Entrepreneurship Development Solved Papers: November' 2015 | Dibrugarh University | B.Com 5th Sem

2015 (November)
COMMERCE (General/Speciality)
Course: 502 (Entrepreneurship Development)
Time: 3 hours
The figures in the margin indicate full marks for the questions
Full Marks: 80
Pass Marks: 32
1. Answer the following questions as directed:
1)      Mention one of the objectives of Business Planning.                     1 To achieve desired objectives
2)      The chief goal of entrepreneurship is field study/pilot study to establish an enterprise. (Choose the correct answer)                               1             
3)      Creation, innovation and entrepreneurship are three foundations of entrepreneurship development (Fill in the blank)   1
4)      Write the full forms of NEITCO and SISIs.                      2
Small Industries Service Institute
5)      Mention an adverse impact of globalization on the Indian economy.                               1
Rise in demand for labour and the rise in wage rates leading to some increase in costs. 
6)      There is no difference between ‘entrepreneurship’ and intrapreneurship’. (Write True or False)                      1
7)      Name Joseph A. Schumpeter’s theory of entrepreneurship.                 1 Theory of Innovation
2. Write short notes on the following:                    4x4=16

a)      Prospects of rural entrepreneurship.
Ans: Opportunities and Prospects for Rural entrepreneurs
a)      Support & Motivation from local people: Rural entrepreneurs have a lot of support from the Rural people. Rural village people always encourage and give the motivation to the entrepreneurs.
b)      Low establishment cost: When compared to the urban areas, rural entrepreneurs' business establishment cost is very low. There is no need to construct or facilities huge infrastructure and buildings.
c)       Competitive advantages / Availability of labour: In India seventy percent of the people are living in the village. Majority of the rural people are depending on the agriculture. The agriculture work is not available throughout the year. That is the reason why rural entrepreneurs have the competitive advantage in easily acquiring unskilled and semiskilled labor.
d)      Government policies and subsidies: The government of India is continuously monitoring and introducing the new policies for encouraging the rural entrepreneurship. These policies are very flexible, innovative, liberalized and giving continues support to rural entrepreneurs. At the same time government has also announced huge subsidies for promoting the rural entrepreneurship.
e)      Availability of raw materials. Most of the times the rural entrepreneurs are depending upon the farm based products as raw materials, which are available through-out the year. These raw materials are available in the rural area that is the reason there is no transportation cost and flotation cost.

b)      Entrepreneurial behaviour.
Ans: Entrepreneurial behavioral is one of two behavioral alternatives underlying the desire to undertake innovations and to change the status quo. The other is managerial behavior. Entrepreneurial behavior embraces innovation, is motivated to seek changes in the status quo, draws satisfaction from institutional changes. In contrast, managerial behavior is a preference for maintaining the status quo.
The underlying source of entrepreneurial behavior is a relative preference for novel information over redundant information. Both types of information are important to the fight or flight response to a threat. Novel information reveals potential threats that results in automatic physiological responses, which is more satisfying to some than it is to others.
Entrepreneurial behavior is a preference for innovation and a change in existing institutions and the status quo. It can be as simple as the willingness to buy a new electronic gadget or as involved as rebelling against the existing political regime and starting a new nation. It often surfaces in the form of an entrepreneur undertaking the risk of organizing production and launching a new business venture.
c)       Problems of women entrepreneurs.
Ans: Problems and Challenges of woman entrepreneurship in Assam
The entrepreneurs in Assam in particular and those of Indian’s North Eastern Region in general, irrespective of their gender, have some specific problems in setting up and running their business ventures. Similarly the Indian women in general have some problems specific to them. The nature and magnitude of the problems faced by our women depends on various factors to which a woman is subjected. Women in general have high degree of patience, profound sincerity in work, diligence, sense of duty and efficient managerial skill (with initial guidance). But unfortunately, the society either fails to identify their quality or under-estimate them and /or suppress them as second class citizen. The problems in general the women entrepreneurs in developing countries like India face, which are equally applicable to the women entrepreneurs in Assam relate to the following:
1)      Social attitude and support: Being in a male dominated society, the Indian women are treated as dependent on men and have no liberty to take decisions of their own. The attitude of non-co-operative from her husband or close family members stands heavily in the way of developing women entrepreneurship. Moreover, the conservative attitude of the society does not allow our women in most cases, to take up entrepreneurial ventures. The gender related discrimination is felt more severely when a woman entrepreneur approaches promotional agencies or banks.
2)      Mobility constraint: The women in Assam more particularly those of rural areas have restrictions in their mobility so far as their social status is concerned. Although now-a-days they have relatively more freedom of mobility, but most often become soft target of suspicion by husband. As a prospective entrepreneur, a woman has to visit various financial institutions and Govt. agencies repeatedly to get her works done. But the humiliating attitude of the officials frustrates her and most often abandons the idea of venturing the project.
3)      Dual Responsibility: A woman entrepreneur has to perform dual responsibility of her profession at enterprise as also at family as wife and mother. The unmarried girls also, in many cases, are expected to take care of their younger’s and help mother in her work, besides working at their enterprises. As responsibility of family care largely remains in the hands of women, the women entrepreneurs in Assam in particular and India in general suffer from work-family conflicts.
4)      Scanty Financial Resources: Financial constraint is a problem for business in general. But when it comes to the case of a woman entrepreneur, the problem becomes more severe. As both family members and the officials of financial institutions have less confidence on women as entrepreneurs, they are mostly reluctant to spare finance for a woman business venture.
5)      Low risk bearing capacity: Women in general have less confidence as compared to their male counterparts. As such, they have less risk taking ability; which is an essential pre-requisite for entrepreneurial success. Women in our country live a protected life. She is taught to depend on male members from birth. She is not allowed to take any risk even if she is willing to take and has ability to bear it.

