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Unit II Creating Entrepreneurial Venture for Entrepreneurship Mcom Sem 3 Delhi University

Unit II Creating Entrepreneurial Venture for Entrepreneurship Mcom Sem 3 Delhi University

Unit II Creating Entrepreneurial Venture for Entrepreneurship MCOM Sem 3 Delhi University

Unit II Creating Entrepreneurial Venture for Entrepreneurship MCOM Sem 3 Delhi University : Entrepreneur is a person and enterprise is a business proposition which involves risk and uncertainty. An enterprise consists of people who work together primarily for the purpose of making and/or selling product/service. It may or may not involve an innovation. It always involves risk taking, decision making, and coordination of resources. Success of an enterprise depends upon various factors, some of which are internal and some external. Few of these are within control of entrepreneur and most of them are beyond control. Nowadays scanning of business environment has become a crucial factor for success. Entrepreneurs try to monitor business environment through techniques like SWOT analysis, business forecasting, contingency planning etc. Entrepreneurs combine the available resources and produce goods and services.

Entrepreneurship is the process of creating something new with value by devoting necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence

Unit II Creating Entrepreneurial Venture for Entrepreneurship Mcom Sem 3 Delhi University

Significance of Entrepreneurship

In the words of Leibenstein, “ Per capita income growth requires shifts from less productive to more productive techniques per worker, the creation or adoption of new commodities, new materials, new markets, new organizational forms, the creation of new skill, and the accumulation of new knowledge . The entrepreneur, as gap filler and input-completer is probably the prime mover of the capacity creation of these elements in the growth process”.

Successful economic growth of countries like US, Japan, Germany, France etc. is due to dynamic and innovative entrepreneurs, entrepreneurship and enterprise development.

Economic development involves change and entrepreneur becomes the best agent for this change. An entrepreneur brings various factors of production together. He/she is an organisation builder. He/she harnesses land, labour, capital and other resources for the betterment of the society. He/she identifies gaps in fulfilling human needs and fills this gap by introducing new products/services, new sources of raw materials/new markets, new methods of production/distribution. It is an innovative function. It involves doing things in a new and better way. It is a creative response to changes in the environment brought about by entrepreneur as a change agent.

Entrepreneurial ventures provide independence, autonomy to entrepreneurs. Entrepreneurship enables them to be their own masters. They get an opportunity to achieve something on their own. They pursue their dreams and ambitions through their enterprises and get the pleasure of fulfillment, selfexpression and self-actualization. Their vision, creativity, gets manifested through their enterprises.

They get an opportunity to stand out in the crowd and get recognition for their contribution. They get an opportunity to enjoy their work and thus are relieved of boring, unchallenging, uninteresting and unexciting work. They need not bother about stress of working under boss. It makes them free from depression and frustration arising out of dull working environment. Entrepreneurship enables them to work in lively environment where there is pleasure, enjoyment, an opportunity to exercise their ideas and explore their worth. It increases their selfesteem and builds up self-confidence.

Unit II Creating Entrepreneurial Venture for Entrepreneurship Mcom Sem 3 Delhi University

Entrepreneurship is a device for wealth creation. It is the dynamic process of creating incremental wealth. The wealth is created by entrepreneurs who assume risks in terms of capital, time, and career commitment. Entrepreneurship contributes to creation and delivery of standard of living to society. It is a means to societal development. It is beneficial for socio-economic development of the society. Entrepreneurs are instrumental in economic growth. They create products/ services and increase national production. They produce goods and services at competitive costs by increasing production.

With increase in number of entrepreneurs, there is an overall increase in production and productivity. They stimulate exports. They substitute imports. They conserve foreign exchange. Entrepreneurs weaken monopoly of big business houses and contribute for dispersal of economic power and equitable distribution of wealth. They invest/ reinvest capital/profit for better productivity and for betterment of the society. Entrepreneurs create small businesses which generate wealth and a tremendous number of jobs. Many entrepreneurs give rise to big businesses. In this manner, entrepreneurship is a key driver of our economy.

Unit II Creating Entrepreneurial Venture for Entrepreneurship Mcom Sem 3 Delhi University

Entrepreneurship Development

Entrepreneurship is mostly related to creation of new businesses. It is important for new enterprise creation, job creation in private sector, and wealth creation. It is also pertinent to creation of not-for-profit initiatives. Entrepreneurship is about innovative practices, i.e. about generating ideas, creating new products/ services, new businesses, and new enterprises. It mobilizes human and non-human resources. Entrepreneurship development has been considered as the key to economic development and societal welfare. It is essential for industrialization. It provides employment and removes poverty.

Kakinada experiment has proved that the myth that ‘entrepreneurs are born, not made’ no longer holds good and that it is certainly possible to develop entrepreneurship through planned efforts. Thereafter, government and NGOs are striving hard to initiate strategies and programs for spread of entrepreneurial culture. A variety of schemes have been introduced by the government in support of entrepreneurship.

