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ENTREPRENEURSHIPDEVELOPMENT

SSIPMT/SAPNA SHARMA/2012 1


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ENTREPRENEUR- Chapter Scheme

Introduction

Concept

Definition

Nature/Characteristics Types of risk an entrepreneur may face

Functions

Role

Types & Classification Women Entrepreneurs

Entrepreneurs Vs Managers



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INTRODUCTION

Since an Individual has 3 career options-

to work for someone else

To be self employed

To be an entrepreneur

Important factor in economic development

First & foremost catalyst for change As a tool for income generation &

employment



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REASONS OF POPULARITY

Provides numerous opportunities for self-

expression & self realisation for doing

something new

Offers growth & self development

More monetary rewards

Decision making power Satisfactory rewards



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CONCEPT

The words derivation is from French word

entreprendre which means to undertake.

Previously applied to military expeditions(early 16th century), then in context to

architects,contractors etc (18th century), then

as an intermediate between capital & labour

(19th-20th century), & at last as emerging class

called entrepreneur class (in 21st century).



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Entrepreneurs...

14th century...Tax contractors...bore the risks

of collecting taxes. If they collected more than

the fee...they kept the rest as profit.

Called the change agents of progressive

economies



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Entrepreneurship

Entreprendre...17th century French...the

individual who undertook the risk of a new

enterprise... undertakers.

They were contractors who bore the risks of

profit or loss

Examples: soldiers of fortune, adventurers,

builders, merchants and funeral directors



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Entrepreneurs...

Adam Smith...The Wealth of Nations: spoke of

the enterpriser as an individual who

undertook the formation of an organization

for commercial purposes

A. Smith...mentioned role of

industrialist...,person with unusual foresight

who could recognize potential demand for

goods and services



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Entrepreneurs...

John Stuart Mill...describes an entrepreneur as a

business founder

Recognized entrepreneurship as central to economic

theory

Carl Menger...Principles of Economics: Economic

change does not arise from circumstances but from

an individuals awareness and understanding of

those circumstances



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Entrepreneurs...

In 19th century entrepreneurs were:

risk takers

decision makers aspired to wealth

endured commensurate losses

gathered and managed resources to create new

enterprises



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Entrepreneurship

Joseph Schumpeter...20th century talks about

creative destruction whereby established

ways of doing things are destroyed by the

creation of new and better ways of getting

things done

Described it as a process and entrepreneurs as

innovators who use process to shatter thestatus quo through new methods...



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Entrepreneurs...

Are not equal to inventors...inventor might

only create anew product, whereas an

entrepreneur will gather resources, organize

talent, and provide leadership to make it a

commercial success

Peter Drucker...Resources, to produce results,

must be allocated to opportunities rather thanto problems...



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DEFINITIONS

The entrepreneur can be defined asone who recognizes & manages onlyenterprise especially involving highrisk.

An entrepreneur is one who creates anew business in the face of risk &

uncertainty for the purpose ofachieving profit & growth byidentifying significant opportunities &assembling the necessary resourcesto capitalize on them.

As per different social scientist- likeeconomist, psychologist, sociologists,

management experts As per different authors- like

R.CANTILLON, J.B.SAY,J.A.SCHUMPETER, P.F.DRUCKER..

17551755 CantilllonCantilllon A person bearingA person bearingriskrisk

18161816 SaySay Agent combinigAgent combinigall fopsall fops

19211921 KnightKnight Recipient of pureRecipient of pureprofitsprofits

19341934 SchumpterSchumpter Ability to identifyAbility to identifynew opportunitynew opportunity

19851985 StevensonStevenson Relentless pursuitRelentless pursuitof opportunityof opportunity

19881988 GartnerGartner Actions taken toActions taken tocreate org.create org.

19911991 Bygrave &Bygrave &HoferHofer

Characteristic ofCharacteristic of

entrepreneurentrepreneurprocessprocess

13SSIPMT/SAPNA SHARMA/2012


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ENTREPRENEURIAL

NATURE/CHARACTERISTICS/DIMENSIONS

An entrepreneur should be one who bears, innovates orimitates & organizes the business

Desire for responsibility

Preference for moderate risk

Confidence to succeed

Immediate desire for feedback

High level of energy & commitment

Future orientation

Skill at organizing

Value of achievement over money

Tolerance for ambiguity & flexibilty

Locus of control

Other important traits



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TYPES OF RISK


Family &Family &

Social RiskSocial Risk

PsychologicalPsychological

RiskRisk

Career RiskCareer Risk

FinancialFinancialRiskRisk

RISKS


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FUNCTIONS OF AN ENTREPRENEUR

A successful entrepreneur recognizes the commercialpotential of a product, designs operating policies inmarketing, production, product development & theorganization structure.

