19BAP21 -

ENTREPRENEURSHIP
 Course Objective
To impart knowledge on
• Students should understand the nuances of
being an entrepreneur and develop a
confidence for entrepreneurship
 Course Outcome
At the end of the course, the students will be able to
• Appreciate the Role & Importance of
entrepreneurship
• Develop skills for Innovation.
• Have the ability to analyze the Environment aspects.
• Be able to deal with the procedural aspects of
entrepreneurship.
• Be able to tap into the incentives available for
entrepreneurs
 UNIT - 1
ROLE & IMPORTANCE OF
ENTREPRENEURSHIP
 Contents
• Entrepreneurship – the entrepreneur
personality, role of an entrepreneur –
Intrapreneur – self-diagnosis.
• Micro, Small and Medium Sector –
definition, role and significance – The
MSMED Act, 2006 - Government subsidies
and tax incentives for the MSME sector
"If we could have an entrepreneur in every family, India's
economy would sky rocket We would then be able to take
our rightful place as an economic super power in the
community of nations. Entrepreneurs create jobs. They
create wealth. They create products and services”

- Rahul Bajaj, chairman emeritus - Bajaj Auto

 “Indefatigable energy, inextinguishable
optimism, and unrelenting enthusiasm are the
essential attributes that make one
entrepreneur”

Founder – Captain G.R.Gopinath – The

Man who made flying Cheap as 'Simply Fly
 Entrepreneurship

 Entrepreneurship refers to a process of action an

entrepreneur (person) and it is a creative and

innovative response to the business environment.

 It promotes capital formation and creates wealth,

and it has the thrill of risk, change, challenge and

growth.
 Entrepreneur
• The term 'entrepreneur' is a relatively new
term and concept used in economic sphere.
• Because of its increasing relevance in
economic sphere over the period, it has
become the buzzword in the economic
literature.
• However, it has been defined differently by
different writers and thinkers.
• The definitions vary from simple as fund
provider to complex as change agents.
 Entrepreneur

 The word ‘entrepreneur’ is derived from the

French word entreprendre.

 It means ‘to undertake’.

 Thus, entrepreneur is the “person who

undertakes the risk of new enterprise”
 Entrepreneur
one who creates a new business in
the face of risk and uncertainty for the purpose
of achieving profit and growth by identifying
significant opportunities and assembling the
necessary resources to capitalize on them.
 Entrepreneur - Definition
Entrepreneur is a person
who establishes his own business or
industrial undertaking with a view of
making profit
 Entrepreneur - Definition
J.A.Schumpeter defined as “A person
who introduces innovative change is an
entrepreneur and he is an integral part of
economic growth”
 Entrepreneur - Definition

Webster defines as "Entrepreneur

is one who assumes risk and management
of business"
Evolution of the Concept of Entrepreneur

