UNIT – II

ENTREPRENEURSHIP

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 ENTREPRENEURSHIP
Meaning of Entrepreneurship
Entrepreneurship is the ability and readiness
to develop, organize and run a business
enterprise, along with any of its uncertainties
in order to make a profit. The most
prominent example of entrepreneurship is
the starting of new businesses.

Meaning of Entrepreneur
The entrepreneur is defined as someone who has the ability and
desire to establish, administer and succeed in a startup venture along
with risk entitled to it, to make profits. The entrepreneurs are often
known as a source of new ideas or innovators, and bring new ideas in
the market by replacing old with a new invention.
In short, anyone who has the will and determination to start a new
company and deals with all the risks that go with it can become an
Entrepreneur. 2
 ENTREPRENEURSHIP
Importance(Benefits) of Entrepreneurship:
Creation of Employment- Entrepreneurship generates employment. It provides an
entry-level job, required for gaining experience and training for unskilled workers.
Innovation- It is the hub of innovation that provides new product ventures, market,
technology and quality of goods, etc., and increase the standard of living of people.
Impact on Society and Community Development- A society becomes greater if the
employment base is large and diversified. It brings about changes in society and
promotes facilities like higher expenditure on education, better sanitation, fewer
slums, a higher level of homeownership. Therefore, entrepreneurship assists the
organisation towards a more stable and high quality of community life.
Increase Standard of Living- Entrepreneurship helps to improve the standard of
living of a person by increasing the income. The standard of living means, increase
in the consumption of various goods and services by a household for a particular
period.
Supports research and development- New products and services need to be
researched and tested before launching in the market. Therefore, an entrepreneur
also dispenses finance for research and development with research institutions
and universities. This promotes research, general construction, and development in
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the economy.
 ENTREPRENEURSHIP
Entrepreneurship is the process of starting a business and taking risks to
create value. Key concepts of entrepreneurship include:
Opportunity recognition: Identifying business opportunities
Innovation: Creating new ideas and products
Risk-taking: Being courageous and willing to take on financial,
psychological, and social risk
Creativity: Being imaginative and coming up with new ideas
Market analysis: Researching the market and competitors
Resource management: Obtaining and using resources like money,
time, and people
Networking: Building relationships with suppliers, buyers, and others
Adaptability: Being flexible and open to change
Persistence: Continuing to pursue opportunities despite setbacks
Value creation: Generating profits by selling products or services
Leadership: Guiding employees towards success 4
 ENTREPRENEURSHIP
CHARACTERISTICS OF A SUCCESSFUL ENTREPRENEUR:
(a) Creativity: The terms creativity and innovation are often used to
mean the same thing, but each has a unique connotation. Creativity is
"the ability to bring something new into existence". This definition
emphasises the "ability", not the "activity." of bringing something new
into existence. A person may therefore conceive of something new and
envision how it will be useful. But not necessarily take the necessary
action to make it a reality. Innovation is the process of doing new things.
But creativity is a prerequisite to innovation.