Function of Innovation

Assumption of Risk

Managerial Function of Organization & Managemant

Business Decisions

Thus,the entrepreneur is an institution himself & he perfomes Variousfunctions related with organization development& management control.



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ENTREPRENEUR Vs MANAGER

Very often Entrepreneur & manager are used interchangeableterms, but strictly speaking these terms are different.

Entrepreneurial role is Played by Chief Executive teams & Toplevel executive team Whereas Managerial Role by Middle &

joint Level executives.

Management involves combining or coordinating resources toproduce whereas entrepreneurship involves combining toinitiate changes in production.

As per Joseph Schumpter, manager is one who deals with dayto day affairs of a going concern. But an entrepreneurattempts to change the factor combinations & thus increasesproductivity & profits.



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Difference

ParameterParameter EntrepreneurEntrepreneur ManagerManager

Goal ManagementGoal Management Starts a new venture for personal useStarts a new venture for personal use Renders service in an alreadyRenders service in an alreadyexisting set upexisting set up

StatusStatus OwnerOwner Employee/servantEmployee/servant

RiskRisk Bears all risk and responsibilitiesBears all risk and responsibilities Bears no risk or responsibilityBears no risk or responsibility

RewardsRewards Gets uncertain & irregular profit & mayGets uncertain & irregular profit & mayeven be negativeeven be negative

Receives fixed & regular salary forReceives fixed & regular salary forservice rendered & never negativeservice rendered & never negative

InnovationInnovation Innovator, change agent & meetsInnovator, change agent & meetschanging customer needschanging customer needs

Executes & translates existing plansExecutes & translates existing plans

of othersof others

QualificationQualification To possess high qualities & qualificationsTo possess high qualities & qualifications

(high achievement motive etc)(high achievement motive etc)

To possess distinct qualificationsTo possess distinct qualifications

(knowledge in management theory)(knowledge in management theory)

ContinuityContinuity DiscontinuousDiscontinuous

To Produce ResultTo Produce Result



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TYPES

As per Clarence Danhof(on the basis of economic development)

Innovative/aggressive entrepreneur

Imitative/Adoptive entrepreneur

Fabian entrepreneur

Drone entrepreneur

As per Arthur H. Cole(on the basis of function & characteristics)

Empirical

Rational

Cognitive



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CLASSIFICATION

TYPES OF

BUSINESS

BusinessEntrepreneur

Service RetailIndustrialCorporateTradingAgricultural

Horti

CultureDairy Forestry

Tiny Small Medium Large



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USE OF TECHNOLOGY

Technical High Technology Low Technology ProfessionalNon Technical

MOTIVATION

Pure Motivated SpontaneousInduced

DEVELOPMENT

First Generation Modern Classical


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GROWTH

Growth Super Growth

AREA

Urban Rural

GENDERM/F

Young Old Middle


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WOMEN ENTREPRENEUR

In 1988, for the first time the definition of

Women entrepreneurs enterprise was

evolved.



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ENTREPRENEUR LEADERS



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The Builder of Indian Industry

SSIPMT/SAPNA SHARMA/2012 26 J R D TATA


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Dhirubhai Ambani alias Dhirajlal

Hirachand Ambani was born on

December 28, 1932, at Chorwad,

Gujarat, into a Modh family. His

father was a school teacher.

Dhirubhai Ambani started his

entrepreneurial career by selling

"bhajias" to pilgrims in Mount

Girnar over the weekends.



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After doing his matriculation at the age of 16, Dhirubhai

moved to Aden, Yemen. He worked there as a gas-station

attendant, and as a clerk in an oil company. He returned

to India in 1958 with Rs 50,000 and set up a textile

tradingcompany.

