Students must practice these AP Inter 2nd Year Commerce Important Questions 1st Lesson Entrepreneurship to boost their exam preparation.
AP Inter 2nd Year Commerce Important Questions 1st Lesson Entrepreneurship
Long Answer Questions
Question 1.
Explain the characteristics of entrepreneurs. [Mar. 2018(AP)]
Answer:
The word entrepreneur is derived from the French verb (word) “enterpredre” which means “to undertake”. The entrepreneur is a person who starts his own, new and small business.
An entrepreneur is referred to such a single person or a group who promote a new enterprise by collecting various factors of production and bearing the risks arising out of such venture.
According to Peter F Drucker, an entrepreneur is one who “searches for change, responds to it and exploits opportunities, and the innovation is the specific tool of an entrepreneur”.
The American Heritage dictionary defines an entrepreneur as “a person who organises, operates, and assumes the risk for a business venture”.
According to Cantillon, an entrepreneur is the agent who buys means of production at certain prices in order to combine them into a product that is going to sell at prices that are certain at the moment at which he commits himself to his costs.
Characteristics:
Entrepreneurs have specific characteristics that distinguish from other people. The following are some characteristics that every successful entrepreneur must possess.
1. Innovation: Innovation is an important characteristic of an entrepreneur in modern business. Innovation may take the form of the introduction of new methods in the process of production or introducing improvements in existing methods. The entrepreneur makes arrangements for introducing innovations which help in (1) increasing production and (2) reducing costs.
It also includes discovery of new markets, raw materials and hew techniques of production.
2. Risk-taking: Risk-taking is another important characteristic of an entrepreneur. He has to pay all the other factors of production in advance. He guarantees interest to creditors, wages to labour and rent to the landholders. There are chances that he may be rewarded with a handsome profit or he may suffer a heavy loss. Therefore, the risk-bearing is the final responsibility of an entrepreneur.
3. Organisation of Production: An entrepreneur procures various factors of production for manufacturing a product or bringing out a service. He makes arrangements for land, labour, capital, raw materials, etc. required for setting up a production process. He selects one process of production which is most suitable from different production processes to minimise losses and reduce costs in production.
4. Decision Making: An entrepreneur has to take decisions with regard to the establishment of business and its management and also co-ordination of various resources. The entrepreneur has to take decisions every day which has an impact on the working of his enterprise.
5. Leadership: An entrepreneur has to be a leader because he is such a person who organizes, directs, commands and controls the functions of organization. An entrepreneur in his role as a leader, not only guides and counsels his persons but he motivates them to achieve goals quickly and efficiently. His personality will influence the working of his subordinates because he is taken as role model.
6. Planning: An entrepreneur plans each and everything in the business. Planning is a process which involves thinking before doing. The entrepreneur plans not only about the products to be produced and the markets where to sell them, but also decides the duties to be assigned in the organization.
7. Hard Work: Willingness to work hard distinguishes a successful entrepreneur from unsuccessful one. Most of the successful entrepreneurs work hard endlessly, especially in the beginning and the same becomes their whole life. The entrepreneurs with their tedious, sweat-filled hours, and perseverance revive their business even from on border verge of failure.
8. Desire for High Achievement: The entrepreneurs have a strong desire to achieve high goals in the business. They run their business successfully even they face so many problems and difficulties by their strong desire for high achievement.
9. Highly Optimistic: The successful entrepreneurs are not disturbed by the present problems faced by them. They are optimistic for future that the situations will become favourable to business in future. Thus, they can run their enterprises successfully in future.
10. Independence: One of the common characteristics of the successful entrepreneurs has been that they do not like to be guided by others and to follow their routine. They like to be independent in the matters of their business.
11. Foresight: They have a good foresight to know about future business environment. They will visualize the likely changes to take place in market, consumer attitude, technological developments, etc. and take timely actions according to those changes.
Question 2.
Explain the functions of entrepreneurs.
Answer:
An entrepreneur performs all the functions right from the genesis of an idea up to the establishment of an enterprise.
Some of these functions are given below.
1. Formation of New Producing Organisation: An entrepreneur procures various factors of production for manufacturing a product or bringing out a service. He makes arrangements for land, labour, capital, raw materials, etc. required for setting up a production process. According to J.B. Say, the function of a producer / entrepreneur is to rationally combine the forces of production into a new producing organization.
