Entrepreneurship

Entrepreneur and

Entrepreneurship

Evolution of the concept of entrepreneur The world entrepreneur has been taken from the French language where it

cradled and originally meant to designate an organizer of musical or other entertainments.

Oxford English dictionary (1897) also defined an entrepreneur in similar ways as the director or a manager of a public musical institution one who gets up entertainment especially musical performance.

In the early 16th century it was applied to those who were engaged in military expeditions. It was extended to cover civil engineering such as construction in 17th century.

It was only in the beginning of the 18th century that the word was used to refer to economic aspects.

The evolution of the concept of entrepreneur is considered over more than four centuries.

The term entrepreneur is used in various ways and various views. These views are broadly classified into three groups

Risk-bearer, organizer and innovator.

Entrepreneur as a risk bearer

Richard Cantillon first coined the term

An agent who buys factors of production at certain prices in order to

combine them into product with a view to selling it at uncertain prices

in future. Eg farmers

Persons who bear uncertainty-risk which cannot be insured /

calculated

Economic functionary who undertakes such responsibility of

uncertainty

Entrepreneur as an organizer Jean –Baptiste Say associates entrepreneur with functions

of coordination , organization and supervision. Land of one , labour of another and capital of another Interest on capital , rent on land and wages to laborers

Essential factors : Moral qualities, work judgment, perseverance and

knowledge Command over sufficient capital Uncertainty of profits

Entrepreneur as a risk bearerJoseph A assigned crucial role of innovation to entrepreneur

New factors of production:Introduction of a new product in the marketInstituting of new production technologyOpening of new marketNew source of supply of raw material

Inventor and Innovator

Characteristics of an Entrepreneur

Hard work Desire for high achievement Highly optimistic Independence Foresight Good organizer Innovative

Difference b/w entrepreneur and manager

Points Entrepreneur Manager

Motive Start venture by setting up enterprise

Render service in already setup enterprise

Status Owner Servant

Risk-bearing High No risk bearing

Rewards Profit – highly uncertain Salary as reward

Innovation How to produce goods to meet changing demands

Executes plans prepared by entrepreneur

Qualification High achievement motive , originality in thinking, foresight, risk bearing ability

Sound knowledge in management theory and practise

Functions of entrepreneur Idea generation and scanning of the best suitable idea Determination of business objectives Product analysis and market research Determination of form of ownership/organization Completion of promotional formalities Raising necessary funds Procuring machine and material Recruitment of men Undertaking the business operations

Classification of Entrepreneurs

Solo operators: These are entrepreneurs who work alone and if needed at all, employ a few employees. In the beginning most of the entrepreneurs start their enterprise like them

Active partners: who start / carry on an enterprise as a joint venture. It is important for them actively participate in the operation of the business.

Inventors: such entrepreneurs with their competence and inventness invent new products. Their basic interest lies in research and innovative activities

Classification of Entrepreneurs

Challengers: these are entrepreneurs who plunge into industry because of the challenge it presents. When one challenge seems to be met they began to look for a new challenges.

Buyers: these are those entrepreneurs who do not like to bear much risk. Hence in order to reduce risk involved in setting up a new enterprise they like to buy the on going one.

Life timers: these entrepreneurs take business as an integral part of their life. Usually the family enterprise and businesses which mainly depend on exercise of personal skill fall in this type / category of entrepreneurs.

Classification of Entrepreneurs-based on functional characteristics

Innovating entrepreneurs: an innovating entrepreneurs I one who

introduces new goods inaugurates new method of production discovers

new market and reorganizes the enterprise. 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.

Imitative entrepreneurs: these are characterized by readiness to adopt

successful innovations inaugurated by innovating entrepreneurs.

Imitative entrepreneurs do not innovate the changes themselves they only

imitate techniques and technology innovated by others. Such type of

entrepreneurs are particularly suitable for the under developed regions.

