MODULE-3

MEANING OF SOCIAL RESPONSIBILITY

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-realisation in work).

Different views on Social Responsibility

There are four different views on the social responsibility of business. These are as under:

Communist View : This view advocates the imposition of social responsibilities on business through the
instrumentality of the State. Communists hold that free industrial civilisation is not good because its
values are of the wrong order. Economic expediency is taken to be the sole criterion of decision.
Compromise is impossible between the church and the idolatry of wealth which is the practical religion
of capitalist societies. Because of this immorality of business standards, this view advocates an
imposition of social responsibilities through legislation or force.

Capitalist View : This view holds that economic expediency alone is a just standard for business
decisions and that business has an unbridled and an uncontrolled right to make money free from all
sorts of social responsibilities. It is argued that by maximising its profit objectives, business gratifies its
personal desires and at the same time satisfies the needs of society. Therefore, business should not
have any responsibility beyond obeying certain legal codes in achieving its goals.

Pragmatic View : This view acknowledges the importance of profits but simultaneously stresses the
need for social responsibility. Hence businessman's first responsibility is to keep his business solvent.
But he must also voluntarily assume social responsibilities beyond the legal minimum. This can be done
at three levels. At the first level, the manager goes beyond the legal minimum and caters also to public
expectations-moving as the winds of public opinion blow. At the second level, he anticipates public
expectations and acts accordingly. At the third and highest level, he creates new public expectations by
voluntarily setting and following the loftiest standards of moral and social responsibility.

Trusteeship View :This view advocates the retention for personal use of so much as is necessary for an
honourable livelihood, no better than that enjoyed by million others; and the utilisation of the rest for
the welfare of the community. The trusteeship slogan is enjoy thy wealth by renouncing it. Earn your
crores by all means but understand that your wealth is not yours; it belongs to the people.
SOCIAL RESPONSIBILITIES OF BUSINESS TOWARDS DIFFERENT GROUPS

Every businessman is at the centre of a network of relationships which consist of those between him at
one end and his workers, employees, consumers, shareholders, other businesses, community and the
government on the other. A businessman's social responsibilities to each of these parties are briefly
enumerated below.

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 rationalising the use
of capital and labour.
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.
5. Honouring contracts and following honest trade practices.
6. Preventing the creation of monopolies. Monopolies are bad in that they make the community
face high prices, short supply and inferior quality of goods.
7. Providing for after-sale servicing.
8. Ensuring hygienic disposal of smoke and waste and voluntarily assisting in making the town
environment aesthetically satisfying.
9. Achieving better public relations by giving to the community, true, adequate and easily
intelligible information about its working.
10. Supporting education, slum clearance and similar other programmes.

Towards Employees and Workers.

1. A fair wage to the workers, which is possible only when the businessman is willing to accept a
voluntary ceiling on his own profits.
2. Just selection, training and promotion.
3. Social security measures and good quality of work life.
4. Good human relations i.e., maintaining industrial peace, creating conditions for collective
bargaining.
5. Freedom, self-respect and self-realisation. There should be 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

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 State

 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 implement rural uplift and secure balanced development of the country.

SOCIAL AUDIT
A social audit is a systematic study and evaluation of the organisation's social performance as
distinguished from its economic performance. The term "social performance” refers to any
organisational activity that effects the general welfare of society.

Benefits

a) It supplies data for comparison with the organisation's social policies and standards. The
management can determine how well it is living up to its social objectives.
b) 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.
c) It provides data for comparing the effectiveness of different types of programmes.
d) It provides data about the cost of social programmes, so that the management can relate this
data to budgets, available resources, company objectives, etc.
e) It provides information for effective response to external groups which make demands on the
organisation.

Limitations

A social audit is a process audit rather than an audit of results. This means that a social audit
determines only what an organisation 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.

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.
 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.

Sexual harassment, discrimination in pay and promotion and the right to privacy are some issues
specially relevant to the study of ethics.

Sexual harassment in the workplace can be defined as unwelcome sexual advances, sexual favour or
other verbal or physical conduct of a sexual nature. Discrimination against women in pay and
promotion opportunities continues to exist despite there being the Equal Remuneration Act, 1976.

There are four important factors which affect a manager's decision on ethical or unethical.

o Government legislation.
o Business codes.
o Pressure groups.
o Personal values of the manager himself

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.

Code for best corporate governance:

 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 non-executive directors to
report on any matter relating to financial management.
 Audit partners should be rotated and there should be fuller disclosure of non-audit work.