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 ENTREPRENEURSHIP
CHARACTERISTICS OF A SUCCESSFUL ENTREPRENEUR (Contd…):
(b) Innovation: Entrepreneurs innovate Innovation is the specific
instrument of entrepreneurship. It is the act that endows resources with
a new capacity to create wealth. Innovation, indeed, creates a resource.
Successful entrepreneurs, whatever their individual motivation- be it
money, power, curiosity, or the desire for fame and recognition- try to
create value and to make a contribution. Still successful entrepreneurs
aim high. They arc not content simply to improve on what already exists,
or to modify it. They try to create new and different values and new and
different satisfaction. to convert a "material" into a "resource', or to
combine existing resources in a new and more productive configuration.
(c) Dynamism: Innovation together with dynamism constitutes a
potential combination for prosperity. Dynamism revises the targets of
the enterprise upwards time and again. The enterprise may open up
new vistas, better product mix. or charismatic product image
stimulating steady growth. A dynamic entrepreneur is always pragmatic.
Given the potentialities of the enterprises, he sets attainable goals, 6
 ENTREPRENEURSHIP
CHARACTERISTICS OF A SUCCESSFUL ENTREPRENEUR (Contd…):
which are to be accomplished within specific timeframes. An entrepreneur
tends to approach problems to solve them rather than running away from
them. A good entrepreneur-manager trains his staff continuously besides
undergoing the same process himself.
(d) Leadership: Leadership is the basic quality of an entrepreneur. This
spirit keeps him paces forward in any field , Leadership qualities will enable
a person to stand apart in whatever profession he might be in. The quality
of his leadership is clear from personal relationships, mode of handling a
problem, generating resources and taking others in to ones own stride. An
enterprise endowed with the resource of leadership will always be
prominent in the market.
(e) Teambuilding: An entrepreneur should have an ability to build a team.
A team is a group of individuals with a common purpose, that is focused
and aligned to achieve a specific task or set of outcomes.
(f) Achievement motivation: Entrepreneurs have a high need for
achievement and are guided by their inner self, motivating their behaviour
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towards accomplishment.
 ENTREPRENEURSHIP
CHARACTERISTICS OF A SUCCESSFUL ENTREPRENEUR (Contd…):
(g) Problem solving: It is important that an entrepreneur should be able
to solve problems and not avoid them. A formal problem-solving model
helps entrepreneurs solve problems on a logical manner.
(h) Goal orientation: Goal setting is the achievement of targets and
objectives for successful performance of an entrepreneur, both long run
and short run. It helps to measure how well individuals and groups are
meeting the performance standards.
(i) Risk taking and decision-making ability: Entrepreneurs arc persons
who take decisions under conditions of uncertainty. and therefore are
willing to bear risk, but never gamble with results. This is evidenced by
market studies, exploring alternative lines of production or a new
product mix, or a new combination of inputs. and so on. They set goals
that require high level of performance.
(j) Commitment: One of the subtle qualities of an entrepreneur is his
willpower. Strong determination with sound thinking fortifies will power.
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 ENTREPRENEURSHIP
CLASSIFICATION OF ENTREPRENEURS
(a) Based on Functional Characteristics
1. Innovative entrepreneur: Such entrepreneurs introduce new goods
or new methods of production or discover new markets or reorganise
their enterprises.
2. Imitative or adoptive entrepreneur: Such entrepreneurs do not
innovate themselves. But imitate techniques and technology innovated
by others.
3. Fabian entrepreneur: Such entrepreneurs display great caution and
skepticism in experimenting with any change in their enterprise.
4. Drone entrepreneur: Such entrepreneurs are characterised by a die-
hard conservatism and may even be prepared to suffer the loss of
business.

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 ENTREPRENEURSHIP
CLASSIFICATION OF ENTREPRENEURS (Contd..)
(b) Based on the Developmental Angle
1. Prime mover: This entrepreneur sets in motion a powerful sequence
of development, expansion, and diversification of business.
2. Manager: Such an entrepreneur does not initiate expansion and is
content just staying in business.
3. Minor innovator: This entrepreneur contributes to economic
progress by finding better use for existing resources.
4. Satellite: This entrepreneur assumes a supplier's role and slowly
moves towards a productive enterprise.
5. Local trading: Such an enterpreneur limits his enterprise to the local
market.

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 ENTREPRENEURSHIP
CLASSIFICATION OF ENTREPRENEURS (Contd..)
(c) Based on Types of Entrepreneurial Business
1. Manufacturing: An entrepreneur who runs such a business actually
produces the products that can be sold using resources and supplies.
2. Wholesaling: An entrepreneur with such a business sells products to
the middle man.
3. Retailing: An entrepreneur with such a business sells products
directly to the people who use or consume them.
4. Service: An entrepreneur in this business sells services rather than
products.
(d) Based on the Nine Personality Types of Entrepreneurs
1. Manufacturing 6. The Analyst
2. The Advisor 7. The Fireball
3. The Superstar 8. The Hero
4. The Artist 9. The Healer
5. The Visionary 11
 CLASSIFICATION OF ENTREPRENEURS (Contd..)
(e) Based on schools of Thought on Entrepreneurship
These are six schools of thought on entrepreneurship each with its own
underlying set of beliefs. Each of these schools can be categorised
according to its interest in studying personal characteristics,
opportunities, management or the need for adapting an existing
venture. The following is the method deciding different schools of
thought.
By Assessing personal qualities
1. The Great Person school of entrepreneurship
2. The Psychological Characteristics school of entrepreneurship
By Recognising opportunities
3. The Classical school of entrepreneurship
By Acting and managing
4. The Management school of entrepreneurship
5. The Leadership school of entrepreneurship
By Reassessing and adopting
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6. The Intrapreneurship school of entrepreneurship
 INTRAPRENEURSHIP
Meaning of Intrapreneurship
Intrapreneurs are employees who exhibit entrepreneurial traits and
behaviors, taking initiative to identify and pursue innovative ideas,
projects, or ventures within their company, often tasked with
developing new products, services, or processes.
Key characteristics of an intrapreneur
Intrapreneurs share many characteristics with entrepreneurs, and their approach is
usually similar. The main difference is that entrepreneurs typically need to find
resources to pursue their ideas—including money, technology, workers, and time—
while intrapreneurs can pull resources from within their current organisation.
Essentially, an intrapreneur is an employer-sponsored entrepreneur.
Some key characteristics of intrapreneurs are:
• They risk something of value, like time or effort.
• They innovate and create.
• They work independently within their company.
• They locate necessary resources within their company.
• They share the reward of their risk with their company.
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Difference Between Entrepreneur and Intrapreneur

