SUBJECT:

TECHNOLOGICAL INNOVATION AND

MANAGEMENT ENTREPRENEURSHIP
Subject Code: BEC501
SEM.:V

MODULE – 3
Social Responsibilities of Business: Meaning of Social
Responsibility, Social Responsibilities of Business towards
Different Groups, Social Audit, Business Ethics and Corporate
Governance (Text 1).
Entrepreneurship: Definition of Entrepreneur, Importance of
Entrepreneurship, concepts of Entrepreneurship, Characteristics
of successful Entrepreneur, Classification of Entrepreneurs,
Myths of Entrepreneurship, Entrepreneurial Development
models, Entrepreneurial development cycle, Problems faced by
Entrepreneurs and capacity building for Entrepreneurship
(Selected topics from Chapter 2, Text 2).

Dr Suresh D, Professor, RNSIT

Social Responsibilities of Business:

MEANING OF SOCIAL RESPONSIBILITY:

• Social responsibility is a nebulous idea and hence is defined in various ways.
• Adolph Berle has defined social responsibility as the manager's responsiveness to public
consensus. This means that there cannot be the same set of social responsibilities
applicable to all countries in all times.
 These would be determined in each case by the customs, religions, traditions, level of
industrialisation and a host of other norms and standards about which there is a public
consensus at any given time in a given society.
 According to Keith Davis,' the term "social responsibility" refers to two types of business
obligations, viz., (a) the socio-economic obligation, and (b) the socio-human obligation.
 The socio-economic obligation of every business is to see that the economic
consequences of its actions do not adversely affect public welfare. This includes
obligations to promote employment opportunities, to maintain competition, to curb
inflation, etc.
 The socio-human obligation of every business is to nurture and develop human values
(such as morale, cooperation, motivation and self-realization in work).
SOCIAL RESPONSIBILITIES OF BUSINESS TOWARDS DIFFERENT GROUPS:
• Every businessman has relationships between him and his workers, employees,
consumers, share holders, other businesses, community and the government. A
businessman’s social responsibilities to each of these parties are given below.
[Link] the Consumer and the Community
[Link] Employees and Workers
[Link] Shareholders and Other Businesses
[Link] the government
Towards the Consumer and the Community
1. Production of cheap and better-quality goods and services by developing new skills,
innovations and techniques, by locating factories and markets at proper places and by
rationalizing the use of capital and labor.
2. Levelling out seasonal variations in employment and production through accurate
forecasts, production scheduling and product diversification.
3. Deciding priorities of production in the country's interest and conserving natural
resources.
4. Providing for social audit (see section below).
5. Honoring contracts and following honest trade practices. Some important but dishonest
trade practices are: making misleading advisements calculated to deceive the purchaser:

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 misbranding of articles with respect to their material. impediments, quality, origin, etc.;
selling rebuilt or secondhand goods as new; procuring business or trade secrets of
competitors by espionage, bribery or other means.
6. Making real consumer needs as the criterion for selecting messages to be given by
product advertisements. Thus. people no longer buy soap to make them clean. They buy
the promise that it would make them beautiful. Toothpaste is bought not to kill bacteria
but to create white teeth. Cars are bought for prestige rather than travel.
7. Preventing the creation of monopolies. Monopolies are bad in that they make the
community face high prices, short supply and inferior quality of goods.
 Inequalities of wealth distribution are accentuated and the standards of public morality
deteriorate as bribing the judges. legislators and the government to gain favors becomes
very common.
8. Providing for after-sale servicing.
9. Ensuring hygienic disposal of smoke and waste and voluntarily assisting in making the
town environment aesthetically satisfying.
10. Achieving better public relations (that is, creating a more favorable attitude towards the
enterprise) by giving to the community, true, adequate and easily intelligible information
about its working.
11. Supporting education. slum clearance and similar other programs.
Towards Employees and Workers
1. A fair wage to the workers (and not merely one determined by market forces of supply
and demand), which is possible only when the businessman is willing to accept a
voluntary ceiling on his own profits.
2. Just selection, training and promotion (without any discrimination on grounds of sex,
race, religion and physical appearance).
3. Social security measures and good quality of work life.
4. Good human relations (i.e., maintaining industrial peace, creating conditions for
collective bargaining, educating workers to produce their own leadership and
participative management).
5. Freedom, self-respect and self-realization. A businessman should devote his knowledge
and ability not only to making his worker's life more affluent, but also to making it more
satisfying and rewarding. There should he an awareness that the quality of man's life is as
important as the-quantity of his material wealth.
6. Increase in productivity and efficiency by recognition of merit, by providing
opportunities for creative talent and incentives.
Towards Shareholders and Other Businesses

