Detailed, Step-by-Step NCERT Solutions for 12 Business Studies Chapter 13 Entrepreneurship Development Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.
Entrepreneurship Development NCERT Solutions for Class 12 Business Studies Chapter 13
Entrepreneurship Development Questions and Answers Class 12 Business Studies Chapter 13
Multiple Choice Questions
Put a tick (√) against the most appropriate answer to the following questions.
(a) Calculated risks
(b) High risks
(c) Low risks
(d) Moderate and calculated risks
(a) Calculated risks.
In economics, which of the following is not a function of the entrepreneur?
(b) Provision of capital and organisation of production
(d) Day to day conduct of business
(d) Day to day conduct of business.
Which of the following statements does not clearly distinguish between entrepreneurship and management?
(a) Entrepreneurs found the business; managers operate it
(b) Entrepreneurs are the owners of their businesses; managers are employees
(c) Entrepreneurs earn profits; managers earn salaries
(d) Entrepreneurship is once for all activity; management is a continuous activity
(d) Entrepreneurship is once for all activity; management is a continuous activity.
In the roles and functions of the entrepreneur identified by Kilby, which of the following is not an aspect of’ political administration’?
(a) Dealing with public bureaucracy
(b) Managing human relations within the firm
(c) Introducing new production techniques and products
(d) Managing customer and supplier relations
(c) Introducing new production techniques and products.
Which of the following attitudes is not generally associated with sucessful entrepreneurship.
(a) Investing in R & D
(b) Live your business day by day
(c) Innovate and improvise continually
(d) Produce as per customers’ requirements
(b) Live your business day by day.
Short Answer Type Questions
Clarify the meaning of the term ‘enterpreneur’, ‘entrepreneurship’ and ‘enterprise’.
Entrepreneurship is the process of setting up one’s own business as distinct from pursuing any other other economic activity, be it employment or practising some profession. The person who sets up his business is called an entrepreneur. The output of the process, that is, the business unit is called an enterprise.
No society can wait for the chance of “birth” of entrepreneurs to pursue its developmental plAnswer: In fact, plans for economic development would bear little fruit unless entrepreneurship development is regarded as a deliberate process of making people aware of entrepreneurship as a career at an early age and creating situations where they may actually make a choice to become entrepreneurs.
When we make this choice, we become a job-provider rather than a jobseeker, besides enjoying a host of other financial and psychological reward. Taking to entrepreneurship is surely more a matter of aspiring to become an entrepreneur rather as being born as one.
We are aware that entrepreneurship is regarded as one of the four major factors of production, the other three being land, labour, and capital. However, it should surprise we that as regards its French origin, -the term ‘entrepreneurship’ (derived from the word ‘entreprende’ meaning ‘to undertake’) pertained not to economics but to undertaking of military expeditions.
So is true of many terms in management such as stratagy (a course of action to beat the competition, the ‘enemy’) and logistics (movement of men and machines for timely availability), etc. Historically, as wars are followed by economic reconstruction, it should be no surprise that military concepts are used in economics and management.
It may be pointed out that whereas the wars are rare and far between, in today’s competitive world, entrepreneurs wage wars everyday. There is a tremendous pressure to continually develop new products, explore new markets, update technology and devise innovative ways of marketing and so on.
The term ‘entrepreneur’ was first introduced in economics by the early 18th century French economist Richard Cantillon. In his writings, he formally defined the entrepreneur as the “agent who buys means of production at certain prices in order to sell the produce at uncertain prices in the future”.
Since then a perusal of the usage in the future.” Since then a*perusal of the usage of the term in economics shows that entrepreneurship implies risk/uncertainly bearing, coordination of productive resources; introduction of innovation; and provision of capital.
Why is entrepreneurship regarded as a creative activity?
Creative Activity : Entrepreneurship is creative in the sense that it involves creation of value. We must appreciate that in the absence of entrepreneurship ‘matter’ does not become a “resource”. By combiningthe various factors of production, entrepreneurs produce goods and services that meet the needs and wants of the society.