Benefits of Good Corporate Governance

 It creates overall market confidence and long-term trust in the company.

 It leads to an increase in company's share prices.
 It ensures the integrity of company's financial reports.
 It maximises corporate security by acting as a whistle blower.
 It limits the liability of top management by carefully articulating the decision-making process.
 It improve strategic thinking at the top by induction independent directors who bring a wealth
of experience and a host of new ideas.
Entrepreneurship
IMPORTANCE OF ENTREPRENEURSHIP: Entrepreneurial development today has assumed special
significance, since it is a key to economic development. The objectives of industrial development,
regional growth, and employment generation depend upon entrepreneurial development.

Entrepreneurs are, thus 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.

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.

Difference between a Manager and an Entrepreneur

Entrepreneur Manager
 Own boss  Salaried employee
 Takes own decisions  Executes the decisions of the
 Hires employees owner
 Uncertain rewards which can be  He is an employee
unlimited  Fixed rewards and salary

Concepts of entrepreneurship

 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
 Entrepreneurial development process can be explained in five stages.

Various Definitions of an Entrepreneur

 An individual who bears the risk of operating a business in the face of uncertainty about the
future conditions - Encyclopedia Britannica
 He is the one who innovates,and introduces something new in the economy- Joseph A.
Schumpeter
 He shifts economic resources out of an area of lower and into an area of higher productivity and
greater yield. -J. B. Say (French economist)
 He searches for change, responds to it and exploits opportunities. Innovation is the specific tool
of an entrepreneur -Peter F. Drucker
 Entrepreneurs are people who have the ability to see and evaluate business opportunities;
together with the necessary resources to take advantage of them; and to intimate appropriate
action to ensure success -International Labour Organisation (ILO)
 He is the one who is endowed with more than average capacities in the task of organising and
coordinating the various factors of production. He is a pioneer and captain of industry - Francis
A. Walker
 He is a critical factor in economic development and an integral part of economic transformation
-William Diamond
 He is a person who is able to look at the environment, identify opportunities to improve the
environment, marshall resources, and implement action to maximise those opportunities. -
Robert E. Nelson
 The word entrepreneur is derived from a Sanskrit word called "Antaraprerana". -Poornima
chantarimath.

Entrepreneurial Development Process

Entrepreneurial development 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. Opportunities do not appear from
nowhere. One has to be "watchful" for opportunities. Ideas can come from various sources. The
opportunities should be 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.

(a) Creativity: The terms creativity and innovation are often used to mean the same thing, but each
has a unique connotation. Creativity is the ability to bring something new into existence. This
definition emphasises the ability, not the activity of bringing 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.

Germination: The germination stage is the seeding process. Most creative ideas can be traced to an
individual's interest in or curiosity about a specific problem or area of study.

Preparation: Once the seed of curiosity has taken form as a focused idea, creative people embark on
a conscious search for answers. Any individual with an idea will consequently think about it,
concentrating his or her energies on rational extensions of the idea and how it might become a
reality.

Incubation: Incubation is a stage of mulling it over" while the subconscious intellect assures control
of the creative process. This is a crucial aspect of creativity because when we consciously focus on a
problem, we behave rationally to attempt to find systematic resolutions.

Illumination: The fourth stage, occurs when the idea resurfaces as a realistic creation. Most creative
people go through many cycles of preparation and incubation, searching for that catalyst of an
incident that can give their idea full meaning.

Verification: An idea once illuminated in the mind of an individual continues to have little meaning
until verified as realistic and useful. Verification is a stage of development that refines knowledge
into application. This is to "harvest the practical results of his or her creation.

(b) Innovation : Entrepreneurs innovate. Innovation is the specific instrument of entrepreneurship.

It is the act that endows resources with a new capacity to create wealth.

Systematic innovation means monitoring following seven sources for innovative opportunity

 The unexpected-unexpected success, unexpected failure, unexpected outside event.

 The incongruity-between reality as it actually is and reality as it is assumed to be or as it ought
to be
 Innovation based on process need Changes in industry structure or market structure that
catches everyone unawares.
 Demographics (population changes)
 New knowledge-scientific and non-scientific
 Changes in perception, mood, and meaning.