• Entrepreneur as Risk-Bearer

• Entrepreneur as Organizer or
Coordinator
• Entrepreneur as Innovator
 Entrepreneur as Risk-Bearer
• Richard Cantillon, an Irishman living in France, was the first
who introduced the Term 'entrepreneur' and his unique
risk-bearing function in economics in the early 18 th century.
• He defined entrepreneur as an agent who buys factors of
production at certain prices in order to combine them into
a product with a view to selling it at uncertain prices in
future (Cantillon 1971: 2).
• He illustrated a farmer who pays out contractual incomes
which are 'certain' to the landlords and laborers and sells at
prices that are 'uncertain'.
• He further states that so do merchants also who make
certain payments in expectation of uncertain receipts. Thus,
they too are essentially 'risk-bearing' agents of production.
Entrepreneur as Organizer or Coordinator
• Jean-Baptiste Say (1827: 285-286), the French political
economist, with his unpleasant practical experiences
developed the concept of entrepreneur a little further which
survived for almost two centuries. His definition associates
entrepreneur with the functions of coordination,
organization and supervision.
• According to Say, an entrepreneur is one who combines the
land of one, the labour of another and the capital of yet
another, and thus, produces a product. By selling the
produce in the market he pays interest on capital, rent on
land, wages to labourers and what remains is his/her profit.
• To play such a role, according to Say, the entrepreneur must
possess the art of superintendence and administration.
Entrepreneur as Organizer or Coordinator
• He further elaborates that in the course of
undertaking a number of complex operations like
obstacles to be surmounted, anxieties to be
repressed, and misfortunes to be repaired and
expedients to be devised, three more implicit
factors are deemed to be essential.
• These are:
 Morale qualities for work - judgment,
perseverance, and knowledge about the business
world,
 Command over sufficient capital, and
 Uncertainty of profits.
 Entrepreneur as Innovator
• Joseph A. Schumpeter (1934: 103), for the first time in
1934, assigned a crucial role of 'innovation' to the
entrepreneur in his magnum opus Theory of Economic
Development.
• Schumpeter considered economic development a
discrete dynamic change brought by entrepreneur by
instituting new combinations of factors of production
which he called 'innovation'.
• In other words, entrepreneur is, according to Schumpeter,
a 'creative destructor' who creates or causes a dynamic
disequilibrium in the economy by taking innovation to
commercialization by embedding it in an environment
where it did not exist previously.
Characteristics of an
Entrepreneur
(The Entrepreneur
Personality)
Hard Work
Business Acumen & Sincerity
Prudence
Achievement
Motivation
Self Reliance & Independence
Highly Optimistic
Keen Foresight
Planning & Organizing Ability
Innovativeness
Risk Taking
Secrecy Maintenance
Public Relation
Communication Skills
 TYPES OF
ENTREPRENEUR
TYPES OF ENTREPRENEUR
(Danhof)
Ratan Tata is said to be an innovative
entrepreneur, who launched the Tata Nano car
at a considerably low cost.
•Suitable for under developed countries
•Avoids taking Risk
Drone Entrepreneur
 Following is a list of Entrepreneur who are not included in
the definition Formulated by DANHOF

 Individual Entrepreneurs & Institutional Entrepreneurs

 Inheritance Entrepreneurs
 Technological Entrepreneurs
 Individual Entrepreneur
 Majority of Entrepreneur belonging to the small scale
industry sector are individual entrepreneur.
 They enjoy the benefits of flexibility, Quick decision
making.
 Individual Enterprise are not able to grow or develop
beyond a limit.
 Example: Bill Gates, Steve Jobs
 INSTITUTIONAL ENTREPRENEUR
 Institutional entrepreneurship occurs when a person or group of
people work to drastically change an institution, and in the
process form a new institution.
 Institutional entrepreneurs think and act strategically by doing
things like presenting research, gathering resources and people,
and thinking outside of the box.

Founders: N.r. Narayana Murthy, Nandan Nilekani, S. D. Shibulal,

Kris Gopalakrishnan, Ashok Arora, K. Dinesh, N. S. Raghavan
 INHERITED ENTREPRENEUR
 Sometimes people become entrepreneur when they
inherit family business.
 Firm pass from one generation to another.
 Entrepreneur of large scale business concern like TATA,
RELIANCE, BIRLA, TVS
 TECHNOLOGICAL ENTREPRENEUR
 TechnicallyQualified persons have entered the field
of business to commercially exploit their inventions &
discoveries
 Technical
and scientific advancements started creating
changes in the economic structure of the nation.
 Their asset is technical expertise.
Jeff Bezos- online empire of Amazon

Elon Musk-co-founding the most popular

online payment network, PayPal and selling it
to eBay for around $1.5 Billion, Elon Musk
invested his entire share of $70 Million into
Tesla and $80 Million into SpaceX

The Redbus success story founded with the three key

people Phanindra Sama, Charan Padmaraju and
Sudhakar Pasupunuri.
Redbus is an online bus ticket booking platform which
facilitates comfortable and affordable traveling to
millions by providing dynamic and efficient online bus
ticket booking system.
 Classification based on
stages of development
First Generation Entrepreneur- One who starts
the business by innovative skills

