In simple words, entrepreneurship can be defined as the

creation of a new business venture. However, it is important

to recognize entrepreneurship is much beyond that.

Entrepreneurship is everywhere. In our daily lives, we use

various products and services that are provided by businesses.

These businesses were created because of entrepreneurs.

Entrepreneurship not only initiates creation of new businesses

in different industries, but also positively impacts economic

development. In economic development, entrepreneurship

plays a crucial role. It is characterized by dynamic economic

activity and has its own rewards for the entrepreneur as well

as for the economy.

A business is defined as a continuous activity,

where economic actions are taken by humans with

the objective of earning a profit by either

producing, sourcing, buying and selling of goods

and services.

Hence, a business refers to an entity or organization

engaged in industrial, commercial or professional

activities.

Businesses vary across industries and sectors. Based on economic activity, businesses are categorized

in manufacturing, service and trading. Based on size, businesses are categorized into micro, small

scale, medium scale and large scale. Based on business model, they might be categorized differently.

Based on legal form, they have to follow different procedures and norms and thus are categorized

differently.

Irrespective of nature, size, scale or ownership, businesses have some common features:

2.1 Trade-related: Most businesses involve the purchase and sale of goods or services and hence
are trade-based.

2.2 Economic or social motive: Usually, most businesses performs economic activities such as

production, distribution, exchange, expansion etc. with the objective of earning a profit. However

some businesses have the sole motive of social welfare. Yet, there are other businesses which have

both the motives – social and economic.

Class IX Entrepreneurial Skills

8. Introduction

2. Business – Meaning and Types

72

2.3 Presence of an entrepreneur: More than an entrepreneur, there is a forerunner in every

business. This person is responsible for taking the initiative of establishing, running and growing the

business, making key decisions and undertaking the risks involved with it.

2.4 Regular Transactions: A business must be doing and dealing in transactions on a regular basis.

An activity that involves only a one-time transaction where the transaction deals in exchange or

transfer of goods and services cannot be necessarily considered as a business even if a profit is earned.

2.5 Uncertainty: Every business is featured with uncertainty of sales, return and success. There is no

guarantee that the amount invested will come with return or the business will earn a specific amount

of profit. Similarly, there is uncertainty about whether customers will choose the product or service

offered.

A business entity is defined as an

enterprise or organization that

uses economic inputs or

resources, converts them into

goods or services and provides

them to its customers in

exchange for money. In line with

this definition, businesses are

also categorized as follows:

3.1 Manufacturing Business:

Manufacturing businesses

source product s that can be

used as raw materials, with the

intention of converting these

materials to make an end product. This new product could be something that can be directly sold in

the consumer market or could be a product that can be used in the value chain. These businesses

focus on transformation of one product to create a new product. Most manufacturing businesses

combine raw materials, technology, labor, plant and machinery and overheads in the process of

production. Some examples of such businesses include manufacturing and selling of shoes, clothes,

mobile phones, laptops, suitcases, metal products etc.

3.2 Service Business: As mentioned in the tertiary sector, a service business is involved into provision

of intangible offering, i.e. a service that does not have a physical form but provides value to the

customer. Services businesses offer value using skills, consultancy, expertise, efficiency etc. Some

service businesses include banks, law firms, chartered accountants, financial consultants, beauty

salons, schools, e-commerce platforms, event planners etc.

3.3 Merchandising Business: Merchandising businesses involves transfer of ownership or tangible

products. Most of the times, in these type of businesses, products are bought at a wholesale price and

sold at retail price. These businesses profit by selling products at a higher price than the purchase cost.

The form of the product is not changed by a merchandising business, but it is sold in the same form.

In merchandising businesses, it is important for the business to have keep enough inventory or stock.

3. Types of Businesses

73
For example, convenience stores, resellers, distributors, grocery stores, supermarkets, retail clothing

stores are examples of merchandising businesses.

3.4 Trading Business: A trading business is also involved in reselling of goods. However, the

difference between a trading business and a merchandising business is that in trading business, a

trader does not necessarily have to keep stock of inventory. Trading businesses work with different

kinds of products and services that is sold to consumers, businesses or government organizations.

Some activities trading businesses are involved in are buying of products or brokering of services,

negotiating for prices and coordinating delivery. A trading business earns money from the profit

margin purchase cost and selling price. Import and export of goods and services largely make up the

trading sector. Some examples of trading businesses are real estate brokers, middlemen, importers,

exporters, foreign exchange traders etc.

