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Introduction to Entrepreneurship

Prepared by,

Manasa Sunny

Asst. Professor

Bharata Mata College of Commerce and Arts, Aluva

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  • For an individual , the role and type of career he chooses is of great importance:
  • Any individual has three career options
  • To work for someone else
  • To be self employed in a profession
  • To be an entrepreneur

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Meaning of Entrepreneur

  • An entrepreneur is ordinarily a business man
  • He is a person who combines capital and labor for the purpose of production
  • He organizes and manages a business unit assuming risk for profit

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  • The word entrepreneur is derived from the French word ‘entrependre’ which means to undertake.
  • The entrepreneur is the person who undertakes the risk of new enterprise

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  • The mission of an entrepreneur is to find economic opportunities, convert them into valuable products and services and create value within organizations and in the market place.

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Definition�

  • “An entrepreneur is the one who always searches for change, responds to it and exploits it as an opportunity”

- Peter Drucker

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Characteristics of an entrepreneur

  1. An entrepreneur always brings about change in the society
  2. He improves the technology, products and the society
  3. He is action oriented, highly motivated individual who takes risk to achieve goals

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  1. He is creative and risk oriented
  2. He is achievement oriented
  3. Hard worker
  4. Desire for high achievement
  5. Optimistic
  6. Independent
  7. Foresight
  8. Organizing ability
  9. Innovative skill
  10. Mental ability

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  1. Ability to guard business secrets
  2. Decision making
  3. Ability to maintain human relations
  4. Initiative and risk bearing

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Functions of an entrepreneur

  1. Generating ideas and scanning of the most suitable ideas
  2. Determining the business objectives
  3. Analyzing the products and conducting market research
  4. Deciding the form of business organization like partnership, company etc

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  1. Completing the promotional formalities
  2. Raising of necessary funds
  3. Procuring of machines and materials
  4. Recruiting men
  5. Undertaking business operations

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  • These entrepreneurial functions can be summarized into three:-
  • Innovation
  • Risk bearing
  • Organization

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1. Innovation

  • Joseph A Schumpeter describes an entrepreneur as innovator. Innovation means introducing something new to the society
  • The innovator may take the following forms:
  • Introduction of a new product
  • Introduction of a new method of production
  • Finding new markets for the products
  • Finding new and cheaper sources of supply of raw materials
  • Making alterations in the organization and management

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2. Risk bearing

  • Risk is inherent in every business
  • Risk bearing may be defined as the willingness to face the losses arising from the uncertainties in the field of business
  • Eg: loss by fire, theft, changes in fashion, variations in Govt policies etc

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  • The success of an entrepreneur depends mainly on predicting these uncertainties and thereby minimizing the losses
  • Whenever an entrepreneur is making an innovation he must be vigilant of the unexpected risks inherent in it.

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3. Organizing and managing the enterprise

  • Organizing is bringing together various factors of production
  • Proper organizing helps to reduce the cost of production and thereby achieve the organizational objective of maximization of profit

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  • In the initial stages of managing an enterprise important decisions are to be taken by the entrepreneur himself
  • In later stages, he can delegate his authorities to his subordinates
  • Thus the final word regarding organization and management should be that of the entrepreneur.

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Major functions of entrepreneur

  1. Promotion function
  2. Managerial function
  3. Commercial function

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1. Promotional function- This includes identifying the business opportunities, researching the market, developing marketing strategies and promoting the business and its products or services through advertising and other channels.

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2. Managerial function- this involves planning, organizing, staffing, directing and controlling the business operations.

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3. Commercial function- this includes all aspects relating to buying and selling of goods or services including market analysis, pricing, logistics and customer service.

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Other functions

  1. Exploring market opportunities
  2. Mobilization of production resources
  3. Managing finance
  4. Managing production process
  5. Dealing with Govt matters
  6. Maintaining good management- employee relations

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Entrepreneurship�

  • It refers to the functions performed by entrepreneurs in establishing the enterprise
  • It is regarded as what the entrepreneurs do
  • It is the set of activities performed by an entrepreneur

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Concept of an entrepreneurship

  • The concept of entrepreneurship involves three key elements
  • Organizing
  • Risk bearing
  • Innovating

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  • 1. Organizing:- it involves mobilization of resources
  • 2. Risk bearing:- the entrepreneurs should be bold enough to assume this risk
  • 3. Innovation:- the introduction of something new to the economy.

