Entrepreneurship Development and

Communication skills
Mr. Sachin Suse Assistant Professor,
Food Technology
 CHAPTER-1
Entrepreneurship Development
 ASSESSING OVERALL BUSINESS ENVIRONMENT IN INDIAN ECONOMY

 Since the 1990s, India's business scene has gotten a lot better.

 The economic reforms, both local and international investors are finding it simpler

to operate here. These changes aim to shift from a centrally controlled economy to

one that's more market-oriented.

 The goal is to boost efficiency and growth by introducing more competition.

 This involves easing internal rules and welcoming foreign investment and trade.
 Compared to other growing economies, India has some strong points that can
help soften the impact of the global economic crisis.
 Despite the tough times worldwide, India still offers plenty of business chances
for both local and foreign entrepreneurs.
 Back in 1947, after gaining independence, India started focusing on
industrialization to boost its economy and the main goal was to build up
manufacturing industries.

ASSESSING
They plannedOVERALL BUSINESS
out development ENVIRONMENT
through five-year INlike
plans. Industries INDIAN
iron and
ECONOM
steel, oil refineries, cement, and fertilizer were put under government control.
Leaders also pushed for the growth of small-scale industries.
 They believed these smaller businesses would be crucial for India's economic
growth and could create lots of jobs.
 Supporting small businesses would also spread out industry growth, make
wealth more evenly distributed, and encourage more investment and
entrepreneurship.
ASSESSING OVERALL BUSINESS ENVIRONMENT IN INDIAN
ECONOMY

 In layman’s language business means buying and selling of goods.

 It is referred to as an organized effort of enterprise to supply consumer with

goods and services for a profit. This simple understanding is limited for
assessing the role of environment in today’s global business activity.
 To gain better understanding, modern business may be defined as complex field
of industry and commerce which involves activities related to both production
and distribution.
The New Economic Policy initiated in early 1990s in India had five main
components. These are
(i) Devaluation of the Indian rupee in order to increase exports,
(ii) Deregulation or dismantling of government controls over domestic industry,
(iii) Privatization, including formation of jointly owned public private enterprises
and sale of public sector enterprises,
(iv) Liberalization or opening up of monopoly markets to increase foreign and
domestic competition, and
(v) Globalization by opening the Indian economy to foreign investment.
 BUSINESS ENVIRONMENT IN INDIAN ECONOMY

1. Strong growth momentum

 Sustained process of liberalization since 1991
 Average GDP growth is 6% in last six years
 Increased openness to foreign trade and investment
 Rapid growth in export oriented IT and BPO industries
 Strong balance of payments (rapid buildup of reserves)
2. Opportunity
 Large, rapidly growing domestic market
 Large, low cost labour force
 Engineering/IT/English language skills
 Abundant availability of raw material
 Political stability, consensus on economic policies
3. High potential sectors
 Software
 BPO (Business Process Outsourcing)
 Autos + Components
 Engineering based manufacturing
 Steel
 Textiles/RMG ( Ready Made Garments)
 Pharmaceuticals
 Alternative to china for companies looking to source merchandise globally
4. Growth constraints
 High fiscal deficits crowd out public and private investment
 Severe infrastructure bottlenecks
 Rigidities in labour and land markets
 Widespread govt. ownership of business, dominance in banking
 Import tariffs, complex tax regimes
 Restrictions on FDI (Foreign Direct Investment) in some sectors
 Excessive regulation increases cost of doing business
 Private investment is only 15% of GDP
 Industry contributes less than 25% of GDP
 Only 7% of total employment in organized sector
 Nature of modern business
 The significant characteristics of modern business are: large size, oligopolistic
nature, diversification, global presence, technology orientation, and government
regulation.

a) Large size of business:

Modern business is large in size. Private sector companies of India are not as large
as some of the companies of developed nations in terms of sales and assets but are
quite large by the standards of developing countries and compare favorably even
with a large number of middle size companies of western world.
The notable private sector large business organizations include Reliance, Tata,
Larsen & Toubro, Bharati Airtel, Adani, etc.

b) Oligopolistic nature: Oligopoly is characterized by small number of firms

seeking a homogenous or a differentiated product.
c) Diversification:
 In order to grow and expand, today business houses adopt the policy of
diversification.
 The Tata is a big business organization of India. It has a diversified portfolio
consisting of different automobiles, iron and steel, insurance,
telecommunication etc.
 Reliance group also has a diversified portfolio of oil, telecom, textiles etc.
Global presence:
 In the wake of liberalization and reduction of trade restrictions, business
organization also expands by doing the business overseas.
 The Indian companies like Reliance, Ranbaxy, Sundaram, Bajaj Auto, Tata etc.
also export their products to different nations of the world.

e) Technology orientation:
 To satisfy ever changing needs of large number of consumers, modern
business organizations adopt new technology to introduce new products in the
market.
 They spend considerable amount of their budget to research oriented activities
Government regulations:
 With liberalization there is also reduction in government controls. But
government control over business organizations is also necessary to correct
market failures represented in the form of monopoly and pollution.
 Moreover government attempts to create stable market conditions by
monetary and fiscal regulations.
 Business Environment
It refers to all external factors which have direct or indirect influence on functioning
of business. It is divided in to two broad categories- external and internal
environments. External environment is futher categorized as macro and micro
environment.
 Characteristic Features of Indian Economy

 India has a mixed economy wherein both private and public enterprises prevail.
Indian constitution allows private ownership of means of production.
 Thus private sector also exists with public sector. At the time of independence,
due to huge resource requirement and long gestation period to realize profit,
several sectors of the economy were developed under public sector mode by
government.
 After liberalization in 1991, there is much higher growth in private sector
compared to public sector.
1. Low per capita income: In 2009 India’s per capita income was Rs. 37490 per
annum. India’s per capita income is very low compared to developed nations of
the world.