3.5 Hybrid Business: Hybrid businesses are some businesses that are involved in different activities

ranging from manufacturing, service, merchandising etc. These could be business groups involved in

different types of businesses that cannot be classified as a definite service business or a manufacturing

business. It may not use the traditional methods of production and distribution. Sometimes,

businesses that focus on socially beneficial goals are also termed as hybrid businesses. For example,

though a traditional restaurant business is classified as a service business, some are also considered

to be hybrid businesses. If they are involved in combining ingredients to make different products, they

are performing a manufacturing activity. If they are involved reselling of alcoholic items, it can be

considered to be involved in merchandising. Similarly, it also provides the service of fulfilling customer

orders. Hence, it can be categorized as a hybrid business.

Manufacturing Services Merchandising

Primary activity Production of goods Provision of service/s Purchase and sales

of goods

End-products Physical/ tangible goods Intangible Physical/ tangible

goods

Inventory Common forms of

inventory include raw

materials, work-in-

progress

& finished goods

No inventory Finished goods

Labour Skilled & unskilled Skilled -

Professionals &

experts

Sales person/s

Location Where infrastructure is

good & supportive, labour

is relatively cheap & raw

materials are easily

accessible at a fair price

Where potential

customers/clients

need the service and

are willing to pay for

it

Where end-users or

customers make the

purchase for the

product

4. Features of Types of Businesses

74

Customer demand Demand is forecasted and

goods are produced

accordingly

Services provided as

per needs and

demands of the

clients

Procured goods are

sold

5.1 Based on size:

5.1.1 Micro Enterprise: A micro enterprise is a business enterprise where the investment in plant and

machinery or equipment is not more than INR 1 crore and turnover does not exceed INR 5 crores.

5.1.2 Small Enterprise: A small enterprise is a business enterprise where the investment in plant and

machinery or equipment is not more than INR 10 crore and turnover does not exceed INR 50 crores.

5.1.3 medium enterprise: A medium enterprise is a business enterprise where the investment in plant

and machinery or equipment is not more than INR 50 crore and turnover does not exceed INR 250

crores.

5.2 Based on legal form:

5.2.1 Sole proprietorship: In a sole proprietorship, the ownership and control of the business is with
one single person, and the liability of the owner is not separate from the entity.

5.2.2 One Person Company: A One Person company also has only one person as a member, who acts

in the capacity of both, a shareholder and a director, but an OPC is legally separate from its owners.

There is no threat on the owner’s personal property in case of unmet liabilities.

5.2.3 Partnership: Partnership is a legal form, where at least two people, or more start a business as

co-founders or co-owners and divide the share as per agreement. The partners are personally liable

for an unlimited amount of liabilities.

5.2.4 Limited Liability Partnership: In a Limited Liability Partnership, there are two or more partners.

In this, no one single partner or owner is individually responsible for any other partner’s or member’s

negligence or misconduct or liability.

5.2.5 Company: A company is defined as a legal entity formed to get engaged in business, by a group

of individuals. Usually, these individuals have limited liability, and the capital in units of equal value of

a company are called ‘shares’. Company can be public or private.

5.3 Based on sector:

5.3.1 Primary sector: This sector includes businesses that involve extraction, retrieval, harvest and

production of raw materials using natural products from the earth. For example, some raw materials

include coal, wood, grains, iron, corn etc. Thus, some primary sectors include mining, agriculture,

fishing, horticulture etc.

5.3.2 Secondary sector: The main activity of businesses in this sector is transformation of raw

materials into finished goods. It takes products from primary sector and organizes all factors of

production to make utility as well as luxury products.

5. Types of Businesses in Our Community

75

5.3.3 Tertiary sector: This sector is defined by provision of services to businesses and customers. It is

completely based on a service and there is no production of goods involved.

Activity I
Read the case study below and answer the questions given below:

Case Study: Naukri.com

Sanjeev Bikhchandani, the founder of Naukri.com, believes that entrepreneurship is all about taking

action to convert creative ideas into a business plan and then into a successful business. Though,

action is not the only thing that one needs to be an entrepreneur. The need to deal with failure, stay

persistent and handle uncertainty is the difficult part in entrepreneurship. Sanjeev learnt the difficult

part during his entrepreneurial journey.

During his adolescent years, Sanjeev often noticed that everyone around him wanted job security

through government jobs. However, the salary in a government job was meagre. Sanjeev realized at

the age of 12 and decided that he would make a different choice for his career. Business was one

career option that he thought would give him money and freedom. With this, he was determined to

not look for jobs. However, his parents pressured him to pursue higher education and give the IIT-JEE

entrance exam. Though he was able to clear the exam, Sanjeev decided to not take admission in IIT

and pursued a Bachelor of Arts degree in economics.