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Entrepreneurship= Entrepreneur + Enterprise

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(Process) (Person) (Object)

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Nature and Characteristics of entrepreneurship

  1. It is a function of innovation
  2. It is a function of leadership
  3. It is an org building function
  4. It is a function of high achievement
  5. It is primarily an economic activity because it involves creation and operation of enterprise

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Types of entrepreneurs

  1. According to type of business
  2. According to motivation
  3. According to use of technology
  4. According to the stages of development

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  1. Classification given by Danhof
  2. According to capital ownership
  3. According to Gender and Age
  4. According to Area
  5. According to Scale
  6. Others

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  • According to type of business
  1. Business entrepreneur
  2. Trading entrepreneur
  3. Industrial entrepreneur
  4. Corporate entrepreneur
  5. Agricultural entrepreneur

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1. Business entrepreneur

  • These are those entrepreneurs who conceive the idea of a new product or service and then translate their ideas into reality.
  • They may be undertaking the trading or manufacturing business

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2. Trading entrepreneur

  • They are concerned with trading activities and not manufacturing
  • Trading means buying the finished product from the producer and selling off to the customer directly or through retailer

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3. Industrial entrepreneur

  • He is the one who sets up an industrial unit
  • Manufacturers of leather products, textiles, electronics, food etc. are examples of industrial entrepreneurs

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4. Corporate entrepreneur

  • He is the one who plans, develops and manages a corporate body.
  • He gets his corporate body registered under the requisite Act.

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5. Agricultural entrepreneur

  • He is the one who is engaged in agricultural activities
  • He uses latest technology to increase the productivity of agriculture and also adopts mechanisation

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  • According to motivation
  1. Pure entrepreneur
  2. Induced entrepreneur

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1. Pure entrepreneur

  • He is the one who may or may not possess an aptitude for entrepreneurship but is tempted by the monetary rewards or profits to be earned from the business venture

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2. Induced entrepreneur

  • They are attracted by the various incentives, subsidies and facilities offered by the Government

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  • According to the use of technology
  1. Technical entrepreneur
  2. Non technical entrepreneur
  3. Professional entrepreneur

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1. Technical entrepreneur

  • The strength of a technical entrepreneur is his skill in production techniques
  • He concentrates more on production than on marketing

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2. Non technical entrepreneur

  • Unlike technical entrepreneur non technical entrepreneur is not concerned with the technical aspect of the product rather he spends more time in developing alternative strategies of the marketing and distribution to promote his business

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3. Professional entrepreneur

  • An entrepreneur who is interested in floating a business but does not want to manage or operate it
  • Once the business is established he sells it out and catches on to float a new business

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  • According to stages of development
  1. First generation entrepreneur
  2. Second generation entrepreneur
  3. Classical entrepreneur

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  1. First generation entrepreneur
  • These are those entrepreneurs who do not possess any entrepreneurial background
  • They start an industrial unit by means of their own innovative skill

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Dhirubhai Ambani

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2. Second generation entrepreneur

  • These are those entrepreneurs who inherit the family business firms and pass it from one generation to another

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Mukesh Ambani, Anil Ambani

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3. Classical entrepreneur

  • He is a stereotype entrepreneur whose aim is to maximize his economic returns at a level consistent with the survival of the unit but with or without an element of growth.

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  • Classification given by Danhof
  1. Innovating entrepreneur
  2. Imitative entrepreneur
  3. Fabian entrepreneur
  4. Drone entrepreneur

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1. Innovating entrepreneur

  • They are one who introduces new goods, inaugurates new methods of production, discovers new market and re organizes the enterprise

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2. Imitative entrepreneur

  • They are characterized by readiness to adopt successful innovations inaugurated by successful innovating entrepreneurs
  • They do not imitate the changes themselves, they only imitate techniques and technologies innovated by others.

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3. Fabian entrepreneur

  • Such entrepreneurs are shy and lazy
  • They imitate only when it becomes perfectly clear that failure to do so would result in a loss of the enterprise.