Drone entrepreneurs: these are characterized by a refusal to adopt

opportunities to make changes in production formulae even at the cost

of severely reduced returns.

Fabian entrepreneurs: are characterized by very great caution in

experimenting any changes in their enterprises. They imitate only

when it becomes perfectly clear that failure to do so would result in a

loss of the relative position in the enterprise.

Classification of Entrepreneurs-based on functional characteristics

Classification of Entrepreneurs-based on developmental angle

Prime mover- development , expansion and diversification of business

Manager – does not initiate expansion and is content just staying in business

Minor innovator- economic progress by finding better use of existing resources

Satellite – assumes supplier’s role and slowly moves towards productive enterprise

Local trading- limits to local market

Classification of Entrepreneurs-based on types of entrepreneurial business

Manufacturing

Wholesaling

Retailing

Service

Classification of Entrepreneurs-based on nine personality traits of entrepreneurs

Improver: improve the world, ability to run business with high integrity and ethics

Advisor : customer focused Superstar :charisma and high energy Artist : business demanding creativity e.g. web design , ad agencies Visionary : Analyst : fixing problems in a systematic way Fireball : full of life, energy and enthusiasm Hero :lead Healer : nurturing and harmony

Entrepreneurial development models

Psychological models

Sociological models

Integrated models

Psychological models

Mc Cleland identification of determinants of entrepreneurship

Importance of achievement motive Change in motivation – need for achievement among

adults Motivation training programme-exploit new opportunities Everett Hagen’s theory – ‘creative personality’ and ‘status

withdrawal’ Status withdrawal – occurs in natural evolutionary process

of society

Psychological models cont…

John Kunkel : behaviorist model

Entrepreneurial behavior function of surrounding social

structure , both past and present –influenced by

manipulating economic and social incentives

Sociological models

Frank W Young’s –based on society’s incorporation of

relative sub groups

Relativeness of a subgroup which has low status in larger

society will lead to entrepreneurial behavior if the group

has better institutional resources than others in the society

at the same level

Creation of supporting institutions

Integrated models

T V Rao

Need for motive

Long term involvement

Personal, social, material resources

Socio –political system

Integrated models contd….. B S Venkata Rao

Five stages for promoting small entrepreneurship:

Stimulation

Identification

Development

Promotion

Follow up

Integrated models contd….. Stimulation : creation of industrial atmosphere , policy statement, wide

publicity of industrial development programmes, creation of support institutions

Identification : prospective entrepreneurs in rural artisans, factory workers, persons with formal training in engineering and technology graduates in business administration and management.

Development : organization of motivation and managerial training programmes , technology, formulation of bankable project , location.

Promotion : govt policy initiatives for promoting small entrepreneurship

Follow up : reviewing policies and programmes and follow up

Entrepreneurial development cycle

Stimulatory

EDC

activities

Support activities

Sustaining activities

Entrepreneurial development cycle contd…

Stimulatory activities :

Entrepreneurial education

Planned publicity for entrepreneurial opportunities

Motivational training to new entrepreneurs

Creating entrepreneurial forums

Recognition of entrepreneurs

Help and guidance in selecting products and preparing project reports

Evolving locally suitable new products and processes


Support activities

Activities help a person to develop into an entrepreneur

Registration of unit

Arranging finance

Providing land , shed, power, water etc

Guidance for selecting and obtaining machinery

Getting licenses/ import licenses

Help marketing the product


Sustaining activities:

Activities for effective functioning of entrepreneurship

Help modernization

Additional financing for full capacity utilization

Deferring repayment / interest

Quality testing and approving agencies

Need based common facilities centre

Intrapreneur

An inside entrepreneur, or an entrepreneur within a large firm, who uses

entrepreneurial skills without incurring the risks associated with those

activities. Intrapreneurs are usually employees within a company who are

assigned a special idea or project, and are instructed to develop the project

like an entrepreneur would. Intrapreneurs usually have the resources and

capabilities of the firm at their disposal. The intrapreneur's main job is to

turn that special idea or project into a profitable venture for the company.