Assisted by his two sons, Mukesh and Anil, Dhiru Bhai

Ambani built India's largest private sector company,

Reliance India Limited, from a scratch. Over time his

business has diversified into a core specialisation in

petrochemicals with additional interests intelecommunications, information technology, energy,

power, retail, textiles, infrastructure services, capital

markets, and logistics.



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N.R.Narayana Murthy

An Indian IT chief who's really made itbig without dropping his ethical preceptsby the wayside is Nagawara RamaraoNarayana Murthy, Chairman of Infosys.

Born in 1946, Murthy's father was aschoolteacher in Kolar district, Karnataka,

India. A bright student, Murthy went on toacquire a degree in Electrical Engineeringfrom Mysore University and later studiedComputer Science at the IIT, Kanpur,India.



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The Infosys legend began in1981 when Narayana

Murthy dreamt of forminghis own company, alongwith six friends. There wasa minor hitch, though-hedidn't have any seed money.

Luckly, like many Indianwomen who save secretlywithout their husband'sknowledge, his wife Sudha-then an engineer with Tatas-

had saved Rs 10,000. Thiswas Murthy's first big break.



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Infosys.a

The decade until 1991 was a tough periodwhen the couple lived in a one-room house.The second break came in 1991 when Indian

doors to liberalization were flung openMurthy grabbed the opportunity with bothhands and has never looked back ever since.Today, Infosys is the first Indian company to

be listed on the US NASDAQ.It provides employment to 85,000 people.



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Food king

When 27-year old Sarathbabu

graduated from the Indian

Institute of Management,

Ahmedabad, he created quite astir by refusing a job that

offered him a huge salary. He

preferred to start his own

enterprise -- Foodking CateringService -- in Ahmedabad.



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The Motivating Force ofFood King



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Requirements to be an entrepreneur

Innovation,

Creativity

Risk Taking

Organization



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Creative as a prerequisite to

innovation

Creativity - is the ability to bring

something new into existence

Innovation - is the process of doingnew thing.



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The Creative Process

Idea Germination

Preparation

Incubation Illumination

Verification



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The difference between invention and

innovation is:

Invention - is the creation of new products,

processes, and technologies not previously

known to exist.

Innovation - is the transformation of creative

ideas into useful applications by combining

resources in new or unusual ways to provide

value to society for or improved products,technology, or services.



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Elements in the Innovation Process

Analitical Planning

Organizing Resources

Implementation

Commercial Application



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ENTREPRENEURSHIP

It is an important factor of industrial development of a country.

This concept is a complex phenomenon, broadly it relates tothe entrepreneur, his vision & its implementation.

Therefore, it refers to a process of action an entrepreneur

undertakes to establish his/her enterprise.

BUT,,, the degree & quality of entrepreneurship differ fromentrepreneur to entrepreneur.

Is a dynamic process of creating incremental wealth. This

wealth is created by individuals who assume the major risks interms of equity, time and career commitment of providingvalue for some product or service

The entrepreneur must somehow infuse value to the productor service...



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CONCEPT/APPROACHES

THEORIES

Entrepreneurship is an evolved thing. With the advancement ofscience and technology it has undergone metamorphosischange and emerged as a critical input for socio-economicdevelopment. Various writers have developed various

theories on entrepreneurship and popularized the conceptamong the common people. The theories propounded bythem can be categorized as under-

Sociological theories

Economic theories

Cultural theories

Psychological theories


E l ti


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Explanation Sociological Theory: It is a process of role performance. Entrepreneurs are

expected to be governed by the wishes of the society, customs, ethics etc.

CONTRIBUTORS- Thomas Chocharan, Peter Marris etc

EconomicsTheory: Process of initiating a new venture, organizing theresources it requires & assuming the risk it entails. Entrepreneurship andeconomic development are interdependent. Economic development takesplace when a country' real rational income increases overall period of timewherein the role of entrepreneurs is an integral part.