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4. Drone entrepreneur

  • They are characterized by the refusal to adopt opportunities to make changes even at the cost of severely reduced returns
  • When competition increases, they are pushed out of the market

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  • According to capital ownership
  1. Private entrepreneur
  2. State entrepreneur
  3. Joint entrepreneur

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1. Private entrepreneur

  • When an individual or group of individuals set up an enterprise with the intention to earn profit , he or the group is called as private entrepreneur

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2. State entrepreneur

  • The trading and industrial venture undertaken by the state or the Govt itself.

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3. Joint entrepreneur

  • It means the combination of private entrepreneur and state entrepreneur who join hands.

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  • According to Gender and Age
  1. Man entrepreneur
  2. Woman entrepreneur
  3. Young entrepreneur
  4. Old entrepreneur
  5. Middle aged entrepreneur

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  • According to area
  1. Urban entrepreneur
  2. Rural entrepreneur

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  • According to scale
  1. Large scale entrepreneur (more than 10 crore)
  2. Medium scale entrepreneur (5 Crore to 10 crore)
  3. Small scale entrepreneur (25 lakhs to 5 crore)
  4. Tiny industry entrepreneur (below 25 lakhs)

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  • Others�
  1. Spiritual entrepreneur
  2. Social entrepreneurs
  3. Edupreneurs

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1. Spiritual entrepreneurs

  • Sri Sri Ravi Shankar can be termed as a spiritual entrepreneur
  • He started his Art of Living Foundation 25 years ago which now has a presence in over 140 countries

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2. Social entrepreneurs

  • Entrepreneurs are innovative, highly motivated and creative thinkers
  • When these attributes are combined with the drive to solve social problems a social entrepreneur is born

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  • Examples are :-
  • Florence Nightingale – first school of Nursing
  • Muhammed Yunus- Grameen Bank, Bangladesh

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Muhammed Yunus Florence Nightingale

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3. Edupreneurs

  • They are entrepreneurial minds who have made a land mark in the field of education.

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  • Eg: TIME institute (Triumphant Institute of Management Education) for CAT,MAT coaching
  • ICFAI- Institute of Chartered Financial Analysts of India

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ACCIDENTAL ENTREPRENEUR

  • Someone who becomes a business owner unintentionally or unexpectedly , rather than having a deliberate plan to start a venture.
  • Eg:, someone who has a successful career in finance start a chocolate factory by reading an article about it.

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Role of entrepreneurs in Economic development

  1. Capital formation
  2. Generating employment opportunities
  3. Balanced Regional Development
  4. Reduces concentration of economic power
  5. Encourages the effective utilization of capital and resources
  6. Promotes export trade

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1. Capital formation

  • One single individual will not be able to contribute the entire capital required for a big business concern
  • the entrepreneur mobilizes the small and scattered savings from the house holds and this will lead to capital formation

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2. Generating employment opportunities�

  • The entrepreneurs by setting up new business concerns can generate employment opportunities

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3. Balanced Regional Development

  • Setting up of business concerns in the rural or under developed areas will help to achieve balanced regional development of the nation
  • Small business concerns can be set up at places where raw materials and labour forces are available

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4. Reduces concentration of economic power

  • Entrepreneurship reduces the accumulation of economic power in few hands.
  • It ensures a wider distribution of economic power among the people.

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5. Encourage effective utilization of capital and resources

  • Entrepreneurs help in the effective utilization of idle funds in the society
  • They can also profitably utilize the natural resources at their place of operation

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6. Promotes Export trade

  • Entrepreneurs setting up their business as EOUs (Export Oriented Units) at EPZs (Export Promotion Zones will help to increase the level of exports of the nation

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Obstacles or Barriers in Entrepreneurship

  1. Environmental barriers
  2. Personal barriers
  3. Social barriers

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  • Environmental barriers�
  1. Non availability of raw materials
  2. Lack of skilled labour
  3. Lack of good machinery
  4. Lack of infrastructure
  5. Lack of fund

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  • Personal barriers
  1. Unwillingness to invest money
  2. Lack of confidence
  3. Lack of motivation
  4. Lack of patience
  5. Inability to dream

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  • Social barriers
  • Low status
  • Custom and tradition of people

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Risks involved in entrepreneurship