2. Decision Making: An entrepreneur as a decision maker takes various decisions regarding the following: (a) Ascertaining the objective of the entreprise, (b) Sources of finance, (c) Product mix, (d) Pricing policies, (e) Promotion strategies, (f) Appropriate Technology or new equipments, etc.
3. Innovation: Innovation is the main function of an entrepreneur, where innovation means “doing new things or doing of things which are already being done in anew way.” An entrepreneur puts science and technology to economic use. Innovative entrepreneurs are essential for rapid industrialization and economic development.
4. Management: An entrepreneur performs managerial factions such as procuring and managing functions, formulations of production plans, providing raw materials, physical facilities, production facilities, organizing and managing sales.
5. Risk-bearing: An entrepreneur undertakes the responsibility for loss that may arise due to unforeseen contingencies in future. He has to pay all the factors of production in advance. He guarantees interest to creditors, wages to labour and rent to land holders. He may get profits or suffer loss. Therefore, risk-bearing is the final responsibility of an entrepreneur.
6. Supervision, control and direction: According to J.S. Mill, superintendence, control and direction are the main functions of entrepreneur.
- Superintendence involves assembling the means, turning out maximum output at minimum cost and to supervise the work.
- Control involves regulation of the flow of goods, the use of finance and machinery and also activities of employees.
- Organization and direction of production process and also employees activities to get the goals of the business.
7. Planning: Planning is the first step in the direction of setting up of an enterprise. An entrepreneur plans each and everything in the business. Planning is the process which involves thinking before doing. The entrepreneur plans not only about the products to be produced and the markets where to sell them, but also decides the duties to be assigned to the organisation. Planning is a scheme of proposed project in a formal systematic approach prepared by an entrepreneur.
According to Kilby, an entrepreneur performs the following four major functions:
1. Exchange functions: Exchange functions involve
- Perceiving (Identifying) opportunities in the market
- Obtaining scarce resources
- Buying inputs and
- Marketing of products and reacting to competition
2. Administration functions: They involve
- Deeding with public bureaucracy
- Managing employee management relations (employee management)
- Managing supplier management relations (supplier management) and
- Customer management
3. Management and control functions: They include
- Financial management
- Production management and
- Factory control
4. Technological functions: They involve
- Acquiring machinery and equipment
- Industrial engineering
- Product and process improvement and
- Introduction of new production techniques and products.
Question 3.
Explain the types of entrepreneurs.
Answer:
Entrepreneurs can be found among various sections of society viz, farmers, arstisans, workers, etc. In study of American Agriculture, Danhof has classified entrepreneurs into four categories. They are (i) Innovating entrepreneurs, (ii) Imitative entrepreneurs or Adoptive entrepreneurs, (iii) Fabian entrepreneurs and (iv) Drone entrepreneurs.
1. Innovating Entrepreneurs: This type of entrepreneurs introduce new products, new methods of production, discovers new markets and reorganizes the enterprize. These entrepreneurs are aggressive in nature. It is important to note that such entrepreneurs can work only when a certain level of development is already achieved, and people look forward to change and improvement.
2. Imitative Entrepreneurs: These entrepreneurs adopt the methods and techniques already successfully executed by innovating entrepreneurs. So they are also called “Adoptive entrepreneurs”. They do not innovate any changes themselves, they only imitate techniques and technology innovated by others. Such type of entrepreneurs are found in underdeveloped countries.
3. Fabian Entrepreneurs: These entrepreneurs neither fall in innovative entrepreneurs category nor in adoptive entrepreneurs category. They are characterised by very great caution and skepticism in experimenting any change in their enterprises. They follow the footsteps of their successors. They are no risk takers.
4. Drone Entrepreneurs: These are characterised by a refusal to adopt opportunities to make changes in production formulae. Fabian entrepreneurs are lazy in nature in adopting new methods, but drone entrepreneurs are more- rigid than fabian entrepreneurs. Such entrepreneurs may even suffer from losses but they are not ready to make changes in their existing production methods. They may close down their business but they don’t accept for changes.
Question 4.