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 1. Promoting good governance through internal accountability and transparency.
2. Fairness in relations with competitors. Competition with rival businessmen should always
be fair and healthy, based on rules of ethics and fair play rather than on rules of warfare.
Towards the government
1. Shunning active participation in and direct identification with any political party.
2. Observing all the laws of land which may have the following objectives:
(a) To provide direction to the economic and business life of the community.
(b) To bring about harmony between the limited enterprise interest and the wider social
interest of the country.
(c) To provide safeguard against errant business practices.
(d) To compel business to play fair to all participants in the economy—employees,
shareholders, minority shareholders, etc.
(e) To prevent oppression or exploitation of the weaker partners in business, such as
employees, minority shareholders, etc.
(f) To enforce maximum production according to the priority of sectors and production
lines laid down by the government.
(g) To allocate limited resources according to social priorities and preferences.
(h) To enforce distributive justice, especially to weaker sections of the community.
(i) To implement rural uplift and secure balanced development of the country
SOCIAL AUDIT
A social audit is a systematic study and evaluation of the organization’s social performance as
distinguished from its economic performance. The term "social performance" refers to any
organizational activity that effects the general welfare of society.
BENEFITS
1. It supplies data for comparison with the organization’s social policies and standards. The
management can determine how well it is living up to its social objectives.
2. It develops a sense of social awareness among all employees. In the process of preparing
reports and responding to evaluations, employees become more aware of the social
implications of their actions.
3. It provides data for comparing the effectiveness of different types of programmes.
4. It provides data about the cost of social programmes, so that the management can relate
this data to budgets, available resources, company objectives, etc.
5. It provides information for effective response to external groups which make demands on
the organization.
LIMITATIONS Social audit determines only what an organization is doing in social areas and
not the amount of social good that results from these activities. An audit of social results is not
made because:
1. They are difficult to measure. If. for example, following a company's S.C./S.T.
employment programme in a certain region, there is a fall in the violent crime rate by 4
per cent, it is difficult to measure how much of the benefit is caused by this programme.

Dr Suresh D, Professor, RNSIT

 2. Their classification under "good" or "bad" is not universally accepted. In other words, the
same social result may be classed as "good" according to one opinion, and as "bad"
according to another.
3. Most of them occur outside the organisation, making it difficult for the organisation to
secure data from these outside sources.
4.
Social Audit in TISCO
The Tata Iron and Steel Company is the first industrial organisation in India to have carried out
a social audit of its performance in 1979. The social audit was conducted by a committee under
the chairmanship of Justice S.P. Kotval, former Chief Justice of Mumbai High Court. The
committee's terms of reference were to examine and report whether, and the extent to which the
company had fulfilled the objectives contained in clause 3A of its Articles regarding its social
and moral responsibilities to the consumers, employees, shareholders, society and the local
community. The Committee in its report praised TISCO's social welfare work and made a
number of suggestions to improve its programmes.
BUSINESS ETHICS AND CORPORATE GOVERNANCE:
BUSINESS ETHICS
• Business ethics is the application of moral principles to business problems. However,
ethics extend beyond the question of legality and involve the goodness or badness of an
act. Therefore, an action may be legally right but ethically wrong.
• Example: A small village community located twenty miles from the closest urban
shopping area has a single grocer's shop. The owner of the shop can charge any
exorbitant price for his product though legally but not ethically.
• Discrimination in pay and promotion, Sexual harassment and the right to privacy are
some other issues specially relevant to the study of ethics.
• The landmark judgment of the Supreme Court in the case of Vishaka& others vs State of
Rajasthan makes it a mandatory duty of the employer to prevent misconduct of sexual
harassment at the workplace. The negative aspects of sexual harassment are: costly
lawsuits, decreased productivity, increased absenteeism, lower morale and higher staff
turnover.
• Discrimination against women in pay and promotion opportunities is also unethical,
which continues to exist despite there being the Equal Remuneration Act, 1976.
• Employees' right to privacy raises several questions which are:
 "Can a company refuse to hire smokers and/or make current smokers quit smoking"? and
 "Can a company conduct drug tests on its prospective employees"?
• The credibility of a business depends on its high business ethics and integrity.
• How does a manager decide what is ethical or unethical? There are four important factors
which affect his decision.
1. Government legislation.