Every entrepreneurial act results in income and weath generation. Even when innovations destory the existing industries, for example, zerox machines destroyed, – carbon paper industry, mobile telephoney threatens land line/basic telephony, net grins accruing to the econmy land such entrepreneurial actions us commendable as the act of creative destruction.
Organisation of Production : Production, implying creation of form , place, time and memory combined utilisation of diverse factors of production, land labour, capital and technology. Entrepreneur, in response to a perceived business opportunity mobilises these resoures into a productive enterprise or firm.
It may be pointed out that the entrepreneur may not be possessing any of these resources, he may just have the idea that he promotes among the resources providers. In an economy with a well-developed financial system, he has to convince just the funding institutions and with the capital so arranged enter into contracts of supply of equipment, materials, utilities (such as water and electricity) and technology.
What lies at the core of organisation of production is the knowledge about availability and location of the resources as well as the optimum way to combine them. An entrepreneur needs negotiation skills to raise these in the best interests of the enterprise. Organisation of production in also involves products development and development of the market for the product. Besides, entrepreneur may be required to develop even the sources of supply of requisite inputs.
For example, weather it is a matter of putting together an automobile manufacturing unit or manufacture of burger/pizza, besides cultivating a market and developing to suit its tastes and preference there would be need to develop a pool of suppliers of the diverse components or elements that go into their manufacture.
Entrepreneurship undertake “moderate risks”. Eloborate this statement.
Risk-Taking : As the entrepreneur contracts for an assured supply of the various inputs for his project, he incurs the risk of paying them off whether or not the venture succeeds. Thus, the landowner gets the contracted rent, capital providers gets the contracted interest, and the workforce get the contracted wages and salaries. However, there are no assurance of profit to the entrepreneur.
It may be pointed out that the possibility of absolute ruin may be rare as the entrepreneur does everything with in his control to risk the business. For example he may enter into prior contract with the customers of his production so much so that he may just be contract manufacturer or marketer of someone elses products! What is generally implied by risk-taking is that realized profit may be less than the expected.
It is generally believed that entrepreneur take high risk. Yes, individuals opting for a carrer in entrepreneurship take a bigger risk that involved in a carrer in employment or practice of a profession as there is no “assured” payoff. In practice, for example, when a person quits a job to start on his own, he tries to calculate whether he or she would be able to earn the same level of income or not.
To an observer the risk of quiting a well-set and promising career seems a “high” risk, but what the person has taken is a calculated risk. The situation is akin to a motorcycist in the ring of death” or a trapeze artist in circus. While the spectators are in the awe of the high-risk, the artists have taken a calculated risk given their runing, skills, and of course confidence and daring.
It is said that the entrepreneur thrive on circumstances whereas favouring and against success area even, that is a 50 :50 situations. They are so sure of their capabilities that they convert 50% chance into sucess.
They avoid situations the higher risk as they hate failure as anyone would do, they dislike lower risk situations as business caures to be a game/fun! Risk as such is more than a financial stake, becomes a matter of personal stake, where less than expected performance causes displeasure and distress.
How does entrepreneurship result in increasing the spectrum and scope of economic activity?
Need for Entrepreneurship : Every country whether developed or developing, needs entrepreneurs. Whereas, a developing country needs entrepreneurs to intiate the process of development, the developed one needs entrepreneurship to sustain it.
In the present India context, where on the one hand, employment opportunities in public sector and large- scale sector are shrinking and on the other, vast opportunities arising from globalisation are waiting to be exploited; entrepreneurship can really take India to the heights of becoming a super economic power.
Studies by Global Entrepreneurship monitor, a research program involving annual assessment of the national level of entrepreneurial activity account for the differences in the level of economic growth to the extent of as much as 33%.
What is that the entrepreneurs do to effect economic development? This leads us to a discussion of the functions of the entrepreneurs in relation to economic development. As the entreprise is the object of their endervour, it is also necessary that we examine their functions in relation to the enterprise as well.
Thus, the need for entrepreneurship arises from the functions the entrepreneurs perform in relation to the process of economics development and in relation to the business enterprise.