Modern Entrepreneur-undertake products for current

market requirements

Classical Entrepreneur-development of self

supporting venture. Maximize his economic returns than
company growth.
 Classification based on motives
Pure Entrepreneur- motivated by psychological &
economic rewards
Induced Entrepreneur- helped by govt to start
business
Motivated Entrepreneur- motivated for self
fulfillment
Spontaneous Entrepreneur- initiative, boldness,
strong conviction which motivate them to undertake
entrepreneurial activity. Such entrepreneurs have a
strong conviction and confidence in their inborn ability.
 FUNCTION OF
ENTREPRENEURS
Function of Entrepreneur
 Function of Entrepreneur

Various functions performed by entrepreneurs

are broadly classified into four categories as
mentioned below:
1. Entrepreneurial Functions
2. Managerial Functions
3. Promotional Functions
4. Commercial Functions
 1. Entrepreneurial Functions
The major entrepreneurial functions include
Risk Bearing
Organizing
Innovation
ASSUMPTION OF RISK
DECISION MAKING FUNCTION
FUNCTION OF INNOVATION
2. MANEGERIAL FUNCTION
Planning: In common parlance, planning is pre-
determined course of action to accomplish the
set objectives.
1. In other words, planning is today's projection
for tomorrow's activity. Planning pervades in
all aspects of business.
2. An entrepreneur has to make decisions as to
what is to be done, how it is to be done,
when it is to be done, where it is to be done,
by whom it is to be done and so on.
Organising: The organizing function of an
entrepreneur refers to bringing together the
men, material, machine, money, etc. to execute
the plans.
The entrepreneur assembles and organizes
the above mentioned different organs of an
enterprise in such a way that these combined
start functioning as one, i.e., enterprise.
Staffing: Staffing involves human resource
planning and human resource management.

Thus, staffing function of an entrepreneur

includes preparing inventory of personnel
available, requirement of personnel, sources of
manpower recruitment, their selection,
remuneration, training and development and
periodic appraisal of personnel working in the
enterprise.
Directing: The functions like planning,
organizing, and staffing are merely preparations
for setting up a business enterprise.
The directing function of entrepreneur
actually starts the setting up of enterprise.
Under the directing function, the
entrepreneur guides, counsels, teaches,
stimulates and activates employees to work
efficiently to accomplish the set objectives.
Controlling: Controlling is the last management
function performed by the entrepreneur.
In simple words, controlling means to see
whether the activities have been performed in
conformity with the plans or not.
Thus, controlling is comparison of actual
performance with the target or standard
performance and identification of variation
between the two, if any, and taking corrective
measures so that the target is accomplished.
 3. Promotional Functions
• Identification and Selection of Business Idea
• Preparation of Business Plan or Project
Report
• Requirement for Finance
 4. Commercial Functions
• Production / Manufacturing
• Marketing
• Accounting
 ROLE OF AN ENTREPRENEUR
ENTREPRENEURS & ECONOMIC
DEVELOPMENT
ROLE OF AN ENTREPRENEUR
• Coordinating Role
• Agent Role
• Role of innovation
• Risk Assumption Role
• Capital Formation Role
• Balancing Role
• Status Transformation Role
• Employment Generation Role
• Export Promotion Role
Coordinating Role
Agent Role
Role of innovation
Risk Assumption Role
Capital Formation Role
Balancing Role
Status Transformation Role
Employment Generation Role
Export Promotion Role
Entrepreneurship contributes in economic
development in following ways:
 Increasing Income and Per Capita Income

 Wealth Creation and Distribution

 Production Evolution Process

 Intrapreneur
• An intrapreneur is nothing but an entrepreneur within
the boundaries of the organisation.
• An intrapreneur is an employee of a large organisation,
who has the authority of initiating creativity and
innovation in the company’s products, services and
projects, redesigning the processes, workflows and
system with the objective of transforming them into a
successful venture of the enterprise.
 Intrapreneur
• The intrapreneurs believe in change and do not fear
failure, they discover new ideas, looks for such
opportunities that can benefit the whole
organisation takes risks, promotes innovation to
improve the performance and profitability, resources
are provided by the organisation.
• The job of an intrapreneur is extremely challenging;
hence they are appreciated and rewarded by the
organisation accordingly.
 Intrapreneurship Examples
1.Google
• What is Google’s 20 percent time? In their own words, simply:
• “We encourage our employees, in addition to their regular
projects, to spend 20% of their time working on what they think
will most benefit Google”
• Google's email tool, Gmail, was developed as a result of
intrapreneurship. Paul Buchheit, the creator of Gmail, worked
independently to build the first version of the tool.
 Intrapreneurship Examples
2. Apple
• Are you familiar with Apple's Macintosh computer, also known
as the Mac? It's just one example of a product that was created
via intrapreneurship.
• Steve Jobs organized a group of intrapreneurs to work
independently to develop the computer.
3. Facebook
• Facebook hosted hackathons that allowed employees to work
on projects they were passionate about.
• A prototype for the "Like" button was developed as a result
of these hackathons.
 CHARACTERISTICS OF INTRAPRENEUR