d)      Role of entrepreneurship in economic development.
The entrepreneur is the key to the creation of new enterprises that energise the economy and rejuvenate the established enterprises that make up the economic structure. Entrepreneurs initiate and sustain the process of economic development in the following ways:
1. Capital formation: Entrepreneurs mobilise the idle savings of the public through the issues of industrial securities. Investment of public savings in industry results in productive utilisation of national resources. Rate of capital formation increases which is essential for rapid economic growth. Thus, an entrepreneur is the creator of wealth.
2. Improvement in per capita income: Entrepreneurs locate and exploit opportunities. They convert the talent and idle resources like land, labour and capital into national income and wealth in the form of goods and services. They help to increase net national product and per capita income in the country, which are important yardsticks for measuring economic growth.
3. Improvement in living standards: Entrepreneurs set up industries which remove scarcity of essential commodities and introduce new products. Production of goods on mass scale and manufacture of handicrafts, etc., in the small scale sector help to improve the standard of life of a common man. These offer goods at lower costs and increase variety in consumption.
4. Economic independence: Entrepreneurship is essential for national self-reliance. Industrialists help to manufacture indigenous substitutes of hitherto imported products thereby reducing dependence on foreign countries. Businessmen also export goods and services on a large scale and thereby earn the scarce foreign exchange for the country. Such import substitution and export promotion help to ensure the economic independence of the country without which political independence has little meaning.
5. Backward and forward linkages: An entrepreneur initiates change which has a chain reaction. Setting up of an enterprise has several backward and forward linkages. For example, the establishment of a steel plant generates several ancillary units and expands the demand for iron ore, coal, etc. These are backward linkages. By increasing the supply of steel, the plant facilitates the growth of machine building, tube making, utensil manufacturing and such other units.
3. (a) Define the term ‘entrepreneur’. Explain the functions of an entrepreneur.    4+10=14
Ans: Entrepreneur: The word “entrepreneur” is derived from the French word entreprendre which means to initiate or undertake. In the early sixteenth century, the Frenchmen who organised and led military expeditions were referred to as “entrepreneurs”. The term entrepreneur was applied to business in the early eighteenth century by French Economist Richard Cantillon. According to him, the entrepreneur buys factor services at certain prices with a view to sell their products at uncertain prices in the future. Richard Cantillon conceived of an entrepreneur as a bearer of non-insurable risk.
Functions of an Entrepreneur:
An entrepreneur frequently has to wear many hats. He has to perceive opportunity, plan, organize resources, and oversee production, marketing, and liaison with officials. Most importantly he has to innovate and bear risk. The main functions of an entrepreneur are as follows:

1. Innovation: Innovation is one of the most important functions of an entrepreneur according to Schumpeter. An entrepreneur uses information, knowledge and intuition to come up with new products, new methods of reducing costs of a product, improvement in design or function of a product, discovering new markets or new ways of organization of industry. Through innovation, an entrepreneur converts a material into a resource or combines existing resources into new and more productive configurations. It is the creativity of an entrepreneur that results in invention [creation of new knowledge] and innovation [application of knowledge to create new products, services or processes.] Systematic innovation means monitoring the following for innovative opportunity:
Ø  The unexpected success or failure or any unexpected outside event, (e.g. when the IT bubble burst the ITES sector started growing.)
Ø  Innovation based on process need [e.g. plate based cameras, film based cameras, digital cameras]
Ø  Changes in industry and market structure [e.g. video cassette VCD, DVD, Blue ray disc]
Ø  Demographics changes (e.g. increasing number of working women and nuclear families in most metropolitan cities)
Ø  New knowledge (e.g. Pentium chip)
2. Risk and uncertainty bearing: According to Hozelist an entrepreneur performs the function of risk and uncertainty bearing. Every decision pertaining to development of new products, adapting new technologies, opening up new markets involves risk. Decision-making in an environment of uncertainty requires anticipation of risk. Profit is said to be the reward for anticipating and taking such risks. However it is pertinent to mention that the entrepreneur is not a gambler, he only takes calculated risks. An entrepreneur develops the art of decision making under conditions of uncertainty as a matter of survival.
3. Organization building: An entrepreneur has to organize men, material and other resources. He has to perform the functions of planning, co-ordination and control. He has to use his leadership qualities to build a team, generate resources and solve problems. With his organizational skills an entrepreneur builds an enterprise from scratch, nurtures it and makes it grow. His vision sows the seeds for a sound and vibrant organization and synergies are built in the enterprise.
According to Kilby in a developing country even the imitator entrepreneurs are very important and the entrepreneurial role encompasses the following:
a)      Perception of market opportunities
b)      Gaining command over scarce resources
c)       Purchasing inputs
d)      Marketing the products
e)      Dealing with bureaucrats
f)       Managing human relations within the firm
g)      Managing customer and supplier relations
h)      Managing finance

i)        Managing production
j)        Acquiring and overseeing assembly of the factory
k)      Industrial engineering
l)        Upgrading process and product
m)    Introducing new production techniques and products
(b) Distinguish between:                              7+7=14
1)      Entrepreneur and Manager.
Ans: Comparison of Entrepreneurs and Traditional Managers
Traditional Managers
Primary motives
Promotional and other Traditional corporate Re­wards, such as office, Staff, and power
Independence, Opportunity to create And money
Time Orientation
Short-term meeting quotas and budgets, weekly monthly, quarterly, and the annual planning horizons.
Survival and achieving 5-10 year growth of business.
Delegates and supervises More than direct involvement
Director involvement
Moderate risk taker
Concerned about status symbols.
No concern about status symbols.
Failure and mistakes
Tries to avoid mistakes and surprises
Deals with mistakes and failures.

2)      Entrepreneur and Entrepreneurship.
Ans: Distinguish between the terms entrepreneur and entrepreneurship.
Though both the terms entrepreneur and entrepreneurship are almost similar they possess several differentiating terms with them. The differences between the entrepreneurs and entrepreneurship are as follows:-
An entrepreneur one who undertakes and operates a new enterprise and assumes some accountability for the inherent risks.
Entrepreneurship is the practice of starting new organizations, particularly new businesses generally in responses to identified opportunities.
Entrepreneur is often synonymous with founder.
Entrepreneurship ranges in scale from solo projects to major undertakings creating many job opportunities.
The person who starts and operates a business enterprise is an entrepreneur.
The process in which an entrepreneur starts and operates his business enterprise is entrepreneurship.
The entrepreneur is a coordinator as he coordinates all the three elements of production i.e. land, labor and capital.
Entrepreneurship is the coordination maintained by an entrepreneur.
The person who innovates something new is an entrepreneur.
The innovation of something new or the process of innovation is entrepreneurship.
He who leads an enterprise towards its vision thorough leadership, motivation is an entrepreneur.
The way in which an entrepreneur leads his manpower, motivates them for the achievement of the firms goal is entrepreneurship.
He who bears risk of the firm for the sake of making a reasonable profit is an entrepreneur.
The risk bearing practice that is done by an entrepreneur is entrepreneurship.