(c) Dynamism: Innovation together with dynamism constitutes a potential combination for
prosperity. A dynamic entrepreneur is always pragmatic. Given the potentialities of the
enterprises, he sets attainable goals, which are to be accomplished within specific timeframes.
A sole entrepreneur should promote a second line of decision-making mechanism to prevent
avoid being created in his absence. An efficient entrepreneur must be good at managing change.
He must foresee and plan for change and administer it with minimum discomfort and
dislocation. He should be highly visible as well as mobile. High visibility ensures good control and
morals.

(d) Leadership: Leadership is the basic quality of an entrepreneur. 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 taking others in to ones own
stride. An enterprise endowed with the resource of from personal relationships, mode of
handling a problem, generating resources and leadership will always be prominent in the
market.

(e) Teambuilding: An entrepreneur should have an ability to build a team. A team is group of
individuals with a common purpose, that is focused and aligned to achieve specific task or set of
outcomes.
A good team will be able to share knowledge, core competency, and goals. The teambuilding
skill consists of the following steps.
Step 1 : Wanting to feel better
Step 2 : Identifying the problem and needs of the enterprise
Step 3 : Creating a vision
Step 4 : Setting goals for the group
Step 5 : Reviewing progress

(f) Achievement motivation: Entrepreneurs have a high need for achievement and are guided by
their inner self, motivating their behaviour towards accomplishment.
Entrepreneurs can be classified into three categories. Some are only dreamers and though they
indulge in nice dreams, they are not capable of translating their dreams. Some belong to the
category of doubters. They always have a negative attitude, never expand their activities, never
take any risk, and never go out of their way to achieve anything. They are never innovative and
they follow the line of least resistance. The third category of entrepreneurs are the doers. They
always accept any challenge and take a calculated risk to do something worthwhile. It is
necessary to contact such highly successful entrepreneurs and ask them what motivated them
to become successful in their life.

(g) 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. The model consists of six steps
 (a) Define the problem
(b) Gather information
(c) Identify various solutions
(d) Evaluate alternatives and select the best option
(e) Take action
(f) Evaluate the action taken
Brainstorming is a creative group problem-solving technique that involves generating a large
number of fresh ideas.

(h) 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. Human behaviour is goal
directed. Therefore, goal setting is a necessary part of all activities.
Goal-setting process requires three steps, which are as follows.
1. Definition of goal
2. Specific goals
3. Feedback about goal achieved
The definition of a goal requires that a leader explain the purpose and necessity of the specified
goals to his team members. Goals must be as specific as possible so that employees can feel a
sense of achievement when goal is attained. Goals must lead to tangible results.

Aspects of goal setting

 Clarity of goals
 Reformulation of goals
 Restating of goals
 Plan of action
 Defining standards of performance and measurement criteria
 Recognising risks and obstacles
 Goal reaffirmation
 Goal attainment

Types of Goals

(a) Target oriented: At times established targets that have been set in advance despite the
constraints and a specified time frame.
(b) Achievement oriented: The value and effectiveness of goals are weighed in as sales
turnover or employee welfare.
(c) Specific (primary): Specific goals are very important to any individual/organisation.
Specific goals are the pivot around which work process revolves.
(d) Overall: Overall goals are broad based.
(e) Secondary: Secondary goals take a back seat to specific goals. But they must not be
overlooked in the rush to meet the primary goal.
(f) Personal/social: Personal and social goals can either be complementary or substitutes or
both.
 (i) 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.
Risk bearing and decisions making calls for absolute clarity in thinking and coordinated actions.
A good entrepreneur should avoid excessively high as well as low risk situations. Risk bearing is
an indication of an extreme sensitivity to cost consciousness and passion for profit. The focus
should always be on the market. The entrepreneur should believe in competition. The progress
of an entrepreneur depends increasingly on effective knowledge and its continuous updating
and proper utilisation.

(j) 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

(a) Based on Functional Characteristics

1. Innovative entrepreneur: Such entrepreneurs introduce new goods or new methods of
production or discover new markets or reorganise their enterprises. Entrepreneurs in this
group are characterised by an aggressive assemblage of information for trying out a novel
combination of factors.
2. Imitative or adoptive entrepreneur: Such entrepreneurs do not innovate themselves, but
imitate techniques and technology innovated by others. Entrepreneurs in this group are
characterised by their readiness to adopt successful innovations by successful
entrepreneurs.
3. Fabian entrepreneur: Such entrepreneurs display great caution and skepticism in
experimenting with any change in their enterprise. They change only when there is an
imminent threat to the very existence of their enterprise.
4. Drone entrepreneur: Such entrepreneurs are characterised by a die-hard conservatism and
may even be prepared to suffer the loss of business.

