Need and importance of Entrepreneurship

Entrepreneurship facilitates the rate of development of a country

Entrepreneurship facilitates the rate of development of a country by significantly contributing to the following factors.

By increasing the rate of growth in GDP of a country Increasing productivity. Growing employment opportunity. Increasing economic diversification. Optimum use of local resources Continued innovation in techno managerial practices Improving in international competitiveness.

Entrepreneurship helps in conserving the outflow of national wealth.

The developing countries usually have a limited national wealth. However, they need to spend this wealth to import goods and services. Also, to trade with other countries, they need foreign exchange. Entrepreneurship helps in conserving the outflow of the national wealth in the following ways.

As entrepreneurship is a low-cost strategy of economic development, job creation and technical innovation. Thus they enable the production locally and reduce the need of import. Entrepreneurs also bear the costs and risk of launching a new venture, developing a new product, commercializing an invention, adopting a technology and enveloping a new market. They will even help in generation of foreign exchange, thus conserving the outflow of national wealth.

Entrepreneurship is a low-cost strategy for

Economic development. Job creation. Technical innovation

The entrepreneurs bear the costs and risks of launching a new venture, developing a new product, commercializing an invention, adapting a technology and developing a new market, there by offering a highly leveraged strategy of development. Entrepreneurship alone results in generating wealth and employment, in increasing GDP and the overal development of society. Governments need to spend a lot of money if they have to provide employment and to establish enterprises. But by encouraging entrepreneurs and by supporting them goverment can achieve these targets easily. So entrepreneurship is called an excercise in low-cost strategy.

Entrepreneurship contributes to the increasing national production through

Its low cost strategy of economic development Job creation Technical innovation

Entrepreneurs bear the costs and risks of

Launching a new venture. Developing a new product Commercializing an invention Adapting a technology Developing a new market

All these factors which the entrepreneur bears upon himself offers highly leveraged strategy of development and contributes to the increased national production. So, all these bearings of costs and risks, by the entrepreneur, can be considered as Sweat Equity of the entrepreneur. Even if the entrepreneurs receive government assistance, they will keep on adding considerably more value through their Sweat Equity Entrepreneurship is not only an exercise in self-employment, but it is employment generative. Wage-employment has the following drawbacks.

It does not necessarily generate resources. It can be organized only with existing usable wealth. It has a strong tendency of self-saturation. So, once availed, it blocks the employment opportunities for others for another 10 years assuming an average 3 promotions in a 30year service career.

Entrepreneurship or self-employment overcomes these problems as

Adds to the GNP It has unique characteristics of self-generation.

In other words, entrepreneurship offers employment to others. As it is economic activity, it also leads to the emergence of other economic activities. This creates unending employment oppotunities. Thus, Entrepreneurship is not only an exercise in self-employment, but it is employment generative. Balanced area development, entrepreneurship help in achieving BRD The development of a country majorly depends upon

Industrial activities. Economic activities.

When any area prospers in the above activities, it also results in the development of the following welfare activities.

Development of roads Transport Communication Health Education Entertainment etc.

When the industrial and business activities are evenly distributed all over the country and not centralized in only few areas, it is called as balanced area development. As entrepreneurs establish the enterprises, this will result in balanced area of development, as the entrepreneurs try to make the best use of the available resources in their local area. This results in sprouting of enterprises all across the country, resulting in the development of the above welfare activities and overall development of the country. Promotion of entrepreneurship in society leads to channeling the youth energy: Due to excessive unemployment, the youth in India are diverting their attention to violence and other anti-social activities. One of the prime factors for the increase in unemployment is that the youth in India are excessively dependent on wage/salary employment and not the pursuit of entrepreneurship. This often results in channeling of youth energy to self-destruction and nonproductive areas. Thus the nation is losing its most valuable youth energy. Entrepreneurship can harness such youth energy. The entrepreneurial pursuit is challenging and creative and can harness the extra vigour that is abundantly available with the educated youth. As the entrepreneurial opportunities are limitless, they open up new opportunities for the unemployed youth. Especially in developing countries, where in the youth lacks self-confidence, entrepreneurship plays a vital role in developing their self-confidence. Thus the promotion of entrepreneurship in society amount the youth leads to entrepreneurisation of the society, thereby leading to the channelization of the youth energy.

Source: http://eshipnotes.wordpress.com/2012/08/11/need-and-importance-of-entrepreneurship/

Problems of entrepreneurship development programmes (EDPs)

