Unit 1 Entrepreneurship

EntrepreneurshipEntrepreneurship

The term ‘entrepreneur’ is often used interchangeably with ‘entrepreneurship’. But conceptually they are different. An entrepreneur is a creator whereas entrepreneurship is the creation. Entrepreneurship is the tendency of a person to organise his own business and run it profitably, exploiting the qualities of leadership, decision making, managerial caliber etc. Entrepreneurship is concerned with the development and coordination of entrepreneurial functions. It is a role played by or task performed by an entrepreneur. The central task of the entrepreneur is to take moderate risks and invest money to earn profits by exploiting an opportunity.According to Zimmerer and Scarborough, “An entrepreneur is one who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying significant opportunities and assembling the necessary resources to capitalize on them”.


According to John K. and Howard Stevenson, “ Entrepreneurship is the attempt to create value through recognition of business opportunity, the management of risk-taking appropriate to the opportunity, and through the communicative and management skills to mobilize human, financial and material resources necessary to bring a project to fruition”.According to Schumpeter, “Entrepreneurship is based on purposeful and systematic innovation. It included not only the independent businessman but also company directors and managers who actually carry out innovative functions”.In India, the definition of an entrepreneur as being the one who undertakes to organise, own and run a business was accepted in 1975 at a national seminar on Entrepreneurship held in New Delhi.


Characteristics of an Entrepreneur

The basic characteristics of an entrepreneur are:•Desire for responsibility•Preference for moderate risk•Confidence in their ability to succeed•High level of energy•Desire for immediate feedback•Future orientation•Skill at organizing•Value of achievement over money•Flexibility•High degree of commitment


Entrepreneurial Motivation Factor

1.Educational background2.Occupational Experience3.Desire to work independently4.Desire to branch out to manufacturing5.Family background6.Assistance from Government7.Assistance from financial institution8.Availability of technology/raw material9.Profit margin10.Desire for taking personal responsibility11.Anticipation of future possibilities12.Success stories of entrepreneurs13.To gain social prestige14.Heavy Demand15.Technical knowledge


Functions of an EntrepreneurAn entrepreneur is expected to perform the following functions:

1.Assumption of Risk:The entrepreneur assumes all possible risks of business which emerge with changes in the tastes of consumers, techniques of production and new inventions. Such risks are not insurable and the entrepreneur has to bear the loss, if any. Thus, risk-assumption and risk-bearing remain the most important functions of an entrepreneur, which he tries to reduce with his initiative, knowledge and skill and good decisions.2. Business Decisions:The entrepreneur has to decide the nature and type of business to undertake and the nature and type of goods that must be produced or services that must be provided to customers. He enters the particular industry which offers him the best prospects and produces whatever commodities he thinks will pay him the most and employs those methods of production which seem to him to be most profitable. He effects suitable changes in the size of the business, its location, techniques of production and does everything that is needed for the development of his business.


3. Managerial Functions:These are different types of managerial functions that an entrepreneur has to perform and these are based on the size and activities of an enterprise. The managerial functions include formation of production plans, raising of finance, dealing with suppliers for procurement of raw materials and other materials, providing production facilities, organising sales, and conducting and so on. Administrative functions such as manpower planning, recruitment etc.Generally an entrepreneur performs many useful functions for the development of society and to satisfy the needs of fellow citizens. The entrepreneur can identify opportunities to start a business either as a manufacturer or as a distributor, for entrepreneurship exists in every field of economic endeavor. Manufacturing activities require a relatively high capital investment and more entrepreneurial abilities than distribution activities. An entrepreneur has a strong motivation and desire to achieve success by undertaking a venture and bearing risk for earning profit.


Types of Entrepreneurs

Clarence Danhof has classified entrepreneurs in the following way:1.Innovative Entrepreneur:An entrepreneur who is able to foresee potentially viable and profitable opportunities through innovation is considered an innovative entrepreneur. An innovative entrepreneur is highly motivated and talented and ‘innovation’ is his key function. According to Peter Drucker, ‘an innovative entrepreneur is one who always searches for change, responds to it, and exploits it as an opportunity’. An entrepreneur creates new values or increases the value of what already exists.An entrepreneur can exhibit his innovativeness in any of the following ways:•By introducing a new product, a new quality, a new process or a new method for an existing product.•By opening a new market, for example e-business.


• By discovering a new source for the supply of raw material or semi-finished goods.

• By reorganizing the enterprise so as to achieve monopoly or to break up an existing monopoly position.

2. Adoptive or Imitative Entrepreneur:An Imitative Entrepreneur does not innovate anything, but imitates techniques and technologies innovated by others. That means an Imitative Entrepreneur is one who is ready to adopt the successful innovations already inaugurated by innovating entrepreneurs. He simply follows the innovators after carefully observing innovative practices of others and to what extent their innovation has caught the imagination of the society. This type of entrepreneurs play a vital role in developing countries.For example, Indian entrepreneurs are adopting the new technologies developed in Japan, France, and Germany in various lines of products such as auto mobiles, electronics, and infrastructure.


