Entrepreneurial Skills PDF

Class IX Entrepreneurial Skills 8. Introduction 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 d...

Class IX Entrepreneurial Skills 8. Introduction 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. 2. Business – Meaning and Types 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. 71 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. 3. Types of Businesses 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. 72 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. 4. Features of Types of Businesses 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 No inventory Finished goods inventory include raw materials, work-in- progress & finished goods Labour Skilled & unskilled Skilled - Sales person/s Professionals & experts Location Where infrastructure is Where potential Where end-users or good & supportive, labour customers/clients customers make the is relatively cheap & raw need the service and purchase for the materials are easily are willing to pay for product accessible at a fair price it 73  Customer demand Demand is forecasted and Services provided as Procured goods are goods are produced per needs and sold accordingly demands of the clients 5. Types of Businesses in Our Community 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. 74 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 75 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? ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ Q. Do you think Sanjeev is an entrepreneur? Explain. ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ Q. What made Sanjeev start his business? ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ Q. What did Sanjeev do to grow his business? ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ 76  A1 Skill- Based Activities 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. 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. 7. Objectives of Entrepreneurship Development 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: 77  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. 8. Phases of Entrepreneurship Development 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. 8. Challenges of Entrepreneurship Development Lack of continued motivation Lack of formal education Low technical knowledge Absence of managerial skills Inadequate infrastructure and resources Lack of finance availability 78  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. ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ 79 ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ 9. Entrepreneurship – Characteristics, Role and Rewards 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 80  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 81  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 entrepreneur. 82 83