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 ENTREPRENEURSHIP
Myths of Entrepreneurship
• Entrepreneurs are born not made
• Entrepreneurs are academic and social misfits
• Entrepreneurs fit an ideal profile.
• All you need is money to be an entrepreneur
• All you need is luck to be an entrepreneur
• A great idea is the only ingredient in a recipe for business
• My best friend will be a great business partner
• Having no boss is great fun
• I can make lots of money
• I will definitely become successful.
• Life will be much simpler if I work for myself 15
 ENTREPRENEURSHIP
ENTREPRENEURIAL DEVELOPMENT MODELS
The models suggested for the development of entrepreneurship fall in
the following categories.
(a) Psychological models
(b) Sociological models
(c) Integrated models
(a) Psychological Models
McClelland (1961) ascribes more importance to achievement motives,
which earlier related to child-rearing practices. But in his recent book with
D.G. Winter, he has altered his earlier proposition on the importance of
child rearing as the intrinsic determinant of the achievement motive. Now
change in motivation is seen primarily as a result of the ideological arousal
of the latent need for achievement among adults.
Everett Hagen's theory of social change lays emphasis on "creative
personality" as a casual link in entrepreneurial behaviour and "status
withdrawal" as the determinant of the creative personality.
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 ENTREPRENEURSHIP
ENTREPRENEURIAL DEVELOPMENT MODELS
(a) Psychological Models (Contd..)
John Kunkel (1965) considered entrepreneurial supply by suggesting a
behaviourist model. His model suggests that entrepreneurial behaviour is a
function of the surrounding social structure, both past and present, and can
really be influenced by manipulating economic and social incentives.
(b) Sociological Models
Frank W. Young's theory of entrepreneurship is a theory of change based
upon society’s incorporation of relative sub-groups. The relativeness of a
sub-group which has a low status in a larger society will lead to
entrepreneurial behaviour if the group has better institutional resources
than others in the society at the same level. Young’s model of
entrepreneurship suggests the creation of supporting institutions in society
as the determinant of entrepreneurship.

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 ENTREPRENEURSHIP
ENTREPRENEURIAL DEVELOPMENT MODELS
(c) Integrated Models
T. V. Rao (1975) in "entrepreneurial disposition" has included the following
factors.
(i) Need for motive is the dynamic which for the prospective
entrepreneur has the greatest possibility of achieving the goals if one
performs those activities.
(ii) Long- tern involvement is the goal either at thinking level or at
activity level in entrepreneurial activity that is viewed as a target to be
fulfilled.
(iii) Personal, social and material resources which, he thinks, are related
to entry and success in the area of entrepreneurial activity.
(iv) Socio-political system to be perceived as suitable for establishment
and development of his enterprise.
All these factors are additive in nature and their optimal presence lead to
the entry point of entrepreneurship. which leads to acquisition of material
resources and beginning of business.
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 ENTREPRENEURSHIP
ENTREPRENEURIAL DEVELOPMENT MODELS
(c) Integrated Models (Contd..)
B. S. Venkata Rao (1975) described the following five stages for promoting
small entrepreneurship.
(I) Stimulation
(2) Identification
(3) Development
(4) Promotion
(5) Follow up
M. P. Akhori suggested the Entrepreneurial Development Cycle (Figure)
consisting of the following components for the promotion and
development of entrepreneurship. According to him the whole process of
developing an entrepreneur, making him start a venture, supporting and
sustaining him involves a cyclic process.

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 ENTREPRENEURSHIP
ENTREPRENEURIAL DEVELOPMENT MODELS
(c) Integrated Models (Contd..)
M. P. Akhori Entrepreneurial Development Cycle. (Contd…)