CONTRIBUTORS-Adam Smith (1776),JB Say(1803), J.S.Schumpter(1934), P.F.DruckerAccording to Schumpeter an entrepreneur is one who perceives the opportunities to

innovate, i.e. to carry out new combinations or entreprise. In his views, theconcept of new combination leading ti innovation covers the following 5 cases-

1- The introduction of new goods, that is the one with which consumers are notyet familiar, of a new quality.

2- The introduction of new method of production

3- The opening of new market4- the conquest of new source of supply of raw material

5-The carrying out of new organization



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THEORIES conttdd

Cultural Theory: Advocates of cultural theories point out thatentrepreneurship is the product of culture. Entrepreneurial

talents come from cultural values and cultural systemembedded into the cultural environment.

Hoselitz explains that the supply of entrepreneurship is governed by cultural factors,and culturally minority groups are the spark-plugs of entrepreneurial andeconomic development. in many countries, entrepreneurs have emerged from a

particular socio-economic class. He emphasized the role of culturally marginallygroups like Jews and the Greeks in medieval Europe, the Chinese in south Africaand Indian in east Africa in promoting economic development.

Psychological Theory: It center's around the psychologicalcharacteristic so the individual in a society. Psychological

characteristics affect the supply of entrepreneurs in thesociety.Mc Clelland states that it is the need for achievement which drives people

towards entrepreneurial activities. Individuals with High achievementmotive tend to take interest in situations of High risk.



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DEFINITION Higgin B: It is meant for the function of seeking investment & production

opportunity, organizing an enterprise to undertake a new production

process, raising capital, hiring labour, arranging the supply of RM, findingsite, introducing a new technique & commodities, discovering newsources of RM & selecting top managers of day to day operations ofenterprise.

J.A.Schumpter: It is essentially doing things that are not generally done in

the ordinary course of business routine.

P.F.Drucker: It occurs when resources are redirected to progressiveopportunities not used to ensure administrative efficiency.

A.H.Cole; It is the purposeful activity of an individual or group ofassociated individuals undertaken to initiate maintain profit byproduction or distribution of economic G/S.

Thus, It is the propensity of mind to take calculated risk with confidenceto achieve a predetermined business or industrial objective.



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CHARACTERISTICS OF ENTREPRENEURSHIP

Innovation A function of high achievement

Organization building function

A function of group level pattern

A function of managerial skills & leadership A function of status withdrawal

Gap filling function

A function of religious belief

Dynamic process

Decision making, skillful management, acceptingchallenges



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DIMENSIONS


EnvironmentNew venture

creation

Individual

Characteristics

Constraints

Organization


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BENEFITS Opportunity to create your own destiny

Opportunity to make a difference Opportunity to reach full potential

Opportunity to reap impressive profits

Opportunity to contribute to society & be recognizedfor the efforts

Opportunity to make avocations their vocation

Opportunity for Economic & social benefits

-creating innovation, fuelling economic growth,identifying ownership opportunities ,enhancingwelfare amenities



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BARRIERS


ENVIRONMENTAL SOCIETALPERSONALFINANCIAL

BARRIERS

CAUSES DRAWBACKS


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ENTREPRENEURSHIP STIMNULANTS

Entrepreneurial education

Entrepreneurs are heroes

Demographic & economic factors

Technological advancements

Increased focus on capital formation

Supportive government programmes

E-commerce & WWW.

International opportunities

Availability of required training & input

Business & research

To make an environment for innovation



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CULTURAL DIVERSITY

Young entrepreneurs

Women entrepreneurs

Minority entrepreneurs

Part-time entrepreneurs Home-based entrepreneurs

Family business

Copreneurs

Corporate castoffs

Corporate dropouts



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HOW TO AVOID PITFALLS

Know your business in depth

Develop a solid business plan

Manage financial resources Understand financial statements

Learn to manage people effectively

To keep in tune with yourself



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CONCEPTUAL MODEL

As per Kao, a conceptual model of entrepreneurship can be a

relativity among various factors. It was generated due to the

limitations of some of the definitions.