A number of institutions have been set up by the government to help budding entrepreneurs in various ways. Some institutions provide training. Some are meant for consultancy and technical know how. Some agencies provide financial assistance while some support marketing. Along with government agencies, non-governmental agencies also are doing their best for supporting entrepreneurship. A series of activities go into developing entrepreneurship and setting up of an enterprise. A prospective entrepreneur has to make up his/her mind for entrepreneurial career. Simultaneously he/she has to identify promising business opportunities and select suitable business idea(s).

The next step is preparation of business plan followed by mobilization of required resources for the enterprise, establishing the venture and making it fully operational by managing it in a proper manner. Entrepreneurial process begins with identification of business opportunity. An entrepreneur is alert and attentive to environmental happenings. He/she immediately picks up certain situations and events as opportunities. As a vigilant observer, an entrepreneur comes across various business opportunities. An entrepreneur finds good business ideas from various opportunities on the basis of their suitability, self-appraisal, family background, business experience, financial position, technical background and other such factors.

There are different sources for exploring promising business ideas such as newspapers, magazines, business experts, professionals, consultants, existing enterprises, bankers, government officials, NGOs etc. After finding an attractive business idea, an entrepreneur starts planning for the venture. Business plan preparation is a blue print of the proposed business venture. It involves an estimation of the resource requirements. It is a plan indicating tie up of resources. It determines acquisition of resources and successful management of the enterprise.

Sometimes, an entrepreneur has to hire consultants, experts for preparing business plan. It is a difficult task dealing with estimations, calculations, projections etc. After conceiving a good business idea, a good business plan is devised by the entrepreneur. Now he/she has to mobilize resources. After an appraisal of own resources, the entrepreneur has to acquire some resources from outside. In the initial phases, the enterprise runs with entrepreneur’s own resources. Then efforts are made to acquire outside resources at lowest possible cost and with maximum extent of control. An attractive business idea is translated into a business plan which comprises a judgment of requisite resources. Now the next step is establishment of business venture.

The entrepreneur has to set a schedule to establish timelines for each stage of venture creation. Care has to be taken for setting feasible and realistic deadlines. Now the venture is created. It is a big achievement. But, managing the enterprise is a big challenge. Until yet, there were estimations, approximations as well as predictions about future. Whatever was visualized and imagined; now it is to be faced in reality. The task of management is challenging and exciting. Human as well as non-human resources are to be integrated together. Expected business performance is based on proper management and coordination of finance, human resources, operations and marketing efforts.

Unit II Creating Entrepreneurial Venture for Entrepreneurship Mcom Sem 3 Delhi University

Some Models for Entrepreneurship Development Some integrated models suggested for the development of entrepreneurship are described below:  

1. Need for motive – the dynamic which for prospective entrepreneur has the greatest possibility of achieving the goals if one performs those activities

2. Long term involvement – is the goal either at thinking level or at activity level in the entrepreneurial activity that is viewed as a target to be fulfilled

3. Resources – personal, social and material resources which he/she thinks are related to entry and success in the area of entrepreneurial activity

4. Socio-Political system – to be perceived as suitable for establishment and development of his/her enterprise

All these factors are additive in nature and its optimal presence lead to entry point of entrepreneurship which leads to acquisition of material resources and development of his/her enterprise.

Unit II Creating Entrepreneurial Venture for Entrepreneurship Mcom Sem 3 Delhi University

B. S.Venkata Rao(1975) has described five stages for promoting small entrepreneurship:

1. Stimulation-

There is no dearth of entrepreneurial talent in any society. However, all those persons with potential for entrepreneurship may not be self-motivated. They may not get supportive families. They may not get conducive environment. Due to discouraging environment, the entrepreneurial spark may not be ignited. The stage of stimulation is required in this background. Those who have hidden potential and latent talent, they should get favourable atmosphere. There is a need to create awareness and arouse interest about entrepreneurship. This stage includes creation of industrial atmosphere, policy statement emphasizing the role of small industry, wide publicity of industrial development programme, formation of special schemes and creation of support institutions. This stage is necessary to stimulate interest of the backward region in industrial activity and to create awareness. Special entrepreneurship awareness campaigns and motivation training is required for stimulation phase.

2. Identification –

This stage is necessary to identify prospective entrepreneurs. Identifying the right target audience is a good beginning. According to the characteristics and requirements of target groups, structured and standardized motivation and training programs need to be organized. The prospective entrepreneurial force can be identified in rural artisans, factory workers, persons who have formal training in engineering and technology, and graduates in business administration and management. With focused approach, untapped talent and unexplored human resources can be diverted to the mainstream through entrepreneurship. e.g. school drop outs, women, minority groups, juvenile delinquents, prisoners, rural population, physically challengedetc.