Why companies encourage intrapreneurs?

Intrapreneurship is responsible for a lot of product innovation around the world today.

At Lockheed Martin, intrapreneurs developed a number of famous aircraft designs

and at 3M, they came up with Post-It Notes and at Google, they came up with Google

News, AdSense and Gmail. What these examples have in common is that companies

embraced the idea of allowing their employees to become entrepreneurs and capitalize

on new business ideas. These free flowing ideas come from in-house programs, which

include Google’s famous “20% program”, contests, hackathons, skunk works and

informal programs where employees pitch ideas directly to executives. Smart

companies want you to become an intrapreneur because it fuels business growth and

allows them to gain a competitive advantage in their industry.

Entrepreneurship and intrapreneurship

ENTREPRENEURSHIPAdvantages Disadvantages

• You are your own boss - independency

• The income increases

• You have the chance to be original

• You have part of excitement and adventure

• There are a lot of possibilities

• Salary potential – you decide upon your own salary

• Money pressure – giving up on the security of a regular paycheck

• Less benefits as the business is new

• Long working hours

• Mistakes are magnified

• All decisions must be made alone

INTRAPRENEURSHIPAdvantages Disadvantages

• Ability to stay in a friendly, well known environment

• Practicing your skills within an organization – lower risk

• Using companies resources, good name, knowledge

• Access to customers, infrastructure

• Reward may not be up to expectation

• Innovation may not be appreciated accordingly

• You can be innovative but to a certain limit – you are not your own boss

Difference between Entrepreneur and intrapreneur

Difference Entrepreneur Intrapreneur

Dependency An entrepreneur is independent in his operation

Intrapreneur is dependent on the entrepreneur i.e., owner

Raising of funds An entrepreneur himself raises funds required for the enterprise

Funds are not raised by the intrapreneur

Risk Entrepreneur bears the risk involved in the business

An intrapreneur does not fully bear the risk involved in the enterprise

operation An entrepreneur operates from outside

An intrapreneur operates from within the organisation itself

Entrepreneurship is defined differently by different authors

While some call entrepreneurship as risk bearing others view as innovating

and others thrill seeking.

In a conference on entrepreneurship held in united states the term

entrepreneurship was defined as follows

Entrepreneurship is the attempt to create value through recognition of business

opportunity the management of risk taking appropriate to the opportunity and

through communication and management skills to mobilise the human,

financial and material resources necessary to bring the project to fruition.

Concept of entrepreneurship

Concept of entrepreneurship contd

A.H.Cole entrepreneurship is the purposeful activity of an individual

or a group of associated individuals, undertaken to initiate maintain or

aggrandise profit by production or distribution of economic goods and

services

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.

Concept of entrepreneurship contd…

In all definition entrepreneurship refers to the function performed by an

entrepreneur in establishing an enterprise. Just as management is

regarded as what managers do, entrepreneurship may be regarded as what

entrepreneurs do.

In other words entrepreneurship is the act of being an entrepreneurs.

Entrepreneurship is a process involving various activities to be

undertaken to establish an enterprise, it is thus process of giving birth to a

new enterprise.

Innovation and risk bearing are the two basic element involved in

entrepreneurship.

Innovation doing something new or something different is a necessary

condition to be called a person as an entrepreneur. The entrepreneur are

constantly on the look out to do something different and unique to meet

the changing requirements of the customers. They may or may not be

inventors of new products or new methods of production but they possess

the ability to foresee the possibility of making use of the inventions for

their enterprise.



In order to satisfy the changing preferences of customers now a days

fruit juice is sold in small cartons instead (mango fruity) instead of

bottles so that customers can carry it and throw away the container

after drinking the juice.

Lipton offers its tea in small packs known as PUDIYAS to meet the

requirements of its rural customers.