After this, he pursued an MBA from IIM Ahmedabad and started working at Hindustan Milkfood

Manufacturers (HMM). While working at HMM, he often observed his colleagues skim through

magazines and newspapers that contained job listings. Although they were already employed, they

were still curious to know the options available out there. This behavior was observed for working

professionals at all levels. Many of his colleagues also received calls from head-hunters at least twice

or thrice a week for jobs that were not even advertised anywhere. After keenly observing this pattern

and talking to some people in the office, Sanjeev thought that he must figure out a way to market

these jobs. For this, he realized that he would have to create a database of jobs. The only problem

was people had not even heard of the internet in India, thus there was no facility as such where a

database could be created and eventually accessed by customers and head-hunters.

With this, Sanjeev decided to drop the idea and started to think of other ideas. Soon, he quit his job

and started two companies in partnership with his friend, ‘Info Edge’ and ‘Indmark’. Leveraging the

technology of creating databases, Info Edge provided the information about entry level salaries for

graduates from different fields, where these salary reports were ultimately sold to companies.
Indmark was a database that provided assistance for trademark registration, where the client paid for

these consultancy services. Most of Indmark’s clients were pharmaceutical companies, who paid to

get detailed reports about pending applications, likelihood of trademark getting accepted etc. While

these companies made little money, Sanjeev struggled to sustain them. Ultimately, the two partners

decided to split up and Info Edge was taken by Sanjeev.

While Sanjeev was selling salary reports and conducting market studies, he came across the

technology of the World Wide Web at an exhibition in Delhi. At this time, it was a very new concept.

After deeply understanding the technology, he contacted his brother in the US to help him hire a

server that could be used to build a portal for finding and marketing jobs. With this, he launched

Naukri.com, the first India-based job portal.

Soon, Sanjeev started to get media coverage. Both his businesses, Info Edge and Naukri.com started

to grow. While Info Edge could earn profit, it was not enough for even distribute salaries for all

76

employees. On the other hand, Naukri.com was gaining more and more popularity as it was a pioneer

in this space. Sanjeev decided to shut Info Edge and focus on building and running Naukri.com. As a

result, by the third year of its operations, Naukri.com earned a turnover of INR 3.6 million. This is when

the expected journey of Naukri.com was set.

Sanjeev grew the business by securing external finance and innovating in terms of building an efficient

sales force. Soon the competition grew but Sanjeev was able to keep the business afloat by offering

value-added products to customers. Seeing the success of Naukri.com, Sanjeev expanded its

operations to other countries. He also acquired Jeevansathi.com, a matrimonial website and launched

99acres.com, a marketplace for real estate sites. In 2006, Sanjeev decided to do an Initial Public

Offering for the company Info Edge that was the umbrella company for all of Sanjeev’s businesses.

This was an extremely successful move, which eventually led to Sanjeev’s worth coming to INR 720

crore by 2007. Using his initial idea of commercializing databases and staying driven towards his goal

of entrepreneurship, Sanjeev Bikhchandani is known to be one of the most successful Indian

entrepreneurs.

Q. Which type of business does Sanjeev own?

77

Entrepreneurship development is the process of strengthening the skills and knowledge of budding

and existing entrepreneurs by handholding them during their entrepreneurial journey.

However, before delving into entrepreneurship development, let us understand the concept of

entrepreneurship.

Entrepreneurship is the process of identifying an opportunity and turning it into a venture.

It is a skill or an ability to act on ideas and build on opportunities.

An entrepreneur is a person who undertakes risk to start a business of his/her own.

An entrepreneur is the one who always searches for change, responds to it and exploits it as an

opportunity.

Entrepreneurship Development involves enabling entrepreneurs through institution-building learning

& development programs and structured training. Largely, the objective of these programs is to

empower budding entrepreneurs to start and run their business effectively and efficiently. These

programs cover aspects of entrepreneurial skills, business planning, fundraising, setting-up of a new

venture and growth & development strategies.

The main aim of entrepreneurship development is to enlarge the base of entrepreneurs, encourage

overall entrepreneurial activity and catalyze the pace at which new ventures are created. Some of the

core objectives of entrepreneurship development include:

I. Business Around ME

• Enlist businesses you can think of, that provide products/services and take money in exchange

for it.

• Prepare posters of businesses found in towns/villages/cities, using pictures. For example, malls

in cities, kirana stores in villages, shopping complexes in towns etc.