(b) Based on the Developmental Angle

1. Prime mover: This entrepreneur sets in motion a powerful sequence of development, expansion, and
diversification of business.

2. Manager: Such an entrepreneur does not initiate expansion and is content just staying in business.

3. Miner innovator: This entrepreneur contributes to economic progress by finding hetter use for
existing resources.

4. Satellite: This entrepreneur assumes a supplier's role and slowly moves towards a productive
enterprise.

5. Local trading: Such an enterpreneur limits his enterprise to the local market.
(c) Based on Types of Entrepreneurial Business

1. Manufacturing: An entrepreneur who runs such a business actually produces the products that can be
sold using resources and supplies. For example, apparel and other textile products.

2. Wholesaling: An entrepreneur with such a business sells products to the middle man.

3. Retailing: An entrepreneur with such a business sells products directly to the people who use or
consume them.

4. Service: An entrepreneur in this business sells services rather than products.

(d) Based on the Nine Personality Types of Entrepreneurs

1. The Improver: If you operate your business predominately in the improver mode, you are focused on
using your company as a means to improve the world.

2. The Advisor: This business personality type will provide an extremely high level of assistance and
advice to customers. The advisor's motto is: the customer is right and we must do everything to please
them.

3. The Superstar: Here the business is centered on the charisma and high energy of the Superstar CEO.
This personality often will cause you to build your business around your own personal brand.

4. The Artist: This business personality is the reserved but a highly creative type. Often found in
businesses demanding creativity such as web design.

5. The Visionary: A business built by a Visionary will often be based on the future vision and thoughts of
the founder.

6. The Analyst: If you run a business as an Analyst, your company focus is on fixing problems in a
systematic way. Often the basis for science, engineering or computer firms, Analyst companies excel at
problem solving.

7. The Fireball: A business owned and operated by a Fireball is full of life, energy and optimism.

8. The Hero: You have an incredible will and ability to lead the world and your business through any
challenge. You are the essence of entrepreneurship and can assemble great companies.

9. The Healer: If you are a Healer, you provide nurturing and harmony to your business. You may avoid
outside realities and use wishful thinking.

(d) Based on schools of Thought on Entrepreneurship

Assessing personal qualities

1. The Great Person school of entrepreneurship - The entrepreneur has an Intuitive ability a sixth
sense and traits and instincts he is born with.
2. The Psychological Characteristics school of entrepreneurship - Psychological Entrepreneurs have
unique Characteristics values, attitudes, and needs, which drive them.
Recognising opportunities

3. The Classical school of entrepreneurship - The central characteristic of entrepreneurial

behaviour is Innovation.

Acting and managing

4. The Management school of entrepreneurship - Management Entrepreneurs are organisers of an

economic venture; They are people who organise, own, manage, and assume the risk.
5. The leadership school of entrepreneurship – Entrepreneurs are leaders of people; they have the
ability and maturity to adapt their style to the needs of people.

Reassessing and adopting

6. The Intrepreneurship school of Entrepreneurship – In corporations, intrepreneurship is the

development of independent units to create, market and expand services.

Myths of Entrepreneurship

 Entrepreneurs are born not made

 Entrepreneurs are academic and social misfits
 Entrepreneurs fit an ideal profile.
 All you need is money to be an entrepreneur
 All you need is luck to be an entrepreneur
 A great idea is the only ingredient in a recipe for business
 My best friend will be a great business partner
 Having no boss is great fun
 I can make lots of money
 I will definitely become successful
 Life will be much simpler if I work for myself

ENTREPRENEURIAL DEVELOPMENT MODELS

The models suggested for the development of entrepreneurship fall in the following categories.

(a) Psychological models - , McClelland suggests motivation training programme as the policy
measure, which will make entrepreneurs really willing and eager to exploit the new
opportunities provided. John Kunkel (1965) considered entrepreneurial supply by suggesting
behaviorist 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.

(b) Sociological models - Frank W. Young's theory of entrepreneurship is a theory of change

based upon society's incorporation of relative sub-groups. The relativeness of a sub-group which
has a low status in a larger society will lead to entrepreneurial behaviour if the group has better
institutional resources than others in the society at the same level. Young's model of
entrepreneurship suggests the creation of supporting institutions in society as the determinant
of entrepreneurship.

(c) 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) Personal, social and material resources which, he thinks, are related to entry and success in
the area of entrepreneurial activity.

(iv) Socio-political system to be perceived as suitable for establishment and development of his
enterprise.