  1. Financial risk
  2. Personal risk
  3. Career risk
  4. Psychological risk

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1. Financial risk

  • The entrepreneur has to invest money in the enterprise on the expectation of getting in return sufficient profits along with the investment. But there is no guarantee of getting back the profits or investment
  • Sometimes he may incur losses

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2. Personal risk

  • Starting a new venture uses much of the entrepreneurs energy and time
  • More over he has to sacrifice the pleasures attached to family and life

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3. Career risk

  • This risk might be caused by a number of reasons such as leaving a successful career to start a new business . It the venture fails it may be difficult to find a job or go back to the old job

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4. Psychological risk

  • It is the mental agonies an entrepreneur bears while organizing and running a business venture.

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Copreneurs�

  • They are entrepreneurial couples who work together as co owners of their business

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Intraprenuers�

  • It can be defined as entrepreneurship within an existing business organisation
  • It is the entrepreneurial behaviour displayed by people within large organisations

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  • An intrapreneur is an employee who is given the authority and support to create a new product without having to be concerned about whether or not the product will actually become a source of revenue for the company.
  • Unlike an entrepreneur, who faces personal risk when a product fails to produce revenue, an intrapreneur will continue to receive a salary even if the product fails to make it to production.

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Women entrepreneurs

  • It may be defined as a woman or group of women who initiate, organise and run a business concern

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  • The enterprise of woman entrepreneur is defined as “on owned and controlled by a woman having a minimum financial interest of 51 percent of the capital and giving atleast 51 percent of the employment generated in the enterprise to women”.

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Functions of woman entrepreneur

  • Idea generation and screening
  • Determination of objectives
  • Project preparation
  • Project analysis
  • Determination of forms of business organisation
  • Completion of promotional formalities
  • Raising funds
  • Procuring men, machines and materials

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Qualities of women entrepreneurs

  • Willingness to face challenges
  • Effort to achieve objectives
  • Intelligence
  • Patience
  • Optimism
  • Skill in learning new things

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  • Merciful approach
  • Power to withstand uncertainty
  • Desire to guide and lead others
  • Power to resist criticism

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Factors affecting women entrepreneurs

  • Pull factors
  • These are factors which encourage women to have an independent occupation
  • Under the influence of these factors they choose a profession as a challenge to do something new

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  • Push factors
  • These are those which compel to take up business enterprises to get over financial difficulties

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Problems of women entrepreneurs

  • 1. Financial constraints
  • For obtaining loans and advances from financial institutions women have to provide securities
  • But usually women do not have property in their names and this hinders them for obtaining funds

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  • The banks also consider women as less credit worthy and discourage women borrower on the belief that they can at any time leave their business and become house wives again

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Over dependence on intermediaries

  • Women entrepreneurs have to depend largely on intermediaries for the distribution of their products
  • These intermediaries take major portion of their profits

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Stiff competition

  • Women entrepreneurs have to face stiff competition for the products from the organised industries and male entrepreneurs
  • They do not have an organisational set up to pump a lot of moey for advertisement

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Scarcity of raw materials

  • Scarcity of raw materials is another problem faced by the women entrepreneurs
  • The price of raw materials is very high and they usually get the raw materials at minimum discount

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High cost of production

  • The Govt grants and subsidies help them to tide over this difficulty, but these grants and subsidies are available only at the initial stages of its setting up
  • For expansion and diversification activities these assistances will be negligible

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Limited mobility

  • Unlike men, women mobility in India is highly limited due to various reasons
  • Physically they are not fit enough to travel a lot
  • A woman running an enterprise independently and alone is often looked upon with suspicion

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Family ties

  • In India it is mainly the duty of woman to look after the children and other members of the family
  • In the case of married woman they have to make a fine balance between the business and family
  • Their success greatly depends on the support given by the family

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Lack of education

  • Due to lack of education women are ignorant of business technology and market
  • Lack of education creates problems for women in the setting up and running of business enterprises

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Low risk bearing capacity

  • Women in India are leading a protected life
  • This reduces the ability to bear the risks associated with business

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Solutions to the problems of women entrepreneurs

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Separate finance divisions�

  • Separate finance divisions can be opened by various financial institutions and banks for providing easy and ready fiancé to women entrepreneurs.
  • Through these divisions they can provide finance at concessional rates to women entrepreneurs