Dr Suresh D, Professor, RNSIT

 2. Business codes. (But being voluntary in nature these codes, though pointed to with pride,
are usually ignored in practice.)
3. Pressure groups. (For example, in recent years Indian carpet industry has been facing
consumer boycott from the west for employing child labor.)
4. Personal values of the manager himself. (But a manager with strong personal values
mostly finds himself in a dilemma when an unethical course of action becomes his only
choice to achieve the company's goal. This has prompted many major business houses, to
teach executives the importance of remaining true to their convictions)
CORPORATE GOVERNANCE
 The term "corporate governance" is used to denote the extent to which companies run in
an open and honest manner in the best interest of all stakeholders. The key elements of
good corporate governance are transparency and accountability projected through a code
which incorporates a system of checks and balances between all key players, viz., board
of directors, auditors and stake-holders.
 In Britain, following corporate scandals in the early 1990s, a committee was appointed in
1991 under the chairmanship of Sir Adrian Cadbury to prepare a code for best corporate
governance. Major recommendations of this committee are as under:
 Non-executive directors whose most important role is to bring an independent judgement
to bear on issues of strategy, performance, resources, etc. should be picked through a
formal selection process on merits.
 Companies should have remuneration committees consisting wholly or mainly of non-
executive directors which should recommend to the board executive directors'
emoluments.
 Companies should have audit committees consisting of minimum 3 nonexecutive
directors to report on any matter relating to financial management.
 Audit partners should be rotated and there should be fuller disclosure of nonaudit work.
Benefits of Good Corporate Governance
1. It creates overall market confidence and long-term trust in the company.
2. It leads to an increase in company's share prices.
3. It ensures the integrity of company's financial reports.
4. It maximizes corporate security by acting as a whistle blower.
5. It limits the liability of top management by carefully articulating the decision-making
process.
6. It improves strategic thinking at the top by inducting independent directors who bring a
wealth of experience and a host of new ideas.
Corporate Governance in India
1. The Securities and Exchange Board of India (SEBI) monitors corporate governance of
listed companies in India through clause 49 which is incorporated in the listing agreement
of stock exchanges with companies.

Dr Suresh D, Professor, RNSIT

2. The companies act, 2000, has introduced several provisions relating to corporate
governance such as setting up of audit committees, additional grounds of disqualification
of directors and director’s responsibility statement in the director’s report.
3. The institute of company secretaries of India (ICSI) has instituted National award for
Excellence in corporate governance in the year 2001.
4. India has several bodies that rate companies for their credit-worthiness. Important among
them are Credit rating and Information services of India Ltd. (CRISIL), Investment
information and credit rating agency of India Ltd.(ICRA), Credit analysis and research
(CARE) and Duff and Phelps credit rating (DCR), India.
5.
Part - 2
Entrepreneurship
Definitions of Entrepreneur
• An entrepreneur can be defined as a person who
 tries to create something new,
 organizes production and undertakes risks and
 handles economic uncertainty involved in enterprise.
• Peter F. Drucker defines an entrepreneur as one who always searches for change,
responds to it & exploits it as an opportunity. Innovation is the basic tool of
entrepreneurs, the means by which they exploit change as an opportunity for a different
business or service.
• Frank Young defined entrepreneur as a change agent.
• Marx regarded entrepreneur as social parasite.
IMPORTANCE OF ENTREPRENEURSHIP
• Entrepreneurial development is a key to economic development.
• The objectives of industrial development, regional growth, and employment
generation depend upon entrepreneurial development.
• Entrepreneurs are the seeds of industrial development, and the fruits of industrial
development are
 greater employment opportunities to unemployed youth,
 increase in per capita income,
 higher standard of living and increased individual saving,
 revenue to the government in the form of income tax, sales tax, export duties,
import duties, and
 balanced regional development.
 Entrepreneurs have historically altered the direction of national economies,
industries, or markets.
 They have invented new products and developed organizations.
 They have introduced quantum leaps in technology and more productive uses.