2. Unequal distribution of income and poverty:

 The inequality in income is gauged from unequal expenditure on house hold
items.
 Wide spread poverty is also prevalent in India. Thus such a situation of poverty
even after six decades of independence is detrimental to the appropriate growth
of business.
 People below poverty line can not create large demands for industrial goods.
3. Agricultural based economy:
 India is referred to as agricultural country. At the time of independence around
70% of people were dependent on agriculture for their livelihood. This figure has
not changed a lot.
 Only there is marginal decline in this number. In 2006-07, agriculture and allied
activities contributed 18.5 percent of gross domestic product.
 This figure is still higher compared to many third world countries like Argentina,
Brazil, Mexico etc. wherein contribution of agriculture is around 10% of GDP.
 Due to less productivity of agriculture sector compared to industrial sector, the
people who are dependent upon it have less purchasing power.
4. Higher population: India is second largest populated country after China.

This puts tremendous pressure on the existing natural resources.

5. Unemployment: Coupled with higher population growth rate, large scale

unemployment and underemployment also characterizes the Indian economy.
6. Scarcity of capital: In India, saving and investment rates have risen at a low
rate which can realize only a moderate growth rate.
Due to this, there is scarcity of capital which does not allow business to grow at
fast rate. It acts as hindrance to implement latest technologies.
7. Technological backwardness:
 Success of any business in today’s globalized competitive world depends on
adoption of latest technology.
 Modern latest technology is certainly scale neutral, but it is not resource neutral.
This acts as a hindering factor for large number of small and marginal farmers to
adopt latest agricultural technology.
8. Limited Entrepreneur potential:
 An entrepreneur takes risks and ventures in to new business. This results in
growth of economy.
 Unfortunately in India there are limited persons possessing entrepreneurial skills
 Assessing Overall Business Environment

 India is a key player in the world economy. The Indian economy is much
diversified. The diversity ranges from agriculture to latest modern technology.
 The contribution of agricultural activity to the GDP is less while it employs
higher workforce.
 Still today it provides around 65 to 70 percent of direct and indirect workforce.
This situation places burden on Indian economy.
 At the same time India has the comparative advantage with regards to higher
proportion of people with technical skills and English language proficiency
skill. This factor is conducive for entrepreneurs.
 Indian economy has changed from controlled public sector to more liberalized
system allowing both national and international players.
 Market has also changed from seller’s market with limited competition to
buyer’s market with increased competition.
 These changes in competitive scenario also give rise to numerous entrepreneur
opportunities.
 Indian economy is considered as a developing economy based on its
characteristic features.
 The salient features of Indian economy can be specified as predominance of
agriculture, rapid, population growth, low per capita income, unemployment,
capital scare economy.
 Some of the problems of Indian economy are: inadequate employment
opportunities, economic inequality, poverty, poor infrastructure, fiscal deficit
and higher proportion of non-performing assets.
 Type of Environment

A) Macro environmental factors

1. Economic Environment:
 A close relationship exists between business and its economic factors which
include business cycles, inflation, unemployment interest rates, income level of
saving and investments, fiscal, monetary and balance of payment situations and
overall growth activity.
 The economic factors affect consumer purchasing power and spending pattern.
 Economic environmental factors decide the growth prospects of business
houses. During recession, the demand of goods and services decreases leading
to slowdown of business.
 The economic policies framed by the government may either act as opportunity
or threat for a business.
 2. Technological environment
 Technology changes really quickly and It's about using organized knowledge to
do practical things.
 Businesses need to keep up with these changes by using the newest technology
in how they make things.
 How fast technology changes can be good or bad for businesses.
 Sometimes it leads to new industries starting up.
 3. Political Legal Environment
This refers to influence exerted by all the three constitutional wings namely
legislature, executive and judiciary on business.
Government frames legal rules and regulations for smooth functioning of
business organizations Subsidies, tariffs, import quotas and deregulation of
industries are some of the regulating forces imposed by government for business
organizations.
 The political environment includes role played by government and other non-
government organizations (NGOs) influencing the business activities.
 The legislature, executive and judiciary either singly or in combination shapes,
direct, develops or controls the activities of business organizations.
 In recent times there is growth of many NGOs which exert influence on
business organizations and compel them to adopt right practices in the larger
interest of all sections of society.
 4. Demographic Environment
 Demography is the study of human population with respect to size, density,
location, age, sex, race, occupation and other statistics.
 Demographic trends such as worldwide explosive population growth, a changing
age – education and aesthetic mix of population, changes in the household pattern,
geographical shifts in population etc. act as opportunity or threat to business
organizations.
 • 5. Socio Cultural Environment

These are most difficult uncontrollable factors to predict. It is necessary for

business organizations to understand and appreciate the socio cultural values of
society in which they conduct their operations.
The cultural environment is composed of society’s basic values, perceptions,
preferences and behaviors, cultural values & beliefs is a mix of concepts like
quality, achievement, youthfulness, efficiency, practicality, freedom, self-
actualization, individualism, patriotism, religious beliefs, morality, courage,
ownership of responsibility, materialism etc.
 6. Natural Environment
 Business as an economic system that is established by man but it is impacted
upon by natural forces.
 Business activities also influence the nature in positive and negative ways. The
ecosystem refers to natural system and its resources that are required as inputs by
business organizations or that are affected by business activities.
 In recent years the concepts & preserving the natural environment or green
marketing have emerged.
 The natural resources are of renewable and non-renewable type. It is
necessary for business organizations to make efficient use of natural resources for
the benefit of mankind.
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