Factors for developing small entrepreneurship

B. S. Venkata Rao (1975) described the following five stages for promoting small
entrepreneurship.

(1) Stimulation: This stage includes the creation of an industrial atmosphere, policy statement
emphasizing the role of small industry, wide publicity of industrial development programmes,
and formation of special schemes and creation of support institutions.

(2) Identification: This stage is necessary to identify prospective entrepreneurs. The prospective
entrepreneurial force can be identified in rural artisans, factory workers, persons with formal
training in engineering and technology, and graduates in business administration and
management.

(3) Development: This stage would include organisation of motivation and managerial training
programmes along with advice on technology, formulation of bankable project, location, and so
on.

(4) Promotion: This stage would include government policy initiatives for promoting small
entrepreneurship.

(5) Follow up: This stage includes reviewing the policies and programmes of the government and
seeking follow up with a view to making them more effective.

Entrepreneurial development cycle :

M. P. Akhori suggested the entrepreneurial development cycle consisting of the following

components for the promotion and development of entrepreneurship.

1. Stimulatory activities: These activities ensure the emergence of entrepreneurs in the society.
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
  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 preparing 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

2) 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.

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

3. Sustaining activities:
These activities are all those that help in the continuous and efficient functioning of
entrepreneurship.
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 for marketing
 Quality testing and approving services
  Need-based common facilities centres

PROBLEMS FACED BY ENTREPRENEURS

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 the entrepreneurs while internal
problems are those which are not influenced by external factors.

Internal problems

1) Planning
(a) Technical feasibility
 Inadequate technical know how
 Locational disadvantage
 Outdated production process

(b) Economic viability

 High cost of inputs

 Break-even point too high
 Uneconomic size of project
 Choice of idea
 Feeble structure
 Faulty planning
 Poor project implementation
2) Implementation
Cost over-runs resulting from delays in getting licences, sanctions, and so on, and
inadequate mobilisation of finance.

3) Production

(a) Production management

  Inappropriate product mix
 Poor quality control
 High cost of production
 Poor capacity utilisation

(b) Labour management

 Excising high wage structure

 Inefficient handling of labour problems
 Excessive manpower
 Poor labour productivity

(b) Marketing management

 Poor sales realisation
 Defective pricing policy
 Booking of large orders at fixed prices in an inflationary market
 Weak market organisation

(d) Financial management

 Poor resource management and financial planning

 Faulty costing
 Dividend policy
 General financial indiscipline and application of funds for unauthorised pur
 poses
 Deficiency of funds

(e) Administrative management

 Lack of professionalism
 Lack of feedback to management (Management Information System)
 Lack of timely diversification

External Problems of Entrepreneurs

(a) Infrastructural

 Location
 Power
 Water
 Communication
 Post Office and so on

(b) Financial

 Capital
 Working capital
 Long-term funds
  Recovery

Specific management problems

 Management deficiency
 Finance inadequacy
 Manufacturing and technical problems
 Product planning
 Selection of plant, equipment and machinery
 Human resource development
 Technical know how
 Preparation of project report

Capacity Building for Entrepreneurship

India has an extraordinary talent pool with virtually limitless potential for entrepreneurship.
India must, however, commit to creating the right environment to develop successful business
builders. To do this, India must focus on four areas.
a) 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; professional team assembled months or perhaps years after the
business was created; and few, if any, external partners.
b) Ensure that entrepreneurs have access to the right skills: A survey conducted
by McKinsey & Company revealed that most Indian start up businesses face
two skill gaps: entrepreneurial and functional. India can move towards
ensuring that the curriculum in universities is modified to address today's
changing business landscape, particularly in emerging markets, and build
"centres of entrepreneurial excellence" in institutes that will actively assist
entrepreneurs.
c) Ensure that entrepreneurs have access to "smart" capital: For a long time,
Indian entrepreneurs have had little access to capital. It is true that in the last
few years, several venture funds have entered the Indian market. However,
India has only a few angel investors who support an idea in the early stages
before VCs become involved. India Venture 2000 showed this to be a critical
gap. While associations such as TIE are seeking to bridge the gap, this is India's
third challenge: creating a global support network of “angels" willing to
support young businesses.
d) 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 members have
extended to young entrepreneurs. The rapid pace of globalisation and the fast
growth of Asian economies present tremendous opportunities and challenges
for India. Through planning and focus, India can aspire to create the pool of
entrepreneurs who will be the regions and the worlds'-leaders of tomorrow.