Dr Suresh D, Professor, RNSIT

  They have forced the reallocation of resources away from existing users to new and more
productive users.
 Many innovations have transformed the society and altered our pattern of living, and
many services have been introduced to alter or create new service industries.
 India needs entrepreneurs for two reasons: to capitalise on new opportunities and to
create wealth and new jobs.
Why Should You Become an Entrepreneur?
• You will be your own boss and boss to other people and make decisions that are crucial to
the business' success or failure.
• You will have the chance to put your ideas into practice.
• You will make money for yourself rather than for someone else.
• You may participate in every aspect of running a business and learn and gain experience
in a variety of disciplines.
• You will have the chance to work directly with your customers.
• You will have the personal satisfaction of creating and running a successful business.
• You will be able to work in a field or area that you really enjoy.
• You will have the chance to build retirement value {for example, by selling the business
when you retire}.
Difference between a Manager and an Entrepreneur:

Sl. No. Entrepreneur Manager

1. Own boss Salaried Employee
2. Takes own decisions Executes the decision of the owner
3. Hires Employees He is an employee
4. Uncertain reward which can be Fixed rewards and Salary.
unlimited.

CONCEPT OF ENTREPRENEURSHIP
• "Entrepreneur" is a person who creates an enterprise. The process of creation is called
as "entrepreneurship".
• The word "entrepreneur" has been taken from French, where it was originally meant to
designate an organiser of musical and other entertainment.
• Entrepreneurial Development is a key to socio-economic transformation of the region.
• Entrepreneurship can be defined as a process of action an entrepreneur undertakes to
establish his enterprise.
• The word "entrepreneur" is derived from the French Verb enterprendre, means 'to
undertake'. This refers to those who "undertook the risk of new enterprises.
• In economics and commerce, an entrepreneur is an economic leader who possesses the
ability
• to recognise opportunities for the successful introduction of new commodities, new
techniques, and new sources of supply, and
• to assemble the necessary plant and equipment, management and labour force, and

Dr Suresh D, Professor, RNSIT

• organise them into a running concern.
• Entrepreneurship can be defined as a process of action an entrepreneur undertakes
to establish his enterprise.
• According to D.C. McClelland, entrepreneurship is doing things in a new and better
way and decision-making under the condition of uncertainty.
• Benjamin Higgins has defined entrepreneurship as the function of foreseeing investment
and production opportunity,
• organising an enterprise to undertake a new production process, raising capital, hiring
labour, arranging for the supply of raw materials, and
• selecting to managers for the day-to-day operation of the enterprise.
• According to Peter F. Drucker, entrepreneurship is neither a science nor an art. It has a
knowledge base. Knowledge in entrepreneurship is a means to an end. Indeed, the ends
largely define what contributes knowledge in practice.
• Entrepreneurial Development Process: This can be explained in five stages.
• Stage 1 Perceiving, identifying and evaluating an opportunity
• Stage 2 Drawing up a business plan
• Stage 3 Marshalling resources
• Stage 4 Creating the enterprise
• Stage 5 Consolidation and management.
• Identifying and evaluating an opportunity is a difficult task. One has to be "watchful"
for opportunities. Ideas can come from various sources, and evaluated carefully. After
having identified the project, the next step is to develop a plan for the venture. A further
step in the process is to assess the resource position. Once the enterprise is established,
an entrepreneur should always look forward to indefinite future, to growth, development,
or at least continuation.
CHARACTERISTICS OF A SUCCESSFUL ENTREPRENEUR
The following are some characteristics that every successful entrepreneur must possess in
adequate measure.
• Creativity
• Innovation
• Dynamism
• Leadership
• Teambuilding (Hare & Tortoise story)
• Achievement Orientation
• Problem Solving
• Goal Orientation
• Risk Taking and Decision making
• Commitment