1. Creates new venture : giving birth to new business

within the existing organization is the typical
characteristics of intrapreneur.
2. Innovates products and services : intrapreneur to
create effectiveness at workplace has to update
organization techniques through implementation of
new technology in company.
3. Innovates process : to sustain in market company's
strategies should be effective to that of competitors
for which intrapreneur should renew company
process at regular interval of time.
 CHARACTERISTICS OF INTRAPRENEUR

4. Proactive : intrapreneur attempt to lead rather than

follow competitors through their proclivity in terms
of advance operations in company.
5. Risk taking : intrapreneur possess risk taking
attitude with regard to investment decision and
strategic actions under uncertain situations.
6. Renews organization : intrapreneur is expected to
transform the organization through renewal of key
ideas.
7. Competitively aggressive : intrapreneur is expected
to come up with new strategies to stabilize or
develop company's brand image in market.
 Entrepreneur Vs Intrapreneur
BASIS FOR
ENTREPRENEUR INTRAPRENEUR
COMPARISON
Intrapreneur refers to an employee of
Entrepreneur refers to a person
the organization who is in charge of
Meaning who set up his own business
undertaking innovations in product,
with a new idea or concept.
service, process etc.
Approach Intuitive Restorative
Use resources provided by the
Resources Uses own resources.
company.
Capital Raised by him. Financed by the company.
Enterprise Newly established An existing one
Dependency Independent Dependent
Borne by the entrepreneur
Risk Taken by the company.
himself.

Creating a leading position in Change and renew the existing

Works for
the market. organizational system and culture.
 Micro, Small and Medium Enterprises
• MSME stands for Micro, Small and Medium Enterprise (MSME),
introduced by Government of India in agreement with Micro, Small
& Medium Enterprises Development (MSMED) Act, 2006 are entities
engaged in the production, manufacturing, processing or
preservation of goods and commodities.

• As per MSME Act-2006, The MSMEs are classified into two

categories:
• 1. Manufacturing Enterprises-The enterprises engaged in the
manufacture or production of goods (as per Development and
Regulation Act, 1951) or employing plant and machinery in the
process of value addition to the final product having a distinct
name or character or use.

• 2. Service Enterprises:-The enterprises engaged in providing or

rendering of services and are defined in terms of investment in
equipment.
 Old MSME Definition
Manufacturing Sector Service Sector

Micro Investment shall not Micro Investment shall not exceed Rs. 10
Enterprises exceed Rs. 25 lakh Enterprises lakh

Investment more than

Small Small Investment more than Rs. 10 lakh,
Rs.25 lakh but not
Enterprises Enterprises shall not exceed Rs. 2 crore
exceeding Rs. 5 crore

Investment more than

Medium Medium Investment more than Rs. 2 crore,
Rs. 5 crore, shall not
Enterprises Enterprises shall not exceed Rs. 5 crore
exceed Rs. 10 crore
New MSME Definition
MSME – Merged Criteria: Investment and Annual Turnover
Sector/Enterprise Medium
Micro Enterprise Small Enterprise
Type Enterprise
Investment less Investment less Investment less
Manufacturing & than Rs. 1 crore than Rs. 10 crore than Rs. 50 crore
Services Sector, Both and Turnover less and Turnover up and Turnover up to
than Rs. 5 crore to Rs. 50 crore Rs. 250 crore