3. Fabian Entrepreneur

This type of entrepreneur is one who is cautious in intoducing any change in the business. Normally, he has neither the will to introduce new changes nor the desire to adopt new methods. He is ready to imitate only when it becomes perfectly clear that failure to do would result in heavy loss for him. He is dominated more by customs, religion, traditions and past practices and he is not ready to take any risk at all.

4. Drone Entrepreneur:

This type of entrepreneur is one who blindly follows the traditional methods of production even when it results in loss to him. He is not prepared to introduce any change in his method of production, which is already in place. He continues to carry out his business in the traditional way even when he suffers losses. Reasons of this attitude could be several, such as lack of funds, lack of understanding of new developments in his field of operations. For example, the coir industry in Kerala is dominated by done entrepreneurs.


Qualities of an Entrepreneur

Success and AchievementRisk BearerOpportunity ExplorerPerseveranceFacing UncertaintyFeedbackIndependenceFlexibilityPlannerSelf ConfidenceMotivatorStress Taker


The Entrepreneurial Process involves ____, ________, and _________ an opportunity by overcoming the strong forces that resist the creation of something new.

.


Entrepreneur

Resources

Opportunity

Organisation

1. Identify and evaluate the opportunity

3. Determine andattract resourcesrequired

4. Lead and manage resulting enterprise

2. Develop Business Plan


THE ENTREPRENEURIAL PROCESS:

An Entrepreneur is the key figure in the process of economic growth. He is

an economic person who tries to maximize his profits by innovation and

thus aggressively contributing towards economic development. He is an

organizer and speculator who is doing new things or doing things that are

already being done in a new way. Entrepreneur is the individual who lies at

the heart of Entrepreneurial process that is the Manager who drives the

whole process forward.


OPPORTUNITY:

It's the potential to serve customers better than they are being served at present. An entrepreneur is held responsible for scanning the business landscape for unexploited opportunities. The improved way of doing is the innovation that the entrepreneur presents to the market.

RESOURCES: Resources include the money invested in the venture, the people include their efforts, Knowledge and skills to it etc. It also includes the intangible assets such as brand name, reputation of the company and the goodwill of the company.

ORGANIZATION: Every organization consists of number of factors such as their size, their rate of growth, the industry they operate in and the type of products they deliver.


Role Of Entrepreneurship In Economic Development

Need for Entrepreneurship Development

•Economic development essentially means a process of upward change

whereby the real pr capita income of a country increases over a period of

time .

•Entrepreneurship has an important role to play in the development of a

country.

•It is one of the most important inputs in economic development.

•The number and competence of entrepreneurs affect the economic

growth of the country.


•The economic history of the presently advanced countries

like USA, Russia and Japan supports the fact that economic

development is the outcome for which entrepreneurship is

an inevitable cause.

•The crucial and significant role played by the

entrepreneurs in the economic development of advanced

countries has made the people of developing and under

developed countries conscious of the importance of

entrepreneurship for economic development.

•It is now a widely accepted fact that active and

enthusiastic entrepreneurs can only explore the potentials

of the countries availability of resources such as labour,

capital and technology.


•The role of entrepreneurs is not identical in the various economies.

• Depending on the material resources, industry climate and

responsiveness of the political system, it varies from economy to

economy.

•The contribution of entrepreneurs may be more in favorable

opportunity conditions than in economies with relatively less

favorable opportunity conditions.


Entrepreneurship and Economic Development

Entrepreneurship helps in the process of economic development in the following ways : Employment Generation :•Growing unemployment particularly educated unemployment is the

problem of the nation. •The available employment opportunities can cater only 5 to 10 % of

the unemployed. •Entrepreneurs generate employment both directly

and indirectly. •Directly, self employment as an entrepreneur and

indirectly by starting many industrial units they offer jobs to millions.•Thus entrepreneurship is the best way to fight the evil of

unemployment.


National Income :

•National Income consist of the goods and services produced in the country and imported.

•The goods and services produced are for consumption within the country as well as to meet the demand of exports.

•The domestic demand increases with increase in population and increase in standard of living.

•The export demand also increases to meet the needs of growing imports due to various reasons.

•An increasing number of entrepreneurism are required to meet this increasing demand for goods and services.

•Thus entrepreneurship increases the national income.


Balanced Regional Development :

• The growth of Industry and business leads to a lot of

Public benefits like transport facilities, health, education,

entertainment etc.

•When the industries are concentrated in selected cities,

development gets limited to these cities. A rapid

development .

•When the new entrepreneurers grow at a faster rate, in

view of increasing competition in and around cities, they

are forced to set up their enterprises in the smaller towns

away from big cities.

•This helps in the development of backward regions.