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Creativity: Creativity is "the ability to bring something new into existence". A person may
therefore conceive of something new and envision how it will be useful, but not necessarily take
the necessary action to make it a reality. The creative process for an idea involves five stages.
 germination,
 preparation,
 incubation
 illumination and
 verification.
A model of the creative process is shown in Figure 1.

Innovation: It is the act that endows resources with a new capacity to create wealth.
 Entrepreneurs try to create new and different values and new and different satisfaction, to
convert a "material" into a "resource', or to combine existing resources in a new and more
productive configuration.
 The most important function of an entrepreneur, according to Joseph Schumpeter, is
innovation. It is the core attribute of an entrepreneur. Innovative spirit is fed by
information, knowledge, or even by intuition.
Dynamism: Dynamism revises the targets of the enterprise upwards time and again. The
enterprise may open up new vistas, better product mix, or charismatic product image stimulating
steady growth. A dynamic entrepreneur is always pragmatic.
Leadership: Leadership is the basic quality of an entrepreneur, and always be prominent in the
market. This spirit keeps him paces forward in any field, Leadership qualities will enable a
person to stand apart in whatever profession he might be in. The quality of his leadership is clear
from personal relationships, mode of handling a problem, generating resources and taking others
in to ones own stride.

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Teambuilding: An entrepreneur should have an ability to build a team. A team is a group of
individuals with a common purpose, that is focused and aligned to achieve a specific task or set
of outcomes. A good team will be able to share knowledge. core competency, and goals.
Achievement Motivation: Entrepreneurs have a high need for achievement and are guided by
their inner self, motivating their behavior towards accomplishment.
 Most entrepreneurs are attracted to this innovative career because it is challenging and
demands a high degree of intelligence, and involvement.
Problem Solving: It is important that an entrepreneur should be able to solve problems and not
avoid them. A formal problem-solving model helps entrepreneurs solve problems on a logical
manner.
 Brainstorming is a creative group problem-solving technique that involves generating a
large number of fresh ideas.
Goal Orientation: Goal setting is the achievement of targets and objectives for successful
performance of an entrepreneur. both long run and short run. It helps to measure how well
individuals and groups are meeting the performance standards.
Risk Taking and Decision making ability: Entrepreneurs are persons who take decisions under
conditions of uncertainty, and therefore are willing to bear risk, but never gamble with results.
 This is evidenced by market studies, exploring alternative lines of production or a new
product mix, or a new combination of inputs. and so on. They set goals that require high
level of performance.
Commitment: One of the subtle qualities of an entrepreneur is his willpower. Strong
determination with sound thinking fortifies will power.
 It is determination that provides the entrepreneur energy to work for 15- 18 hours a day, 7
days a week and 52 weeks in a year till the unit reaches a natural stage of take off.
CLASSIFICATION OF ENTREPRENEURS
• Entrepreneurs may be classified according to functional characteristics:
 Innovative entrepreneur: Innovative entrepreneurs are innovative in their approach to
business and introduce new products, new production methods, or discover new
markets or new forms of organization in their enterprise.
 Imitative or adoptive entrepreneur: Entrepreneurs belonging to this category imitate
production methods, and new forms of organization in their enterprise.
 This category of entrepreneurs can be found in developing and underdeveloped
countries, partly due to a lack of investment in research and development.
 Fabian entrepreneur: Fabian entrepreneurs are not proactive in nature and do not
respond much to changes in the environment. Instead, they change only when there is
the existence of enterprise.
 Drone entrepreneur: Drone entrepreneurs are conservative and complacent in nature
to maintain the status quo. These entrepreneurs may incur losses and have to close
enterprises.
MYTHS OF ENTREPRENEURSHIP
1. Entrepreneurs are born, not made