ENTREPRENEUR-

-SHIP

THEPERSON

THE

ORGANIZATION

THE

ENVIRONMENT

THE TASK


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ANALYTICAL FRAMEWORK

THE PERSON: personality, skill, experience, motives,

psychological preferences

THE TASK: perceiving opportunity, marshalling

resources, providing leadership THE ENVIRONMENT: availability of resources,

infrastructure, competitive pressures, social values,

rules, state of technology

THE ORGANIZATION: structure, rules, policies,

culture, HR system, communication system



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ENTREPRENEURIAL DECISION

This decision occurs despite recession, inflation, highinterest rates, lack of infrastructure, economicuncertainties etc. Each of these decisions is a personalhuman process which although is unique, have

common characteristics. The impulsive motives are the forces behind these

decisions.

The decision to start a new company occurs when anindividual perceives that it is both desirable &possible.

The perception is desirable result from an individualsculture, teachers, sub culture, family etc.



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DECISION FOR A POTENTIAL

ENTREPRENEUR


Change from present

Life styleWork environment

Disruption

Form new enterprise

DESIRABLE

culturalSub cultural

Family

TeachersPeers

POSSIBLE

GovernmentBackground

MarketingFinance

Role models


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ENTREPRENEUR Vs ENTREPRENEURSHIP Vs

ENTERPRISE


CONCEPT

ENTREPRENEUR

(person)

ENTREPRENEURSHIP

(process of action)ENTERPRISE

(object)


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ENTREPRENEUR Vs ENTREPRENEURSHIP

Refers to a personRefers to a person Refers to a processRefers to a process

Visualizer Visualizer VisionVisionAble Able AbilityAbility

CreatorCreator CreationCreation

OrganizerOrganizer OrganizationOrganization

InnovatorInnovator InnovationInnovationDecision makerDecision maker DecisionDecision

Administration Administration AdministrationAdministration

MotivatorMotivator MotivationMotivation

Analysizer Analysizer AnalysisAnalysis

LeaderLeader LeadershipLeadership

HumanHuman HumanityHumanity

PlannerPlanner PlanningPlanning



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Conttddd.

CharacterCharacter CharacteristicsCharacteristics

BelieverBeliever Belief Belief

MarketierMarketier MarketingMarketing

DirectorDirector DirectionDirection

ProgrammerProgrammer ActionAction

InvestorInvestor InvestmentInvestment

EmpowererEmpowerer EmpowermentEmpowerment



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ENTREPRENEUR & ENTERPRISE

Entrepreneur is one who provides the 4th

FOP, namelyenterprise.

Enterprise may be defined as an undertaking oradventure involving uncertainty & risk & requiringinnovations.

It serves as the framework within which decisionsconcerning what to produce, how much to produce,when to produce & how to produce are taken byentrepreneurs / managers.

The success of an enterprise depends upon severalinternal & external factors to the business world &some of these factors may be under the control of theentrepreneur.



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ENTREPRENEURIAL PROCESS

Identify an opportunity

Establish vision

Persuade others Gather resources

Create new venture

Change/adapt with time



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Scope of entrepreneurship Capitalism: a capitalist economy represents free

enterprise, freedom to save & invest, freecompetition, consumer sovereignty & very littleinterference from the government.

Socialism: private entrepreneurship is absent in it.It is the economic & financial experts who playedan important role in the development. The purposeis to serve for the satisfaction of society & not tomake profits or to make profits

Mixed economy: both private as well as public

sectors coexist side by side.



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Intrapreneur

Intra means inside the organization

In the era of globalisation, large corporationsare developing new products & services &

creating innovative technologies & systems. The term was coined in America in late 70s.

this is called as corporate entrepreneurs orintra corporate entrepreneur. It implies any ofthe dreamers who do. The concept waspromoted by Pinchot III



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Definition

Those who take hands-on responsibility for

creating innovation of any kind within an

organization.

The intrapreneur may be creator or inventor

but is always the dreamer who figures out hoe

to turn an idea into a profitable reality.

Intrapreneur is a person who promotescreativity within a larger enterprise.



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Intrapreneurship can be defined as the development

within large corporation of internal markets &

relatively small autonomous or semi autonomous

business units producing products, services or

technologies that employ the firms resource in

unique way.