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Supply of raw materials�

  • Women entrepreneurs must be given priority over other entrepreneurs in the supply of controlled and scarce raw materials
  • The Govt must provide tax exemptions to the supply of raw materials to women entrepreneurs

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Co-operative Women Marketing Societies�

  • Marketing of products is one of the major problems faced by women entrepreneurs
  • They can start co-operative societies to overcome this difficulty
  • These societies can collect the products manufactured by the women entrepreneurs and sell them at competitive prices by eliminating the middle men

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Education and social change

  • It is necessary to make the people aware of entrepreneurship development, various products, their marketing facilities, competition etc
  • The negative attitude of the society towards women should be changed

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Training�

  • The Govt agencies and financial institutions cans et up separate divisions for giving training to women entrepreneurs

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Family background

  • There should be sound family background for the development of women entrepreneurs
  • Parents in the initial stage and husbands in the later stage should support women for doing the entrepreneurial activities successfully

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Support form the Govt

  • Both Central and State Govt should give priority to women entrepreneurs for starting new ventures
  • The Govts must give priority to women entrepreneurs in providing infrastructural facilities, raw materials etc.

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MYTHS OF ENTREPRENEURSHIP

  • 1. Entrepreneurs are born, not made: This is a very common misconception. While some individuals may have inherent traits that make them well-suited for entrepreneurship, many successful entrepreneurs develop their skills and mindset through learning and experience. Entrepreneurship can be taught and learned. 

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  • 2. Entrepreneurs are natural risk-takers: While some entrepreneurs may be comfortable with calculated risks, many successful entrepreneurs are skilled at identifying and mitigating risks. They often make informed decisions based on research and planning, rather than simply acting on a whim. 

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  • 3. Starting a business is easy and guarantees success: The reality is that starting a business is challenging and requires significant effort, dedication, and often, financial resources.
  • Success is not guaranteed and requires ongoing effort, adaptation, and sometimes, a willingness to pivot and learn from failures. 

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  • 4. Entrepreneurs are young: While many young people are starting businesses, entrepreneurship knows no age limit. Experience, wisdom, and established networks can be significant assets for older entrepreneurs. 
  • 5. Entrepreneurs need a unique or innovative idea: While a unique idea can be an advantage, many successful businesses are built on existing concepts, improved upon or adapted to a specific market. 

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  • 6. Entrepreneurs must work 24/7: While long hours are often part of the entrepreneurial journey, work-life balance is possible and crucial for long-term success and well-being. 
  • 7. Entrepreneurs are rich: Many entrepreneurs start with limited resources and build their wealth over time. Not all entrepreneurs are rich, and wealth is not the sole motivator for all. 

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  • 8. Entrepreneurs must be the CEO: Entrepreneurs can be successful in various roles within their businesses, not just as the CEO. 
  • 9. All entrepreneurs are immediate success stories: The path to success for entrepreneurs is often a journey with challenges, setbacks, and learning opportunities. 
  • 10. Entrepreneurs don't have a personal life: While the demands of entrepreneurship can be significant, successful entrepreneurs understand the importance of work-life balance and prioritize their well-being. 
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PROCESS OF ENTREPRENEURSHIP

  • 1. Ideation: This initial stage focuses on generating business ideas, identifying market needs, and exploring potential opportunities. It involves brainstorming, researching trends, and analyzing market gaps. 

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  • 2. Feasibility Analysis: Once an idea is generated, it's crucial to assess its viability. This stage involves researching the market, analyzing competition, and evaluating the idea's potential for success. A feasibility study helps determine if the idea is worth pursuing. 

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  • 3. Business Planning: This stage involves creating a comprehensive business plan that outlines the venture's goals, strategies, and operational details. It includes defining the target market, developing a marketing strategy, creating financial projections, and outlining the operational plan. 

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  • 4. Execution: This is the stage where the business plan is put into action. It involves setting up the business, acquiring necessary resources (funding, personnel, etc.), launching the product or service, and managing daily operations. 

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  • 5. Growth: After launching, the focus shifts to scaling the business and achieving sustainable growth. This involves expanding the business, developing new products or services, entering new markets, and managing the increased complexity of a growing organization�

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