• Identify and discuss key activities carried out by small businesses in a local community.

II. Creativity in Business

• Create 3 or more products out of waste materials.

• Calculate the costing of the products made out of waste.

• Decide the prices and sell the products made from waste materials.

A1

Skill- Based Activities

7. Objectives of Entrepreneurship Development

78

• Assisting entrepreneurs in undergoing the process of entrepreneurship.

• Handholding budding entrepreneurs to recognize and design unique business opportunities.

• Helping aspiring entrepreneurs start and grow dynamic businesses that provide high value

add.

• Developing the motivational needs of entrepreneurs.

• Training entrepreneurs to develop the required skills and gain knowledge for running and

managing a new business.

• Providing support to entrepreneurs for effective business planning

• Accelerating and incubating new ideas.

• Aiding in the availability of technology or raw material.

• Creating adequate infrastructure for entrepreneurial activities.

• Providing financial assistance from banks and other financial institutions.

• Enabling a suitable entrepreneurship ecosystem and business environment.

• Implementing norms, policies and rules for establishment of new ventures and enterprises.

• Providing tax benefits, incentives, subsidies etc. for creation of new enterprises.

• Encouraging research and development across industries.

Entrepreneurship development is also a process in itself and can be divided into following three

phases:

8.1 Stimulatory phase: Stimulatory phase involves stimulating or generating need, interest,
motivation and awareness among individuals to become entrepreneurs. It is done by orienting them

towards the meaning, process, benefits and practice of entrepreneurship.

8.2 Support phase: Support phase is about providing support for various activities of new ventures

by mentoring, incubating, financing and advising the entrepreneurs. Some of these activities include

business model design, prototype and product development, legal registration, management

consultancy, financial assistance, provision of land, shed and power, selection of plant and machinery,

marketing support, approvals and licenses etc.

8.3 Sustenance phase: Sustenance phase focuses on helping enterprises to plan for growth.

Guidance is provided around growth strategies, expansion, diversification, modernization etc. Support

is also given in terms of research and development, additional finance, exploration of global markets

etc.

• Lack of continued motivation

• Lack of formal education

• Low technical knowledge

• Absence of managerial skills

• Inadequate infrastructure and resources

• Lack of finance availability

8. Phases of Entrepreneurship Development

8. Challenges of Entrepreneurship Development

79

• Lack of awareness about entrepreneurship schemes

• Strict regulatory framework

• Low margin market linkages

Activity II

The Indian government has also taken various initiatives for entrepreneurship development.

Some organizations were set up to implement policies for entrepreneurship development.

Some of these organizations, policies and initiatives include:

Ministry of Skill Development and Entrepreneurship

National Policy on Skill Development and Entrepreneurship 2015

National Skill Development Mission

Make in India

Start-Up India

Stand up India

ATAL Innovation Mission (AIM)

Research, read and discuss about the above initiatives taken by the Indian Government for

entrepreneurship development.

Activity III

You read about some initiatives taken by the Indian Government for entrepreneurship development.

Entrepreneurship has proven to be beneficial for various sections of the society. Can it bring a

difference in school children? Will learning entrepreneurship help college students? Can any working

professional at the age of 30, 40 or 50 become an entrepreneur? Does entrepreneurship development

have the potential to uplift farmers? Can entrepreneurship transform careers for women?

Think about different sections and cohorts of the society who can be benefited by participating in

entrepreneurship development programs and list them below. After making the list, write some ways

in which entrepreneurship development can take place for these sections. Keep in mind the objectives

of entrepreneurship development given above.

9.1 Characteristics of Entrepreneurship

9.1.1 Innovation: In simple words, innovation can be understood as creative use of one’s ideas to
propose a solution that introduces something unique or new to the world. There are many types of

innovation such as product, process, disruptive etc. Entrepreneurship is characterized by innovation

as it is about using innovation to bring unique solutions to fruition. It involves continuously searching

for new ideas, evaluate existing solutions, systems and processes, finding ways to increase efficiency

and effectiveness of products and services etc.

9.1.2 Dynamic Economic Activity: Entrepreneurship involves creation of value or wealth through a

business enterprise, that buys and sells commodities/product/services and uses resources optimally.

Hence, entrepreneurship is an economic activity. The process of value creation occurs in an uncertain

and dynamic business and economic environment. A lot of ambiguity is involved in running a business

due to many unknowns or things not going as planned. Due to this, entrepreneurship is considered a

dynamic economic activity.