Key Takeaways of New MSME Definition introduced in ‘Aatm Nirbhar Bharat Abhiyan‘ or Self-
reliant India Scheme 2020 by Government of India.
Contribution of the Micro, Small and Medium Enterprises in the
Indian economy

• There are around 6.3 crore MSME units in the country, with
over 99% categorised as small units (as per original
definition).
• MSME sector is the second largest employer after
agriculture in India. MSMEs provide employment to around
120 million people in India.
• MSMEs are responsible for a 48% share of India's total
export.
• MSMEs contribute around 6.11% of the manufacturing GDP
and 24.63% of the GDP from service activities.
 Contribution of the Micro, Small and Medium Enterprises in the
Indian economy

• The contribution of this sector to the country's Gross Domestic

Product is about 30%.
• The MSME sector has consistently grown at an average rate of
10% annually.
• A study done by the Confederation of Indian Industries (CII) on
the Indian MSMEs reveals that the MSME's contribution will be
around 50% in the India's GDP by 2024.
• Many units of MSMEs are located in rural areas, which are
checking the migration from rural areas to urban areas.
• The sector acts as the instrument of inclusive growth
empowering the most vulnerable and marginalized groups.
 Importance of MSME

• It creates large-scale employment

• Economic stability in terms of Growth and
leverage Exports
• Encourages Inclusive Growth
• Cheap Labor and minimum overhead
• Simple Management Structure for Enterprises
• The main role in the mission of “Make in India”
 The Twelfth Plan has listed the following as the objectives for
the MSME sector

• Promoting competitiveness and productivity

in the MSME space.
• Making the MSME sector innovative,
improving technology and depth.
• Enabling environment for the promotion and
development of MSMEs.
• Strong presence in exports.
• Improved managerial processes in MSMEs.
 Challenges of MSME

• Most of the unregistered MSMEs would predominantly comprise

micro-enterprises, particularly confined to rural India, operating
with obsolete technology, limited access to institutional finance etc.
And there is a need to transform the huge unregistered MSME into
registered MSME.
• Need to improve the competitiveness of the overall MSME sector.
• Access to technology.
• IPR related issues.
• Design as a market driver.
• Wasteful usage of resources/manpower.
• Energy inefficiency and associated high cost.
• Low ICT usage.
• Low market penetration.
• Quality assurance/certification.
• Standardization of products and proper marketing channels to
penetrate new markets.
MSMED ACT, 2006
MSMED ACT, 2006
 Schemes of MSME
1. Prime Minister Employment Generation Programme
and Other Credit Support Schemes
2. Development of Khadi, Village and Coir Industries
3. Technology Upgradation and Quality Certification
4. Marketing Promotion Schemes
5. Entrepreneurship and skill Development Programme
6. Infrastructure Development Programme
7. Scheme of Surveys, Studies and Policy Research
8. National SC-ST-HUB
9. Scheme of Information, Education and Communication
 Tax Subsidy
• Income-Tax exemption and Sales Tax
exemption as per State Govt. Policy.
• Incentives and concessions in power tariff etc.
• Price and purchase preference for goods
produced.
• Availability of raw material depending on
existing policy.
 Benefits of MSME Registration
• Due to the MSME registration, the bank loans become cheaper as the
interest rate is very low around ~ 1 to 1.5%. Much lower than interest
on regular loans.
• There are various tax rebates offered to MSME.
• It also allowed credit for minimum alternate tax (MAT) to be carried
forward for up to 15 years instead of 10 years
• There are many government tenders which are only open to the MSME
Industries.
• They get easy access to credit.
• Once registered the cost getting a patent done, or the cost of setting
up the industry reduces as many rebates and concessions are available.
• Business registered under MSME are given higher preference for
government license and certification.
• There is a One Time Settlement Fee for non-paid amounts of MSME.
 Entities registered under MSME can avail
loans from following:
• Small Industries Development Bank of India (SIDBI)
• National Small Industries Corporation (NSIC)
• Regional Rural Banks (RRBs)
• Scheduled Commercial Banks (SCBs)
• North Eastern Development Finance Corporation (NEDFi)
• Other banks and NBFCs (Non-Banking Financial
Company)