Intrapreneuring means the entrepreneurial activitiesthat acquire organizational sanctions & commitment

of resource for the sole objective of innovative

results

Intrapreneurship is not limited to germination of newideas but even includes implementation of new ideas



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G Pi h t III t i hi f b k I t i


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G. Pinchot III wrote in his famous book Intrapreneuringin 1985 & as intrapreneurs are the person whoresigned from their well paid executive positions to

launch their own ventures. He suggested that wellestablished company should learn to make use of theentrepreneurial talents within to avoid stagnation &decline. Therefore, needed was a system & anorganization culture within a large organization thatwould allow the executives to operate likeentrepreneur. These persons are not driven bymonetary gain but by a deep desire of personalachievement.



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Examples

Don Estridge, an employee at IBM posted atFlorida, far away from his bosses at IBM HQspearheaded the creation of PCs.

Paul Scagnetti, an engineer at Intel came upwith the concept of a handheld computeraimed at helping people do just one thing-record & plan their fitness & nutrition. The

gizmo Vivovic fitness planner hit the marketsuccessfully.



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Features

An entrepreneurship which takes place within anexisting business.

It is the development within a corporation ofinternal markets

Internal managers & employees are responsiblefor it through their innovative work.

It is promoted in the form of autonomous or semiautonomous business units that produceproducts, services or technologies in a uniqueway.



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Stages in Intrapreneurial Behaviour

Solo stage

Networking

Boot legging

Creating formal team


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Factors governing intrapreneurial

success

Appropriate rewards & punishment

Recruitment of interested & enthusiastic

personnel

New ventures & established business with a

difference

Internal product competition & corporate

bureaucracy


Process


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Process

Problem definition

Coalition

building

Resource mobilisation

Project execution

Venture completion



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Types

Innovative Intrapreneur

Technical Intrapreneur

Marketing Intrapreneur

Manufacturing Intrapreneur

Financial Intrapreneur

Service Intrapreneur

Other intrapreneur in various managementactivities


Difference


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Entrepreneur Intrapreneur

Owner ofhis enterprise Not the owner, but a key worker

Independent Partially independent

Raises finance from varioussources Doesnot own responsibility to raise capital

Maynot be educated & skilled Educated & skilled person

organizer Strategist

Strives to earn maximum profit Strives to excel in all fields

Bears full risk of business Doesnot bear full risk

Promoter Operates & develops the business

Visualizer Pragmatic visionary, innovator & creative

Direct participation in all activities Direct but restricted participation

Objective is money, freedom to take decision,

chance to innovate

Objective is freedom to take decisions,

corpaorate rewards, promotion rewardsSSIPMT/SAPNA SHARMA/2012 75


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Entrepreneurial culture

Implies a set of values, norms & traits that are

conducive to the growth of entrepreneurship. It is

the corporate culture that focuses on the

emergence of new opportunities, the means ofcapitalising on them & the creation of the

structure appropriate for pursuing them.

It should be differentiated from administrative

culture which focuses on existing opportunities,

organization structure & control procedures.



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An ideal administrator would askquestions as-

What resources do I control?

What structure determines

our organizations

relationship to its market?

How can I minimise theimpact of others on my

ability to perform?

What opportunity is

appropriate?

An ideal entrepreneur would askquestions as-

Where is the opportunity?

How do I capitalize on it?

What resources do I need?

How do I gain control over

them?

What structure is best?


Exception: though as per Stevenson & Gumpert companies

must often contain both entrepreneurial & administrative

culture because they consist of both entrepreneurial &

established units.


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focus Entrepreneurial culture Administrative culture

Strategic orientation Driven by perception of

opportunities due to

changing technology

By controlled resources

due to social constraints

Commitment to seize

opportunity

Revolutionary, withshort

duration, due to narrow

decision, action

orientation

Evolutionary, with long

duration, due to

negotiation, risk reduction

Commitment of resources Many stages with minimal

exposure at eachstage

Asingle stage with

complete commitment out

of decision

Control of resources Episodic use/ rent of

requirement resources due

to increased specialization

Ownership or employment

of required resources to

power ,status

Management structure Flat, with multiple

informal networks

Hierarchy



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Various subculture

Culture of a business

Business ethics

TQ culture Productivity culture

Corporate culture

Organization culture

Documents

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