1. No Policy at the National Level. Though Government of India is fully aware about the importance of entrepreneurial development, yet we do not have a national policy on entrepreneurship. It is expected that the government will formulate and enforce a policy aimed at promoting balanced regional development of various areas through promotion of entrepreneurship. 2. Problems at the Pre training Phase. Various problems faced in this phase are identification of business opportunities, finding & locating target group, selection of trainee & trainers etc. 3. Over Estimation of Trainees. Under EDPs it is assumed that the trainees have aptitude for self employment and training will motivate and enable the trainees in the successful setting up and managing of their enterprises. These agencies thus overestimate the aptitude and capabilities of the educated youth. Thus on one hand the EDPs do not impart sufficient training and on the other financial institutions are not prepared to finance these risky enterprises set up by the not so competent entrepreneurs. 4. Duration of EDPs. An attempt is made during the conduct of EDPs to prepare prospective entrepreneurs thoroughly for the various problems they will be encountering during the setting up and running of their enterprises. Duration of most of these EDPs varies between 4 to 6 weeks, which is too short a period to instill basic managerial skills in the entrepreneurs. Thus the very objective to develop and strengthen entrepreneurial qualities and motivation is defeated. 5. Non Availability of Infrastructural Facilities. No prior planning is done for the conduct of EDPs. EDPs conducted in rural and backward areas lack infrastructural facilities like proper class room suitable guest speakers, boarding and lodging etc. 6. Improper Methodology. The course contents are not standardized and most of the agencies engaged in EDPs are themselves not fully clear about what they are supposed to do for the attainment of pre-determined goals. This puts a question mark on the utility of these programmes. 7. Mode of Selection. There is no uniform procedure adopted by various agencies for the identification of prospective entrepreneurs. Organisations conducting EDPs prefer those persons who have some project ideas of their own and thus this opportunity is not provided to all the interested candidates. 8. Non Availability of Competent Faculty. Firstly there is problem of non availability of competent teachers and even when they are available, they are not prepared to take classes in small towns and backward areas. This naturally creates problems for the agencies conducting EDP. 9. Poor Response of Financial Institutions. Entrepreneurs are not able to offer collateral security for the grant of loans. Banks are not prepared to play with the public money and hence

they impose various conditions for the grant of loans. Those entrepreneurs who fail to comply with the conditions are not able to get loan and hence their dream of setting up their own enterprises is shattered. Helpful attitude of lending institutions will go a long way in stimulating entrepreneurial climate.

Entrepreneurs problems
1. Lack of adequate finance 2. High cost of raw materials & other inputs 3. Unfavorable market conditions 4. Unreliable supply of raw materials, power, labour, etc.. 5. Complex rules, regulations, procedures by the govt..

The path of small entrepreneurs is not rosy. Small entrepreneurs face the following types of problems: (1) Problem of raw materials: A major problem that the small entrepreneurs face is the procurement of raw materials. They have to confront with numerous problems like; i. Availability of inadequate quantity ii. Poor quality of materials iii. High cost of raw materials etc All these factors adversely affect the proper functioning of small units. (2) Problem of finance: Finance is one of the most important problems faced by small entrepreneurs. As finance is the life blood of a business organization and no business organization can function properly in the absence of adequate funds. The problem of finance in small sector is mainly due to two reasons i.e. (i) Scarcity of capital in the country as a whole. (ii) Weal credit-worthiness of small units in the country. Due to their weak economic base, they find it difficult to take financial assistance from the commercial banks and financial institutions.

Therefore, small entrepreneurs have to obtain credit from the money lenders on a very high rate of interest. (3) Problem of marketing: One of the major problems faced by small entrepreneurs is in the field of marketing. They are not in a position to get first hand information about the market i.e. information about completion, taste, liking disliking of consumers. Therefore, they are not able to upgrade their products according to the changing business environment. These small units acceding to the changing business environment. These small units often do not process any marketing organization. As a consequence, their product quality compares unfavorably with the quality of the products of the large scale industries. Therefore, these industries suffer from a comparative disadvantage as compared to large scale industries. (4) Problem of under utilization of capacity: Most of the small entrepreneurs are suffering from the problem of under utilization of capacity. Small scale units are making only 40 to 50 percent use of their installed capacities due to various reasons such as shortage of finance, raw-materials, power and under-developed markets for their products. (5) Outdated technology: Most of the small entrepreneurs depend upon old techniques and equipment. These units find it very difficult to modernize their plant and machinery due to limited capacity and capital. He quality of products and productivity tend be low in the absence of modern technology and that too at higher cost. They are in no position to complete with their better equipped rivals operating modern large scale units. For example, Khaki products even after government subsidy seem to be costlier. (6) Poor project planning: Poor project planning is another problem faced by small entrepreneurs. In the absence of education and experience, these entrepreneurs do not attach much significance to viability studies. They do not bother to study the demand aspect, marketing problems, sources of raw materials. Inexperienced and incompetent entrepreneurs often submit unrealistic feasibility reports and incomplete documents which invariably result in delays in completing promotional formalities. They cannot afford to avail services of project consultants due to limited financial resources.

(7) Inadequate infrastructure: Insufficient quality and quantity of transportation, communication and other basic services particularly in backward areas is another problem. Inadequate infrastructure results in under utilization of capacity and wastages. Inadequate infrastructures also adversely affect the quality, quantity and production schedule of the enterprises operating in these areas. Therefore, their functioning will become uneconomical and unviable. (8) Problem of skilled manpower: A small entrepreneur located in backward area may not have problem of unskilled workers but it may be exposed to the problem of non-availability of skilled workers. Skilled workers may be reluctant to work in their areas and small scale enterprise may not afford to pay the wages and other facilities demanded by these persons. Unavailability of skilled manpower result in lower productivity, deterioration of quality, increase in wastages, rise in other overhead costs and finally adverse impact on the profitability of these small scale units. (9) Managerial problem: Another serious problem for small scale units is managerial inadequacies. Modern business demands vision, knowledge, skill, aptitude and whole hearted devotion. The managerial competence of the entrepreneur is very important for the success of any venture. An entrepreneur is required to undergo training and counseling for developing his organization revolves. Therefore, he must be fully conversant with all aspects of management. Lack of proper commitment and managerial skill will add to the problems of entrepreneurs. (10) Other problems: In addition to above discussed problems, the small scale industries have been constrained by a number of other problems such as trained technicians, technological obsolescence, unorganized nature of operation etc.