9.1.3 Risk bearing: Since entrepreneurship is about starting something new, it involves uncertainties

and risks. Entrepreneurs have to take risks in implementation of certain decisions and ideas. There are

some risks that can be projected by businesses such as supply shortage, increase in cost of raw

materials, volatility in market prices, changes in government regulations etc. while there are some

risks which cannot be projected such as disasters, pandemics, economic slowdowns etc. The risk of

profit versus loss is always prevalent in a business.

9.1.4 Potential For Profit: “Profit potential is the likely level of return or compensation to the

entrepreneur for taking on the risk of developing an idea into an actual business venture.” For a

commercial entrepreneur, profit is usually the main goal. Even for social entrepreneurs, profit might

not be the main motive, but a way to sustain the organization has to be found. Without recurring

revenue transactions and low profitability, entrepreneurship can turn into a theoretical and leisurely

activity.

9.2 Entrepreneur Vs. Entrepreneurship Vs. Enterprise - Characteristics

Entrepreneurship Entrepreneur Enterprise

Process Person Entity

Organisational Organiser Organisation

Leadership Leader Goal-Driven

9. Entrepreneurship – Characteristics, Role and Rewards

81

Motivation Motivator Motive

Risk-bearing Risk- bearer Risk Management

Visualisation Visionary Vision

Creativity Creator Creation

Innovation Innovator Innovative

9.3 Role of Entrepreneurship

9.3.1 Capital Formation: Entrepreneurship leads to value addition and creation of wealth, because

entrepreneurs promote capital formation by mobilising the idle savings of public.

9.3.2 Employment Generation: There is potential for increase in large-scale employment

opportunities with increase in entrepreneurial activity. As more enterprises, offices, factories,

businesses, trading entities etc. are set up, numerous job opportunities are created for skilled,

unskilled and unemployed people, especially in developing countries.

9.3.3 Balanced Regional Development: Entrepreneurship helps to remove regional disparities

through setting up of industries in less developed and backward areas. Micro businesses and cottage

industries also play a role in increasing entrepreneurial activity in many specific cultural regions.

9.3.4 Value Creation: Value creation occurs when the worth of products and services increases for

a customer base and a business earns profit by selling the product or service to fulfil customer needs

and wants. Value is created when outputs are more valuable than inputs. Value creation is the

foundation of every entrepreneurial activity or business.

9.3.5 Wealth Distribution: Wealth and income are distribution across people and geographies due

to entrepreneurship and transaction-based activities. Employees are paid salaries, vendors are paid

for their supplies, goods are sold in multiple markets, services are provided at large scale etc. This

stimulates distribution of wealth to larger sections of society.

9.3.6 Industrialization and Development: Establishment of even a single enterprise can lead to

beginning of a new industry. In a specific region, if a business is set up and seen to be a profitable

opportunity, it is likely that others will get motivated to set up similar businesses. Additionally a

business might require certain inputs, which leads to setting up of businesses that can supply those

inputs. Hence, entrepreneurship catalyses industrialization in almost a chain reaction form, which

in turn contributes positively to economic and infrastructural development.

9.4 Rewards of Entrepreneurship

9.4.1 Economic development: Some features of economic development include optimal use of

resources, creation of new ideas, wealth generation, continuous flow of money, skill building etc. All

these factors are enabled due to entrepreneurship and are essential for economic development of a

nation.

9.4.2 Enterprise and Business Creation: Business creation is a direct result of entrepreneurship.

Many types of enterprises can be created by coordinating and combining different types of resources

82

such as physical, financial, human, intellectual and entrepreneurial skills such as risk taking,

innovation, leadership, resource planning etc.

9.4.3 Capacity Building: Skilled development and training is a significant reward of

entrepreneurship as an entrepreneur invests in training employees and building their managerial

capabilities. Similarly, an entrepreneur also develops his/her own capabilities by solving problems,

making decisions, embracing failures, experimenting with alternative approaches etc.

9.4.4 Improved Standard of Living: With entrepreneurship, customers have many options of

choosing from different products and services to solve the same purpose. This variety and availability

of improved goods and services offered by enterprises leads to higher standards of living.

A2

Skill- Based Activities

I. Explore the world of entrepreneurship

• Discuss in groups and prepare a chart to explain advantages of entrepreneurship, based on its

characteristics, role and rewards.

• Interact with 5 entrepreneurs in your community OR Read about any 5 successful Indian

entrepreneurs and their success stories.

• From the interviews/stories, identify at least 15 skills and qualities of a successful