Explain the relation between entrepreneur and entrepreneurship. [Mar. 2020,’17; May ’17 (AP)]
Answer:
Entrepreneur: An entrepreneur may be referred to such a single person or a group who promote a new enterprise by collecting various factors of production and bearing the risks arising out of such venture.
According to Cantillon, an entrepreneur is the agent who buys means of production at certain prices in order to combine them into a product that is going to sell at prices that are certain at the movement at which he commits himself to his costs.
The American Heritage dictionary defines an entrepreneur as “a person who organises, operates, and assumes the risk for a business venture”.
Entrepreneurship: Entrepreneurship is the process of identifying opportunities in the market place, organizing the resources required to pursue these opportunities and investing the resources to exploit the opportunities for long term gains.
Entrepreneurship is the ability to identify an investment opportunity and to organize an enterprise in order to contribute for the real economic growth.
According to D.C. McClelland, entrepreneurship is doing things in a new and better way and decision making under the conditions of uncertainty.
Relation between entrepreneur and entrepreneurship: Entrepreneur is the person (subject), entrepreneurship is the process (verb) and enterprise is the creation of the person and output of the process (object).
The term entrepreneur is often used interchangeably with entrepreneurship, yet they are conceptually different.
The following table may help us to understand the distinction between entrepreneur and entrepreneurship:
Relation between Entrepreneur and Entrepreneurship
| S.No. | Entrepreneur | Entrepreneurship |
| 1. | Person | Process |
| . 2. | Organiser | Organisation |
| 3. | Innovator | Innovation |
| 4. | Risk-bearer | Risk-bearing |
| 5. | Motivator | Motivation |
| 6. | Creator | Creation |
| 7. | Visualiser | Vision |
| 8. | Leader | Leadership |
| 9. | Imitator | Imitation |
From above table we can observe that the relationship between entrepreneur and entrepreneurship is just, like the two sides of the same coin. Entrepreneurial functions are collectively termed as entrepreneurship. Without entrepreneur there is no entrepreneurship. Entrepreneurship is the action part of an entrepreneur.
Thus, entrepreneurship is concerned with the performance and co-ordination of the entrepreneurial functions. This also means that entrepreneur precedes entrepreneurship.
Question 5.
Explain the role of entrepreneurship in economic development. [March 2019]
Answer:
Entrepreneurship plays a vital role in economic development. The role of entrepreneurship in economic development varies from economy to economy depending upon its material resources, industrial climate and the responsiveness of the political system to the entrepreneurial functions.
India is developing country which aims at decentralized industrial structure to militate regional imbalances in levels of economic development and small-scale entrepreneurship in such industrial structure plays an important role to achieve balanced regional development.
The important role of entrepreneurship plays in the economic development of an economy can be put in a more systematic and orderly manner as follows:
- Entrepreneurship promotes capital formation by mobilizing the idle saving of the public.
- Entrepreneurship provides large-scale employment. Thus, it helps reduce the unemployment problem in country, i.e. the root of all socio-economic problems.
- Entrepreneurship promotes balanced regional development.
- Entrepreneurship encourages effective resources mobilization of capital and skill which might otherwise remain unutilized and idle.
- Entrepreneurship helps to reduce the concentration of economic power.
- Entrepreneurship helps to improvement of standard of living by innovation of new technology, new products and by increase in per capita income.
- Entrepreneurship stimulates the equitable redistribution of wealth, income and even political power in the interest of the country.
- Entrepreneurship also induces backward and forward linkages which stimulate the process of economic development in the country.
- Entrepreneurship also promotes country’s export trade, i.e. an important ingredient to economic development.
- Entrepreneurship helps in growth of infrastructural facilities by starting new enterprises in undeveloped areas.
Thus, entrepreneurship serves as a catalyst of economic development. On the whole, the role of entrepreneurship in economic development of a country can best be put as “an economy is the effect for which entrepreneurship is the cause.”
Question 6.
Explain the opportunities for entrepreneurship in Andhra Pradesh.
Answer:
Andhra Pradesh, with its rich and abundant natural resources base as well as diverse agricultural and forest wealth provides tremendous investment opportunities for entrepreneurs in the state. Government policies, excellent infrastructure facilities, diversified cropping pattern, vibrant manufacturing and mining sector makes it one of the most preferred destinations for the investors.