4. (a) Discuss the concept of ‘micro, small and medium’ enterprises. Explain its role in the economy of North-Eastern region.                  2+2+2+8=14
Ans: Meaning of Micro, Small and Medium Enterprises: By enacting the Micro, Small and Medium Enterprises Development Act, 2006, the Government has recently fulfilled one of the needs felt and articulated by this segment for long. This Act seeks to facilitate promotion and development and enhancing competitiveness of these enterprises. It provides the first-ever legal framework for recognition of the concept of “enterprise” (comprising both manufacturing and services) and integrating the three tiers of these enterprises, namely, micro, small and medium. Apart from clearer and more progressive classification of each category of enterprises, particularly the small, the Act provides for a statutory consultative mechanism at the national level with wide representation of all sections of stakeholders, particularly the three classes of enterprises.
Section 7 of Act provides for the following classification in respect of industries engaged in production or manufacture of goods or rendering service enterprises:
Manufacturing Enterprises – Investment in Plant & Machinery
Services Enterprises – Investment in Equipment
Less than Rs. 25 lacs
Less than Rs. 10 lacs
Greater than Rs. 25 lacs but up to Rs. 5 Cr.
Greater than Rs. 10 lacs but upto Rs. 2 Cr
Greater than Rs. 5 Cr. but up to 10 Cr.
Greater than Rs. 2 Cr. but upto Rs. 5 Cr.

Role of MSME in N-E region
1. To generate large scale employment: In North-eastern region, capital is scarce and labor abundant. MSMEs are thought to have lower capital-output and capital-labour ratios than large-scale industries, and therefore, better serve growth and employment objectives. The MSME sector in North-eastern region has grown significantly since 1996 – with an average annual growth rate of 4.4% in the number of units and 4.62% in employment (currently employing 1 million). Not only do MSMEs generate the highest employment per capita investment, they also go a long way in checking rural-urban migration by providing people living in isolated areas with a sustainable source of employment.
2. To sustain economic growth and increase exports: Non-traditional products account for more than 95% of the MSME exports. Since these products are mostly handcrafted and hence eco-friendly, there exists a tremendous potential to expand the quantum of MSME led exports. Also, MSMEs act as ancillary industries for Large Scale Industries providing them with raw materials, vital components and backward linkages.
3. Making Growth Inclusive: MSMEs are instruments of inclusive growth which touch upon the lives of the most vulnerable and marginalized. For many families, it is the only source of livelihood. Thus, instead of taking a welfare approach, this sector seeks to empower people to break the cycle of poverty and deprivation. It focuses on people’s skills and agency. However, different segments of the MSME sector are dominated by different social groups.
(b) What do you mean by ‘Entrepreneurship Development Programme’? Explain its objectives.                4+10=14
Ans: Entrepreneurial Development Programme (EDP) can be defined as a programme, formally designed to help an individual in strengthening his/her entrepreneurial motive and in acquiring skill and capabilities necessary for playing entrepreneurial role effectively. In fact, it is an academic exercise to build up human resources by including them to take up entrepreneurial activities through motivation and developing the required entrepreneurial skills through exposure creation to effectively manage their enterprises. According to N.P. Singh, EDP is not merely a training programme. It is a process of:
a)      Enhancing and motivation, knowledge and skills of the potential entrepreneurs;
b)      Arousing and reforming the entrepreneurial behavior in their day-to-day activities; and
c)       Assisting them develop their own ventures or enterprise as a sequel to entrepreneurial action.