Dr Suresh D, Professor, RNSIT

According to this long-prevalent myth, the characteristics of entrepreneurs cannot be taught or
learned, they are innate traits with which a person must be born. Today, the recognition of
entrepreneurship as a discipline is helping to dispel this myth.
2. Entrepreneurs are academic and social misfits
The belief that entrepreneurs are academically and socially ineffective is born of some business
owners having started successful enterprises after dropping out of school or quitting a job.
Historically, educational and social organisations did not recognise the entrepreneur.
3. Entrepreneurs fit in an ideal profile
Studies being conducted at universities across the world will, in the future, provide more
accurate insights into the various profiles of successful entrepreneurs.
The environment. the venture itself, and the entrepreneur have interactive effects, which result in
many different types of profiles.
4. All you need is money to become an entrepreneur
It is true that a large number of business failures occur because of lack of adequate financing. Yet
having money is not the only bulwark against failure. Failure due to a lack of proper financing is
often an indicator of other problems: managerial incompetence, lack of financial
understanding, poor investments, poor planning, and so on.
5. All you need is luck to become an entrepreneur
Prepared entrepreneurs who seize an opportunity when it arises often appear to be "lucky". What
appears to be luck is really a combination of preparation. determination. desire, knowledge, and
innovativeness.
6. A great idea is the only ingredient in a recipe for business
“The quality of management will determine the success/failure of the venture.“ Venture
capitalists say bad management is the main cause of failures among small businesses.
7. My best friend will be a great business partner
You may agree on most issues but misunderstandings can erupt over insignificant aspects like
who should be in the office first, who's in charge of supervising the office staff and so on.
8. Having no boss is great fun
If you thought your boss was way too demanding, watch out for your vendors, bankers,
investors, suppliers and customers. Since customers can make or break you, their wish often ends
up being your command.
9. I can make lots of money
For most people it is years, not months, before the money starts coming in. Till that happens,
you'll have to miss the sc:curity of your monthly pay cheque.
10. I will definitely become successful
Put it down to plain optimism, egoism or a survival strategy, but most business owners or even
those starting off on their own refuse to accept the possibility of failure.
11. Life will be much simpler if I work for myself
• Don't believe it for one moment. Working for yourself is definitely more strenuous than
working for others, at least when starting off.
• For instance consider Dinesh Gupta. He set up Green Investors' Grievances Services two
years ago to take care of individuals' stock-related problems, and has a punishing
schedule even now. His typical day starts al 5 a.m. and ends at 7 p.m.
•
ENTREPRENEURIAL DEVELOPMENT MODELS

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The models for the development of the entrepreneurship fall in the following categories
1. Psychological models
2. Sociological Models
3. Integrated Models
1. Psychological models
• McClelland (1961) suggests motivation training programme as the policy measure,
which will make entrepreneurs really willing and eager to exploit the new opportunities
provided.
• Everett Hagen's theory of social change lays emphasis on "creative personality" as a
casual link in entrepreneurial behaviour and "status withdrawal" as the determinant of the
creative personality.
• John Kunkel (1965) considered entrepreneurial supply by suggesting a behaviourist
model. His model suggests that entrepreneurial behaviour is a function of the surrounding
social structure, both past and present, and can really be influenced by manipulating
economic and social incentives. Thus, his model is based upon experimental psychology,
which identifies sociological variables as the determinants of entrepreneurial supply.
2. Sociological Models
 Frank W Young’s theory of entrepreneurship is a theory of change based upon society’s
incorporation of relative sub-groups.
 Young's model of entrepreneurship suggests the creation of supporting institutions in
society as the determinant of entrepreneurship.
3. Integrated Models
T. V. Rao (1975) in "entrepreneurial disposition" has included the following factors.
(i) Need for motive is the dynamic which. for the prospective entrepreneur. has the greatest
possibility of achieving the goals if one performs those activities.
(ii) Long- term involvement is the goal either at thinking level or at activity level in
entrepreneurial activity that is viewed as a target to be fulfilled.
(iii) (iii) Personal, social and material resources which, he thinks, are related to entry and
success in the area of entrepreneurial activity.
(iv) (iv) Socio-political system to be perceived as suitable for establishment and development
of his enterprise.
B. S. Venkata Rao (1975) described the following five stages for promoting small
entrepreneurship.
1. Stimulation – stimulate interest.
2. Identification – identify prospective entrepreneurs.
3. Development – motivation and training to formulate into a project.
4. Promotion – Govt. policy initiatives to promote small entrepreneurship.
5. Follow-up – review the policy and programs to make it more effective.