Increasing the spectrum and scope of Economic Activities : Development does not merely mean ‘more’ and ‘better’ of the existing, it also and crucially means diversification of economic activities-across the geographic, sectoral and technological scope.
We are aware that underdeveloped countries are caught in the vicious cycles on the demand as well as supply side. Entreprenesurs penetuate into and break these cycles. For example, by organising and orienting domestic production for exports. Thus, production (and there by of generation of Income) is not cdhstrained by the inadequacy of domestic demand. (Demand-side vicious cycle). In today’s context we are that India is posed to become a manufacturing hub for the global markets for diverse products.
Economic development is also constrained by the supply-side pressures resulting into absence of capacity to meet the demand whether domestic or overseas. Entrepreneurs mobilise local and even overseas resources to augment the productive capacity of a country. Indian multinational giants is fast becoming a reality.
Entrepreneurs lead the process of economic development via bringing about sectoral change. You must be aware that as the economics grow, percentage of GDP originating from argiculture ‘decreases and the orginating in industry and services sectors goes up. Entrepreneurs through their decision to divest from the state sectors and invest in green-field sectors bring about a virtu# transformation of the economy from “underdeveloped” to an “emerging” and “developed” status.
Describe briefly the role of achievement motivation in entrepreneurship.
Anybody who has a perception of self efficacy and is yet to feel intrested in or motivated by the idea of being of their own comprise a potential, future source of entueneurship. The standard and method of motivation differ from person to person. Achievement or self actualisation is a powerful drive to motivate the person.
Entrepreneucial situation is characterised by personal accomplishment in competitive situation and involving higher standards of excellance. Encouraged by achievement, the entire preneur use his tallent in the right direction. Achievement implies a desire to accomplish something difficult, to master, moniuplak or organise physical objects and human beings to achieve high standards. Further it means to overcome obstacles and attain a high standard, to excel one’s self, to rival and surpass other.
Enterpreneurship provides the best opportunity for making best use of other talents and resources to sucessfully achieve organisational objectives.
Long Answer Types Questions
Describe briefly the steps involved in starting a new business.
In terms of the process of stating of New business therefore, an entrepreneur is on the look out for and spots the business opportunity, assesses its value, develops it in the form of a product services idea, assembles the resources and gets going see fig.
These elements are ho sequential as the figure may convey, the entrepreneur may have to address to all these elements-simultaneously. Yet depending upon their backgrounds, the individual entrepreneur may prefer one over the other. For example, technicians tend to be over obsessed with the production aspect, those with marketing background may over emphasie creation of market.
Investor type entrepreneurs may be over concerned with the returns from the project. One should resist the temptation of looking at the business only from one’s own narrow prespective. Having said this, it is apt that we provide a brief description of the various issues that may be relevant at each stage.
Entrepreneurial opportunities have to be actively searched for. One may rely on personal observation, discovery or invention. Personal constract and experience or may also help in identifying business opportunities. Alternatively, one may rely on published reports, surveys and the like.
Narayan Reddy of Virchow Laboratories relied on the personal discovery of the molecule during his employment with phamaceutical company. As observation means seeing/hearing/ smelling with a purpose, opportunity spotting presupposes tendency to look at the things and phenomenon form an entrepreneurial mildset. Most of us have a consumer’s mindset. If we see any object of desire, may be a pen, laptop, latest model of the mobile phone or some body eating pizza or burger, we crave to have the same thing for ourselves.
The entrepreneurial mind, on the other hand starts working out, what would be the market Size, where to procure it from and a what price, will I able to woo the customers from the existing players and how by selling it cheaper by providing more value or by better service and soon. Entreprenneuical opportunities may also be identified through a process of research of international, domestic sector / industrial analysis.
For example, post WTO, international trade and investment have become freer of restrict ions. Tentile quotas are being phased out, and, there are greater opportunities for tentile and tentile made ups from India. A lobal outsourcing is on the rise and India offers huge and varied pool of technical manpower that marks it a cost effective destination for in bound global out-sourcing in manufacturing as’well as Information-Technology Enabled Servies (ITES).