Traditional sectors such as .textiles, leather, minerals and food processing, etc. information technology and the tourism gives necessary support for attracting significant investment into the various sectons of the economy.
The various opportunities for entrepreneurs in AP are presented in brief below:
1. Information Technology: Government of Andhra Pradesh has declared the Information Technology (IT) industry as an essential service under the “Essential Services Maintenance Act” and the industry have been exempted from power cuts. The state has numerous advantages in terms of abundant availability of highly skilled IT manpower as well as world class technical and social infrastructure.
Government of Andhra Pradesh recently announced that entrepreneurs who are women, scheduled castes or scheduled tribe setting up Info Tech units would get 25 percent investment subsidy on fixed capital besides other incentives, further, the people with innovative ideas would be encouraged to set up their own IT or IT Enable Services 0TES) units in the state.
2. Automobile: There are more than 100 automotive component manufacturing companies in the state. The companies are specialised in precision aluminium castings, forging, machined components, gears, pistons, leaf springs, brake liners, clutch covers, fuel filters, delivery valves, starter motors, grey-iron, oils and lubricants, diesel fuel injection equipment, electronics / electrical, electronic regulators, CAD / CAM design, etc. The industry is highly potential and there is a plenty of demand for the automobile components, hence the entrepreneurs in the state may grab the opportunities.
3. Drugs & Pharmaceuticals: The state offers excellent opportunities for the growth of pharmaceutical industry in the country, due to availability of trained and skilled manpower, good infrastructure as well as research and development facilities. Hyderabad, in the erstwhile A.P. state accounts for around one third of India’s total bulk drug production, is considered as the drug capital of the country. The government has taken a decision for the establishment of a “Pharma City” near Visakhapatnam with private sector participation, which provides a plenty of opportunities for entrepreneurs.
4. Mines and Minerals: A.P. is the second largest storehouse of mineral resources in India. It includes vast deposits of coal, limestone, slabs, oil and natural gas, manganese, asbestos, iron ore, ball clay, fire clay, gold, diamonds, graphite, dolomite, quartz, tungsten, feldspar, silica, etc. The State Government has recognized ‘mines and minerals sector’, as one of the growth engines for the overall development of industry and infrastructure.
5. Agriculture and Forestry: Agriculture is the main occupation of the people in A.P. Rice is a major food crop and staple food of the state, contributing about 11% of the food, grain production. Other important crops are jowar, bajra, maize, ragi, castor, cotton and sugarcane. It is the second largest producer of horticulture produce in India (mangoes, citrus fruits, grapes, etc., some of spices such as chillies, tamarind, turmeric, etc.) and forest products like teak, cashew, bamboo, etc. Agro food processing industries like bread, oilseed meals, biscuits, etc. are found in the state. A.P. announced Industrial Policy to explore the possibilities of establishing agro based units where it provides many opportunities to establish unit based on these products.
6. Tourism: A.P. is truly a land of beauty and opportunity. It represents Indian culture and heritage in all its glory. Beaches, hill stations, historical monuments are the main attractions of the state. It also possesses many holy temples like Sri Mallikharjuna Swamy Temple at Srisailam, Kanaka Durga Temple in Vijayawada, Sri Venkateswara Swamy Temple at Tirumala which promote architectural beauty. These provide many opportunities to entrepreneurs to start ventures related to tourism services.
7. Fisheries: The aqua culture around the coastal proved to be a rich source of sea food, which occupies a major share in the exports from the state. The entrepreneurs may examine the various opportunities to explore the possibilities of setting units based on the seafoods and exporting the same.
Short Answer Questions
Question 1.
Explain the meaning of entrepreneur. [Mar. ’18 (AP)]
Answer:
The word entrepreneur is derived from the French verb “entrepredre”, which means “to undertake”. In the earlier 16th century, the French men who organised and led military expeditions were referred to as “entrepreneurs”. Later the term was applied to architects and contractors of public works. The entrepreneur is often associated with a person who starts his own, new and small business. An entrepreneur may be referred to such a single person or a group who promote a new enterprise by collecting various factors of production and bearing the risks arising out of such venture.
Question 2.