Henry Ford


Risk bearing: starting a new enterprise always involved risk and trying for

doing something new and different is also risky. The reason is not difficult to

seek. The enterprise may earn profits or incur losses because of various factors

like increasing competition, changes in customer preferences shortage of raw

material and so on. An entrepreneur therefore, needs to be bold enough to

assume the risk involved in the enterprise. He needs to be a risk taker not risk

avoider. His risk bearing ability enables him even if he fails one time or one

venture to persist on and on which ultimately helps him succeed.

“Fall Seven times, Stand up Eight”

Relationship between entrepreneur and entrepreneurship

Entrepreneur Entrepreneurship

Person Process

Organizer Organisation

Innovator Innovation

Risk bearer Risk bearing

Motivator Motivation

Creator Creation

Visualizer Vision

Leader Leadership

imitator imitation

Growth of Entrepreneurship in India

Entrepreneurship during pre-independenceTraced back to Rig Veda- metal handicraftsAbsence of localization of industryIndustrial activity – Banaras,Allahabad,Gaya etcRoyal PatronageKharkhanasPerfection in art, durability, appeal to eyeNagpur- silk bordered cloth, Ahmedabad-dupattas, dhotisIndia – queen of International Trade.


Decline of handicraft Industry:Disappearance of Indian Royal CourtsLukewarm attitude of British Colonial GovernmentImposition of heavy duties on imports of Indian goods in EnglandLow priced British made goodsDevelopment of transport facility in India Changes of tastes and habits of IndiansUnwillingness of Indian craftsmen to adapt changes


East India Company’s advent in India Various changes in Indian Economy First ship building industry in Surat Manjee Dhanjee –first large gun powder mill in Bombay Parsi foremen –steel industry in Bombay-1852 EIC- growth of Entrepreneurship Swadeshi Campaign- swadeshi mill Post First world war- discriminating protection Importance of Parsis declined –Gujarathis, Marwari

Vaishyas


Managing agency system-Joint stock companies- mgmt remained in hands of firm and not individual

Entrepreneurship during post independence

First industrial policy , 1948- achieving balanced growth State to promote , assist and develop industries in the national interest Role of private sector in accelerating industrial development

Three important measures: To maintain proper distribution of economic power between private

and public sector To encourage the tempo of industrialization by spreading

entrepreneurship from existing centers to other cities , towns To disseminate the entrepreneurship acumen concentrated in a few

dominant communities to a large number of industrially potential people of varied social strata.

Entrepreneurship during post independence

Third five year plan , the Govt provided various incentives and

concessions in the form of capital know how , markets and land to

potential entrepreneurs

Directorate of industries , financial corporations , small scale

industries

Corporations and small industries service institute

Family entrepreneurship units like Tata, Birla, Mafatlal, Dalmia,

Kirloskar and others grew beyond the normally expected size

Role of entrepreneurship in economic development

Classical theories of economic development – no room for entrepreneurship,

economic development is automatic and self regulated.

Enthusiastic entrepreneurs fully explore the potentialities of the country’s

available resources – labour, technology and capital

Entrepreneur – key in economic development because of his role in

introducing innovations

Two necessary conditions for economic development:

Entrepreneurship

Increased o/p of capital


Entrepreneurship in economic development varies from economy to economy depending upon its material resources , industrial climate and the responsiveness of the political system to entrepreneurial function

Underdeveloped regions –entrepreneurs are imitators and not innovators resulting in small scale enterprises

Small scale entrepreneurship in underdeveloped country like India plays an important role to achieve balanced regional development.

Small scale industries provide Large –scale employment Equitable distribution of national income Effective resource mobilization of capital and skills


Promotes capital formation by mobilizing idle saving of public

Provides immediate large scale employment

Promotes balanced regional development

Helps reduce concentration of economic power

Stimulates equitable redistribution of wealth, income and political

power

Effective resource mobilization of capital and skill

Promotes country’s export trade

Entrepreneurship

Documents

Transcript of Entrepreneurship