Identification of specific product, offering While the environment scan leads to the discovery of more generalised business opportunities, these is a need to zero in on the a specific product or services idea, for example, trade liberlisation since WTOs has resulted in export opportunities, but the question is what to export and where? Clearly decision on specific product offering necessitates decisions on who is buying, why, and what are the value expectations. You will be able to succed when the value delivered not only meet, but also exceed customers, expectations and create a “VOW!” impact. – Feasibility Analysis
The product offering idea must be technically feasible, that is it should be possible with the available technology to convert the idea into a reality. And this should be possible at a cost that can be converted by tffe price it will fetch; in other words, the idea must be economically feasible too.
The project cost should be with in the.resources available and the resources provides should be reasonably sure of an appropriate return on (profit) and return of (safety and liquidity) of their investments. That is, the idea must be financially viable as well.
There should be enough sales in the immediate and the prospect of growth in the foreseable future, there should be adequate assurance on the commercial and other legal restrictions/necessity of prior appovals for setting up the business. It is also to be decided as to whether the business will be organised as a proprietary concern/parthership firm/ company or cooperative entity.
As noted earlier too/entrepreneurial function do not come to an end with business start up. He often looks after its day-do-day operations and strives for its stability and growth. The following diagram may be presented for economic fesibility.
Examine the nature of relationship between entrepreneurship and economic development.
Enterpreneurial roles and functions dearly seem onerous. Perhaps that is why many shy away to simples, softer and safer options of employment and practice of profession. Entrepreneurial going may be tough; but then that is where the tough get going.
Do not worry if presently you may find yourself short on those competencies, values and attitudes. It is just a matter of making up your mind for a carrer in entrepreneurship and grooming yourselves for it. This takes us to the discussion of the process of entrepreneurship development.
Entrepreneurship does not emerge, spontaneously. Rather it is the outcome of a dynamic process of interaction between person and the environment. Ultimately the choice of entrepreneurship as a career lies with the individual, yet he must see it as a desirable as well as a feasible option.
In this regard, it becomes imperative to look at both the factors in the invironment as well as the factors in the individual as having a nearing on the perception of desirability and feasibility and thereby entrepreneurship development.
The Role Of Environment In Entrepreneurship Development:-
Entrepreneurs bring about economic growths development, and the latter in turn provides a tertile soil for the flourshing of enterpreneurship. There certainly is a mutually facilitating reciprocity between economic growth and entrepreneurship development.
Relationship between Entrepreneurship and Economic Development : In general, capitalist economy with its emphasis on individual achivement is more suitable for entrepreneurship. Lower rates of taxation on personal income, lower rates of interest and moderate inflation stimulate entrepreneurical activity.
(Can you think why it is so?) Moderately low external value of domestic or in other words, moderately lower exchange rates, stimulate import substituting and export promoting entrepreneurship. (Can you rationalise why?).
Well developed financial system, good infrastructure, helpful bureaucracy all these have a favourable impact or entrepreneurship. Specially designed and dedicated institutions such as National Institude for entrepreneurship and small Business Development (visit, niesbud. nic. in), Entrepreneurship Development Institute of India (visit, www.ediindia.org) that conduct entrepreneurship awareness and entrepreneursurship development programmes (EAPs and EDPs) a further fillip to this activity.
An important enabler or disabler of entrepreneurship is the prevailing socio-cultural milieu. Those socities that respect individual freedom to choose among occupations, that encourage the spirit of enquiry, exploration and experimentation, celebrate individual accomplishment and in general accord important status to the entrepreneurs are likely to have selfsustaining supply of able and willing men and women for taking to entrepreneurship as a carrer clarify have motivation and abilities impact an individual’decision to choose entrepreneurship as a carrer.
Mr Nagarufun was desirous of starting a small scale industry and also had a sense of efficacy or readiness to pursue it given his qualifications, experience and the necessary values, attitudes and motivation (the opening case does not elaborate this. We will discuss that at suitable places). Even you may like to see as to where do you find yourself on the desirability (willingness) – (efficacy ability) matrix.