Dispersal of economic power :

• Industrial development normally may lead to concentration of

economic powers in a few hands.

•This concentration of power in a few hands has its own evils in the

form of monopolies.

•Developing a large number of entrepreneurers helps in dispersing the

economic power amongst the population.

•Thus it helps in weakening the harmful effects of monopoly.


•Better standards of living :

• Entrepreneurers play a vital role in achieving a higher rate of

economic growth.

•Entrepreneurers are able to produce goods at lower cost and supply

quality goods at lower price to the community according to their

requirements.

•When the price of the commodities decreases the consumers get

the power to buy more goods for their satisfaction. In this way they

can increase the standard of living of the people.


•Creating innovation :

• An entrepreneur is a person who always look for changes. apart

from combining the factors of production, he also introduces new

ideas and new combination of factors.

• He always try to introduce newer and newer technique of

production of goods and services.

•An entrepreneur brings economic development through

innovation.


•Entrepreneurship also helps in increasing productivity and capital

formation of a nation.

• In short, the development of the entrepreneurship is inevitable in

the economic development of the country.

•The Role played by the entrepreneurship development can be

expressed in the following words :

" Economic development is the effect for which

entrepreneurship is a cause "


Women in Economic Leadership:

Women economic empowerment is the policy level priority to bring the previously neglected half of Indian population in to the mainstream of economy. The Financial Express was face to face with a few women who are empowered and work for the development of other women entrepreneurs. The evident fact is that women are half of the total; their contribution to the economy is unrecognized in most cases. They are underrepresented in many economic sectors. These discouraging figures turn momentarily pale when it is seen that, among women a good number are successful and have scaled to the peak where many men find it hard to reach. They are mentors for hundreds of thousands of women particularly in business having the qualities like hard work, devotion, sincerity, professionalism and significant managerial capacity.


According to Laila Kabir a noted Entrepreneur:

"If women get the opportunity to develop as entrepreneurs, I think they can do very well because they very early in life learns to manage available resources and time successfully"

And it is very true because women are far more better Managers as compared to their Male counterparts because they learn Management not in Schools but through real life Experiences. The biggest challenge that many literate and illiterate women in rural and urban areas faces in entering into small industry as entrepreneurs is due to the lack of knowledge on product, Market and Quality and its to be seen that some committee should be constituted and the recommendations which are placed should be implemented in phases to root out the problems mentioned above.


According to Noted women Entrepreneur Anu Aga C.E.O Thermax Industries Ltd., Every woman has the potential to be an Entrepreneur and it can be developed through nurturing skills and ideas. According to her women in business attain success for their intelligence, efficiency, commitment and Honesty. But she said that women in our country have to earn an extra quality to consider the society and it's norms and values for the sake of business and added that although it is an added burden on them but this consideration helps them to stand beside the men as equals, however she feels that the big thirst for finance and knowing the Markets created among women need to be satisfied through taking necessary steps by all stakeholders including Banks and the Government. In the End there is an urgent need for establishing a Women Development Bank (WDB), a separate and independent bank for women, in the rural and remote areas after observing that a large number of women fail to compete with the male entrepreneurs in receiving bank loans and assistance.


The government of India should acknowledge the importance of Entrepreneurs and provide assistance to groom entrepreneurs especially in the wake of liberalization policy. At the same time, the education system should be revamped so as to groom female Entrepreneurs. Every economy has recognized the need of having entrepreneurs. In fact in the U.S. and most of the developed countries, as much as 36% of the total working class are entrepreneurs. Our future rests squarely upon the entrepreneurial ventures founded by creative, adventurous individuals. People who seize opportunities, who harness and use resources in usual ways to emerge into the new era with a flourish.How to Develop Women Entrepreneurs?Right efforts on from all areas are required in the development in the development of women entrepreneurs and the participation in the entrepreneurial activities. Following efforts can be taken in to account for effective development of women Entrepreneurs and in turn resulting in the economic development of the country.


Consider women as specific target group for all the developmental activities.Better educational facilities and schemes should be extended to women folk from government.Adequate training programme on management skills to be provided to women community.Encourage women participation in the decision making.Vocational training to be extended to women community that enables them to understand the production process and production Management.Skill development to be done in women polytechnics and ITI's.Training on professional competence and leadership skills to be extended to women Entrepreneurs. Training and counseling on a large scale of existing women Entrepreneurs to remove psychological causes like lack of self confidence and fear of success. Continuous monitoring and improvement of training programmes.Industrial Estates could also provide marketing outlets for the display and sale of products made by women Entrepreneur.


Training in entrepreneurial attitudes should start at the high school level through well design courses, which build confidence through behavioral games. More governmental schemes to motivate women entrepreneurs to engage in small scale and small scale business ventures. District Industries Centres and single window agencies should make use of assisting women trade and business guidance. Involvement of Non governmental Organization in women entrepreneurial Training Programmes and counseling.

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Unit 1 Entrepreneurship