Thus, EDPs endeavous to change educate and equip a person to become a successful entrepreneur. The whole process envisages developing the participant’s latent qualities and skills as also equipping him with other capabilities. By the end of the programme, the participant is expected to be in a position to crystalise his vision in to action and launch and manage his enterprise with competence. The system involves a selection procedure and only those who prove to have certain minimum initial traits are selected as potential entrepreneurs to be trained up to develop the other required traits through interventions.
Objectives of EDP: The major objectives of the Entrepreneurship Development Programmes (EDPs) are to:
1)      Develop and strengthen the entrepreneurial quality, i.e. motivation or need for achievement.
2)      Analyse environmental set up relating to small industry and small business.
3)      Select the product.
4)      Formulate proposal for the product.
5)      Understand the process and procedure involved in setting up a small enterprise.
6)      Know the sources of help and support available for starting a small scale industry.
7)      Acquire the necessary managerial skills required to run a small-scale industry.
8)      Know the pros and cons in becoming an entrepreneur.
9)      Appreciate the needed entrepreneurial discipline.
10)   Besides, some of the other important objectives of the EDPs are to:
11)   Let the entrepreneur himself / herself set or reset objectives for his / her enterprise and strive for their realization.
12)   Prepare him / her to accept the uncertainty in running a business.
13)   Enable him / her to take decisions.
14)   Enable to communicate clearly and effectively.
15)   Develop a broad vision about the business.
16)   Make him subscribe to the industrial democracy.
17)   Develop passion for integrity and honesty.
18)   Make him learn compliance with law.
Need and Importance of EDP
Importance of entrepreneurship development programme (EDP) is to enable entrepreneurs initiating and sustaining the process of economic development in the following ways:
1.Creation of Employment Opportunities: Unemployment is one of the most important problems confronting developing and underdevelopment countries, EDP’s enable prospective entrepreneurs in the setting up of their own units, thus enabling them to get self employment. With the setting up of more and more units by entrepreneurs, both on small and large scale, numerous job opportunities are created for the others.
2. Capital Formation: It is not possible to set up an enterprise without adequate funds. Entrepreneur as an organizer of factors of production employs his own as well as borrowed resources for the setting up of his enterprise. Entrepreneur mobilizes idle savings of the public and put them to productive use. In this way he helps in capital formation, which is so essential for the industrial and economic development of a country. Various development banks like ICICI, IFCI, IDBI; SFCs, SIDCs take initiative in promoting entrepreneurship through assistance to various agencies involved in EDP and by providing financial assistance to new entrepreneurs.
3.Balanced Regional Development: Small scale units can be set up in industrially backward and remote areas with limited financial resources. Successful EDP’s assisted in accelerating the pace of industrialization in the backward areas and reduces the concentration of economic power in the hands of a few. Setting up of more units leads to more development of backward areas and balanced regional development.
4. Use of Local Resources: In the absence of any initiative local resources are likely to remain unutilized. Proper use of these resources can result in the progress or development of the area and that too at lower cost. Effective EDPs can help in the proper use of local resources by providing guidance, assistance, education and training to the prospective entrepreneurs.
5.Improvement in per Capital Income: Entrepreneurs are always on the look out for opportunities. They explore and exploit the opportunities. Entrepreneurs take lead in organizing various factors of production by putting them into productive use through the setting up of enterprises. More enterprises will lead to more production, employment and generation of wealth in the form of goods and services. It will result in the increase in the overall productivity and per capita income in the country. EDPs play a positive role in the setting of more units and thus help in generation of more employment and income.
6.Improvement in the Standard of Living: Entrepreneurs by adopting latest innovations help in the production of wide variety of goods & services. By making efficient use of the resources, they start producing more of better quality and that too at lower costs. This enable them to ensure easy availability of better quality products at lower prices to the consumers which result in the improvement in the standard of living of the people.
7.Economic Independence: Entrepreneurs enable a country to produce wide variety of better quality goods & services and that too at competitive prices. They develop substitutes of the goods being imported and thus prevent over-dependence on foreign countries and at the same time help in the saving of precious foreign exchange. Through sale of their surplus products in foreign market entrepreneurs enable a country to earn foreign exchange, which is so essential for meeting developmental needs of the economy. Export promotion and import substitution thus help in promoting economic independence of the economy.
8.Preventing Industrial Slums: Industrially developed areas are faced with problem of industrial slums, which result in over burdening of civic amenities and adverse impact on the health of people. Dispersal of industries can help in the overcoming of this grave problem. EDPs can help in preventing spread of industrial slums by providing various incentives, subsidies and infrastructural support to entrepreneurs for setting up their enterprises in industrially backward areas. This will also help in reducing pollution and overtaxing of civic amenities.
9. Helps in searching and exploiting opportunities: There are many opportunities for entrepreneurs in various fields like-Electronics,medicine,engineering,agriculture,food technology and packing, communication etc. EDPs help in searching such opportunities and provide necessary information, guidance  and assistance in the search and exploiting these opportunities.
10. Enhancing managerial abilities: Entrepreneur development programmes help the entrepreneurs to enhance their organizing and managerial abilities so that they can run their enterprise efficiently and successfully. This is done through organizing educational,management,training and orientation programmes. Various specialized agencies like National Institute for Entrepreneurship and small Business Development(NIESBUD),New Delhi and Entrepreneurship Development Institute of India(EDII), Ahmadabad are engaged in entrepreneurship programmes.