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Entrepreneurial Development Cycle
• M. P. Akhori suggested the entrepreneurial development cycle (Figure 2) consisting of
the following components for the promotion and development of entrepreneurship.

 The cycle is surrounded by three major activities :

Stimulatory Activities – These activities ensure the emergence of entrepreneurs
in the soc iety. They prepare the background for the entrepreneurship to sprout
and for people to start looking for entrepreneurial pursuits. They generate initial
motivation and offer opportunity to acquire skill. These can be achieved by the
following activities.
• Entrepreneurial education • Planned publicity for entrepreneurial opportunities •
Identification of potential entrepreneurs through scientific methods • Motivational
training to new entrepreneurs • Help and guidance in selecting products and
prepari ng project reports. • Making available techno-economic information and
product profiles • Evolving locally suitable new products and processes •
Availability of local agencies with trained personnel for entrepreneurial
counselling and promotions • Creating entrepreneurial forums • Recognition of
entrepreneurs
Support Activities – These activities help a person to develop into an
entrepreneur. They nurture and help entrepreneurship to grow. This can be done
by providing the necessary infrastructure in the form of computers, Internet
connectivity, offering consultancy and training, and providing all required

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 information as to how a person should groom himself as an entrepreneur.
Financial assistance for projects and seminars could also promote
entrepreneurship. These activities can be promoted in the incubation centre to
groom a person to become an entrepreneur. The various support activities are
given below.
• Registration of unit • Arranging finance • Providing land. shed, power, water,
and so on. • Guidance for selecting and obtaining machinery • Supply of scarce
raw materials • Getting licences/import licences • Providing common facilities •
Granting tax relief or other subsidy • Offering management consultancy services •
Help marketing the product • Providing information

 Sustaining Activities – These activities are all those that help in the continuous
and efficient functioning of entrepreneurship. These include modernisation of
infrastructure, encouraging diversification. providing opportunities and supporting
industry-institute interaction through consultancy, promoting quality, and
organising need-based common facilities centres. The various sustaining activities
are as follows.
• Help modernisation • Help diversification/expansion/substitute production •
Additional financing for full capacity utilisation • Deferring repayment/interest •
Diagnostic industrial extension/consultancy services • Production units
legislation/policy change • Product reservation/creating new avenues fo r
marketing • Quality testing and approving services • Need-based common
facilities centres

Problems faced by Entrepreneurs and capacity building for Entrepreneurship:

• Entrepreneurs face a number of problems in the promotion of units and during
production, marketing, distribution, procurement of raw material, and availing of
incentives offered by the State government.
• The problems of entrepreneurs may be divided into two groups-external and internal.
• External problems are those, which result from factors beyond the control of
entrepreneurs while internal problems are those, which are not influenced by external
factors.
• The problems of industries, whether in the small sector or in organized sector are almost
identical.
I. Internal Problems of Entrepreneurs
1. Planning
a) Technical feasibility • Inadequate technical know-how. •Locational disadvantage •
Outdated production process
b) Economic viability • High cost of input. • Break-even point too high • Uneconomic size
of project • Choice of idea • Feeble structure • Faulty planning • Poor project
implementation • Lack of strategies • Lack of vision •Inadequate connections • Lack of