3. Development –

This stage would include organization of motivation and managerial training program along with advice on technology, formulation of bankable project, location etc.

4. Promotion –

This can be the job of supporting institutions to provide developmental facilities, services and incentives.

5. Follow up –

This stage includes reviewing the policies and programmes of the government and seeking of new ways with a view to make it more effective. Entrepreneurship is a behavior rather than a personality trait. It is risky in the sense that only a few of them know what they are doing. The future is uncertain. There is no certainty about acceptability of the outcome by market. The whole process of developing an entrepreneur, making him/her start a venture, supporting and sustaining him/her involves a cyclic process.

Unit II Creating Entrepreneurial Venture for Entrepreneurship Mcom Sem 3 Delhi University

M.M.P. Akhouri suggested the entrepreneurship development cycle consisting of the following components for the promotion and development of entrepreneurship:

1. Stimulatory activities:

These activities refer to all such activities that stimulate entrepreneurship in any society. These activities ensure the emergence of entrepreneurs in the society. They prepare the background for entrepreneurship to germinate and for people to start looking for entrepreneurial pursuits. They generate initial motivation and offer opportunity to acquire skill. These can be obtained by various activities such as 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 technoeconomic information and product profiles available; evolving locally suitable new products and processes; availability of local agencies with trained personnel for entrepreneurial counseling and promotions; creating entrepreneurial forums; recognition of entrepreneurs.

2. Support activities –

These activities refer to all such activities that help entrepreneurs in establishing and running their enterprises. These activities help a person to develop into an entrepreneur. They nurture and help entrepreneurship to grow. This can be done by providing the necessary infrastructure in the form of computers, internet connectivity, offering consultancy and training, and providing all required information as to how a person should groom himself/herself as an entrepreneur. Financial assistance for projects and seminars could also promote entrepreneurship. These activities can be promoted in the incubation centre to groom a person to become an entrepreneur. The various support activities are given below: registration of unit; arranging finance; providing land, shed, power, water and so on; guidance for selecting and obtaining machinery; supply of scarce raw materials; getting licenses/import licenses; providing common facilities; granting tax relief or other subsidy; offering management consultancy services; help marketing the product; providing information.

3. Sustaining activities –

These activities help in continuous, efficient and profitable functioning of an enterprise. These include modernization of infrastructure, encouraging diversification, providing opportunities and supporting industry-institute interaction through consultancy, promoting quality, and organizing need-based common facilities centres.

The various sustaining activities are as follows: Help modernization; help diversification/expansion/substitute production; additional financing for full capacity utilization; 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.

Unit II Creating Entrepreneurial Venture for Entrepreneurship Mcom Sem 3 Delhi University

Canadian Foundation for Economic Education delineated various stages of entrepreneurship development as follows:

1. Formative stage: This relates to various factors that influence development of desires, attributes, and attitudes that are found to be most highly correlated with entrepreneurial success

2. Developmental stage: This relates to the learning and skill development that equip and prepare an individual to consider the start-up and launch of an entrepreneurial venture

3. Start-up stage: This refers to the specific skills and supports that are needed by an individual during the start-up, launch and initial operation stages of a venture

4. Growth stage: This refers to specific skills and supports that are required by a successful entrepreneur who is looking to advance an initial startup venture to a period of growth and expansion

Unit II Creating Entrepreneurial Venture for Entrepreneurship Mcom Sem 3 Delhi University

Venture Initiation and Success Competencies:

An entrepreneur must also possess the competencies required for launching the enterprise and for its survival and growth. These competencies may be further divided into two categories of competencies.

Enterprise launching competencies:

These comprise of competency to understand the nature of business, competency to comply with Government regulations, competency to deal with business, competency to finance business, competency to locate business, competency to plan marketing strategy, competency to choose type of ownership, competency to obtain technical assistance, competency to develop a business plan, competency to determine the potential as an entrepreneur.

Enterprise management competency:

These include the competency to protect business, competency to manage customer credit and collection, competency to manage finances, competency to manage business records, competency to manage sales efforts, competency to promote products and services of business, competency to manage human resources, competency to manage business. Robert Hisrich classified skills required by entrepreneurs into three main areas: technical skills, business management skills and personal management skills. Technical skills involve such things as writing, listening, oral presentations, organizing, coaching, being a team player, and technical know-how.

Business management skills include those areas involved in starting, developing, and managing an enterprise. Skills in decision making, marketing, management, financing, accounting, production, control, and negotiation are essential in launching and growing a new venture. The final skill area involves personal entrepreneurial skills. Some of these skills differentiate an entrepreneur from a manager. Skills included in this classification are inner control (discipline), risk taking, innovativeness, persistence, visionary leadership, and being change oriented.

Unit II Creating Entrepreneurial Venture for Entrepreneurship Mcom Sem 3 Delhi University

Entrepreneurship MCOM NOTES

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