising: Advantages of advertising are: (a) Increased sales (b) Quick turnover (c) Creating dealer interest i) Display (d) Lowering costs ii) Advertising (e) Creation of goodwill iii) Publicity trough sales campaign (f) Encourages employees for improved performance iv) Leaflets, handouts through little box, newspaper v) Telephone Selling HUMAN RELAnONS vi) Bill -Board advertisement Good human relations stimulate people to strive for overall improvement and create a healthy vii) Free sampling, gifts, coupons etc. organizational environment, which encourages : ADVERTISING punctuality and less absenteeism (a) High (b) Stimulates cooperation. avoid industrial strife and disagreement It is the means of informing as well as influencing the general public to buy products or services (c) Boost morale and motivation and to create awareness through visual or oral messages. It helps to create demand, promote marketing system and boast economic growth.
DEVELOPMENT OF INTERPERSONAL SKILLS The development of interpersonal skills cail be continued to four stages: (a) Forming fist impression (b) Developing mutual expectation (c) Honoring Psychological contracts
(d) Developing trust and influence.
LEADERSHIP STYLES
Leadership is the activity of influencing people to strive willingly for group activities. The different leadership styles are: (a) Human relations style (b) Theory of "X" and "Y" style (c) Authoritarian, Democratic and Laissez -faire style. (d) Employee -oriented style (e) Production oriented style (f) Consideration and Initiating structure style (g) Scientific Management style Styles have been related to various theories of leadership such as, Trait theory, Group and Exchange theory, social Learning theory, Managerial Grid theory, Contingency theory and Path goal theory. In the context of leadership and influence process, a distinction is drawn between authority and power. Power is divided into five types, such as, legitimate power, reward power, expect power, charismatic power and coercive power, Based on these types of power there may be two types of leaders: i) Formal and ii) Informal
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Morale: Morale is defined in many ways. In the industrial field, it reflects more group oriented concepts and group cohesion. If the workforce is generally satisfied the cost will be less.

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Notes on Entrepreneurship Management

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Entrepreneurship Management -2010

Entrepreneurship Management -2010

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Long term Capital

Entrepreneurship Management -2010

Long Term Loans

Entrepreneurship Management -2010

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Entrepreneurship Management -2010

Entrepreneurship Management -2010

Entrepreneurship Management -2010

Entrepreneurship Management -2010

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Entrepreneurship Management -2010

(d) Developing trust and influence.

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