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 motivation •Underestimation of financial requirements • Unduly large investment in fixed
assets • Overestimation of demand.
2. Implementation
• Cost over-runs resulting from delays in getting licenses, sanctions and so on and
inadequate mobilization of finance.
3. Production
a) Production management • Inappropriate product mix • Poor quality control • Poor
capacity utilization • High cost of production • Poor inventory maintenance and
replacement •Lack of timely and adequate modernization and so on • High wastage •
Poor production
b) Labor management • Excising high wage structure • Inefficient handling of labor
problems • Excessive manpower • Poor Labor productivity • Poor labor relations • Lack
of trained skilled labor or technically competent personnel.
c) c) Marketing Management • Dependence on a single customer or a limited number of
customers/single or a limited number of products. • Poor sales realization • Defective
pricing policy • Booking of large orders at fixed prices in an inflationary market • Weak
market organization • Lack of market feedback and market research • Unscrupulous sale
purchase practices
d) d) Financial management • Poor resource management and financial planning • Faulty
costing • Dividend policy • General financial indiscipline and application of funds for
unauthorized purposes • Deficiency of funds • Over trading • Unfavorable gearing or
keeping adverse debt equity ratio • Inadequate working capital • Absence of cost
consciousness • Lack of effective collection machinery
e) e) Administrative management • Over centralization • Lack of professionalism • Lack
of feedback to management (management Information System) • Lack of timely
diversification • Excessive expenditure on R&D
II. External Problems of Entrepreneurs
a) Infrastructure • Location • Power • Water • Post Office and so on • Communication •
Non-availability or irregular supply of critical raw materials or other inputs • Transport
bottlenecks
b) Financial • Capital • Working capital • Long term funds • Recovery • Marketing Taxation
• Raw material • Industrial and financial regulations • Inspections • Technology •
Government policy Administrative hurdles • Rampant corruption • Lack of direction •
Competitive and volatile environment.

CAPACITY BUILDING FOR STRONG ENTREPRENEURSHIP

Dr Suresh D, Professor, RNSIT

 • India has an extraordinary talent pool with virtually limitless potential for
entrepreneurship. To develop successful business builders, India must focus on four
areas.
1. Create the right environment for success:
• Entrepreneurs should find it easy to start a business. To do so, most Indians would start
slow with capital borrowed from family and friends; the CEO playing the role of
salesman and strategist; a professional team assembled months or perhaps years after the
business was created; and few, if any, external partners.
• Critical support services abound. including professional managers, legal firms, venture
capitalists, angel investors, and placement agencies. Combine this with excellent
infrastructure - connectivity, communication, and office space, and getting started is easy.
2. Ensure that entrepreneurs have access to the right skills: A survey conducted by Mc
Kinsey & Company revealed that most Indian start up businesses face two skill gaps:
 entrepreneurial (how to manage business risks, build a team, identify and get funding)
and
 functional (product development know-how, marketing skills. and so on).
• Entrepreneurs either gain these skills by hiring managers or have access to "support
systems" such as universities or other institutions that may nurture many regional
businesses. In addition, business schools give young graduates the skills and knowledge
required for business today.
3. Ensure that entrepreneurs have access to "smart" capital: In the last few years, several
venture funds have entered the Indian market. While the sector is still in its infancy in India,
venture capitalists (VCs) are providing capital as well as critical knowledge and access to
potential partners, suppliers, and clients across the globe. India has only a few angel
investors who support an idea in the early stages before VCs become involved.
4. Enable networking and exchange: Entrepreneurs learn from experience-theirs and that of
others. Much of the success of Indians in Silicon Valley is attributed to the experience, sharing,
and support TIE (The IndUS Entrepreneurs) members have extended to young entrepreneurs.
India would benefit from creating a strong network of established entrepreneurs and managers
that entrepreneurs could draw on for advice and support.

*** END ***

Dr Suresh D, Professor, RNSIT

Dr Suresh D, Professor, RNSIT