5. (a) Discuss the role played by the District Industrial Centre (DIC) in the economic development of Assam.        14
Ans: Functions of DI&CC: The DI&CC words at the grass-root for promotion and development of indigenous entrepreneurship in the state through policy supports initiated by the central and the state Governments. The major functions include the following:
a)      To facilitate the voluntary filling of Memorandum by the Micro and Small Enterprises (MSEs) as per the Government of India’s MSME Development Act 2006.
b)      To facilitate the compulsory filling of Memorandum by the Manufacturing Sector Medium Enterprises as per the Govt. of India’s MSME Development Act 2006.
c)       To facilitate pre registration of the enterprises to avail benefits under the different schemes of assistance and supports under the central and the state Governments.
d)      To guide the prospective entrepreneurs through appropriate counseling and suggestions in staring their new enterprises.
e)      To guide the entrepreneurs through documentation and counseling in availing the Govt. incentive and support facilities.
f)        To facilitate organization of Entrepreneurship Development Programmes (EDPs) by the NGOs through liaison.
g)      To organize screening committee (Task Force) meeting for selection of beneficiaries for grant of Govt. incentives and supports.
h)      To forward and recommend the entrepreneurs’ applications for availing of Govt. incentive and supports to the Commissioner of Industries and Commerce, Guwahati for onward recommendations.
(b) Describe the role of Khadi and Village Industries Board in rural development of Assam.                           14
It is a statutory body created by an Act of Parliament in 1956 and became operative from April 1957 by taking over the work of the erstwhile “All India Khadi and Village Industries Board” set up in 1950. The Commission is engaged in the task of promoting and developing Khadi and Village Industries (KVI) with a view to creating employment avenues in the rural areas thereby strengthening the rural economy of India. It functions under the administrative control of the Ministry of Micro Small and Medium Enterprises, Govt. of India.
KVIC has its central office at Mumbai. It has 36 State and Divisional offices, 6 Zonal offices, 15 Departmental and 23 Non-Departmental Training Centers and a number of accreted Training Centers in addition to 13 Departmental Sales Outlets. The KVIC operates through 33 Boards spread over in different states and union territories of the country, in addition to thousands of institutions and co-operatives including DIC/DICCs.
Objectives: The broad objectives of the KVIC are of three-fold as under:
·         The social objective of providing employment;
·         The economic objective of producing saleable articles, and
·         The wider objective of creating self-reliance amongst the people and building up a strong rural community spirit.
Functions: The crucial functions which the KVIC performs towards attainment of its avowed objectives are as follows:
1.       Works towards planning, promotion, organization and implementation of programmes for the development of Khadi and other village industries in the rural areas of the country in coordination with the other agencies engaged in rural development.
2.       Works towards building up of a reserve of raw materials and implements for supply to producers, creation of common service facilities for processing of raw materials as semi-finished goods and provision of facilities for marketing of KVI products.
3.       Organizes training of artisans engaged in Khadi and Village Industries.
4.       Encourages and promotes research in the production techniques and equipments employed in the KVI sector and provides facilities for study of the problems relating to the same.
5.       It also encourages the use of non-conventional energy, bio-fertilizer and other organic products.
6.       Provides financial assistance to institutions and persons who are engaged in the development and operation of Khadi and Village Industries and guides them through the supply of designs, prototypes and other technical information.
6. (a) Discuss the various steps taken in establishing a new business unit.              14

(b) Write an explanatory note on ‘venture capital and its sources’.                           14