Write one definition of entrepreneur. [May ’22,’17 (AP)]
Answer:
An entrepreneur is referred to such a single person or a group who promote a new enterprise by collecting various factors of production and bearing the risks arising out of such venture.
According to Peter F Drucker, “An entrepreneur is one who searches for change, responds to it and exploits opportunities, and the innovation is the specific tool of an entrepreneur”.
(OR)
The American Heritage dictionary defines an entrepreneur as “a person who organises, operates, and assumes the risk for a business venture”.
(OR)
According to Cantillon, an entrepreneur is the agent who buys means of production at certain prices in order to combine them into a product that is going to sell at prices •that are certain at the moment at which he commits himself to his costs.
Question 3.
Write one definition of entrepreneurship.
Answer:
Entrepreneurship is the ability to identify an investment opportunity and to organise an enterprise in order to contribute for the real economic growth.
According to D.C. McClelland, “Entrepreneurship is doing things in a new and better way and decision making under the conditions of uncertainty”.
(OR)
According to Perter F. Drucker, “Entrepreneurship is neither a science nor an art. It has a knowledge base. Knowledge in entrepreneurship is a means to an end. Indeed, the ends largely define what contributes knowledge in practice.”
Question 4.
Explain any one characteristic of an entrepreneur.
Answer:
Innovation: Innovation is an important characteristic of an entrepreneur in modern business. Innovation may take the form of the introduction of new methods in the process of production or introducing improvements in the existing methods. The entrepreneur makes arrangements for introducing innovations which help in 1) increasing production and 2) reducing costs.
(OR)
Risk-taking: Risk-taking is important characteristic of an entrepreneur. Entrepreneur has to pay all the factors of production in advance. He guarantees interest to creditors, wages to labour, and rent to the land holders. There are chances that he may be rewarded with a handsome profit or may suffer a heavy loss. Therefore, the risk¬bearing is the final responsibility of an entrepreneur.
Question 5.
Explain any one function of an entrepreneur. [Mar. ’18; May ’17 (AP)]
Answer:
Formation of New Producing Organisation: An entrepreneur procures various factors of production for manufacturing a product or bringing out a service. He makes arrangements for land, labour, capital, raw material, etc. required for setting up a production process. According to J.B. Say, the function of a producer/ entrepreneur is to rationally combine the forces of production into a new producing organization.
(OR)
Innovation: Innovation is the main function of an entrepreneur, where innovation means “doing new things or doing of things which are already being done in a new way”. An entrepreneur puts science and technology to economic use. Innovative entrepreneurs are essential for rapid industrialization and economic development.
(OR)
Planning: Planning is the first function in the direction of setting up an enterprise. An entrepreneur plans each and everything in the business. Planning is the process which involves thinking before doing. The entrepreneur plans not only about the products to be produced and the markets where to sell them, but also decides the duties to be assigned to the organization.
Question 6.
Write the types of entrepreneurs. [May 2022; Mar. ’20,’19,’18,’17 (AP)]
Answer:
In study of American Agriculture, Danhof has classified entrepreneur into four categories.
They are (1) Innovating Entrepreneurs (2) Imitative Entrepreneurs (3) Fabian Entrepreneurs and (4) Drone Entrepreneurs.
1. Innovating Entrepreneurs: This type of entrepreneurs introduce new products, new methods of production, discovers new markets and reorganises the enterprise. They are aggressive in nature. It is important to note that such entrepreneurs can work only when a certain level of development is already achieved, and people look forward to change and improvement.
2. Imitative Entrepreneurs: Those entrepreneurs adopt the methods and techniques already successfully executed by innovating entrepreneurs. So they are also called “Adoptive entrepreneurs”. They do not innovate any changes themselves, they only imitate techniques and technology innovated by others. Such type of entrepreneurs are found in underdeveloped countries.
3. Fabian Entrepreneurs: They are characterized by very great caution and skepticism in experimenting any change in their enterprises. They follow the footsteps of their successors. They are no risk takers.
4. Drone Entrepreneurs: These are characterized by refusal to adopt opportunities to make changes in production formulae. Drone entrepreneurs are more rigid than fabian entrepreneurs. Such entrepreneurs may even suffer from losses but they are not ready to make changes in their existing production methods. They may close down their business but they don’t accept for changes.