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 ENTREPRENEURSHIP
ENTREPRENEURIAL DEVELOPMENT MODELS
(c) Integrated Models (Contd..)
M. P. Akhori Entrepreneurial Development Cycle. (Contd…)
1. Stimulatory activities: They prepare the background for the
entrepreneurship to sprout and for people to start looking for
entrepreneurial pursuits. These can be achieved by the following activities.
• Entrepreneurial education
• Planned publicity for entrepreneurial opportunities
• Identification of potential entrepreneurs through scientific methods
• Motivational training to new entrepreneurs
• Help and guidance in selecting products and preparing project reports
• Making available techno-economic information and product profiles
• Evolving locally suitable new products and processes
• Availability of local agencies with trained personnel for entrepreneurial
counselling and promotions
• Creating entrepreneurial forums
• Recognition of entrepreneurs
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 ENTREPRENEURSHIP
ENTREPRENEURIAL DEVELOPMENT MODELS
(c) Integrated Models (Contd..)
M. P. Akhori Entrepreneurial Development Cycle. (Contd…)
2. Support activities: These activities help a person to develop into an
entrepreneur. The various support activities are given below.
• Registration of unit
• Arranging finance
• Providing land. shed, power, water, and so on.
• Guidance for selecting and obtaining machinery
• Supply of scarce raw materials
• Getting licences/import licences
• Providing common facilities
• Granting tax relief or other subsidy
• Offering management consultancy services
• Help marketing the product
• Providing information

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 ENTREPRENEURSHIP
ENTREPRENEURIAL DEVELOPMENT MODELS
(c) Integrated Models (Contd..)
M. P. Akhori Entrepreneurial Development Cycle. (Contd…)
3. Sustaining activities: These activities are all those that help in the
continuous and efficient functioning of entrepreneurship. The various
sustaining activities are as follows.
• Help modernisation
• Help diversification/expansion/substitute production
• Additional financing for full capacity utilisation
• Deferring repayment/interest
• Diagnostic industrial extension/consultancy services
• Production units legislation/policy change
• Product reservation/creating new avenues for marketing
• Quality testing and approving services
• Need-based common facilities centres

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PROBLEMS FACED BY ENTREPRENEURS
The problems of entrepreneurs may be divided into -Internal, External
and Other problems. External problems are those which result from
factors beyond the control of the entrepreneurs while internal
problems are those which are not influenced by external factors.
A) Internal Problems of Entrepreneurs
1. Planning
(a) Technical feasibility
• Inadequate technical know-how
• Locational disadvantage
• Outdated production process
(b) Economic viability
• High cost of inputs • Lack of strategies
• Break-even point too high • Lack of vision
• Uneconomic size of project • Inadequate connections
• Choice of idea • Underestimation of financial
• Feeble structure requirements
• Faulty planning • Unduly large investment in fixed assets
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• Poor project implementation • Overestimation of demand
 ENTREPRENEURSHIP
PROBLEMS FACED BY ENTREPRENEURS (Contd…)
A) Internal Problems of Entrepreneurs (Contd..)
2. Implementation
Cost over-runs resulting from delays in getting licences, sanctions, and so
on and inadequate mobilisation of finance.
3. Production
(a) Production management
• Inappropriate product mix
• Poor quality control
• Poor capacity utilisation
• High cost of production
• Poor inventory maintenance and ,eplacement
• Lack of timely and adequate modernisation and so on
• High wastage
• Poor production
(b) Labour management
• Excising high wage structure
• Inefficient handling of labour problems 25
 ENTREPRENEURSHIP
PROBLEMS FACED BY ENTREPRENEURS (Contd…)
A) Internal Problems of Entrepreneurs (Contd..)
3. Production (Contd…)
(b) Labour management (Contd..)
• Excessive manpower
• Poor labour productivity
• Poor labour relations
• Lack of trained skilled labour or technically competent personnel
(c) Marketing management
• Dependence on a single customer or a limited number of
customers/single or a limited number of products
• Poor sales realisation
• Defective pricing policy
• Booking of large orders at fixed prices in an inflationary market
• Weak market organisation
• Lack of market feedback and market research
• Unscrupulous sale purchase practices
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 ENTREPRENEURSHIP
PROBLEMS FACED BY ENTREPRENEURS (Contd…)
A) Internal Problems of Entrepreneurs (Contd..)
3. Production (Contd…)
(d) Financial management
• Poor resource management and financial planning
• Faulty costing
• Dividend policy
• General financial indiscipline and application of funds for
unauthorised purposes
• Deficiency of funds
• Over trading
• Unfavourable gearing or keeping adverse debt equity ratio
• Inadequate working capital
• Absence of cost consciousness
• Lack of effective collection machinery

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 ENTREPRENEURSHIP
PROBLEMS FACED BY ENTREPRENEURS (Contd…)
A) Internal Problems of Entrepreneurs (Contd..)
3. Production (Contd…)
(e) Administrative management
• Over centralisation
• Lack of professionalism
• Lack of feedback to management (Management Information
System)
• Lack of timely diversification
• Excessive expenditure on R & D
B) External Problems of Entrepreneurs
(a) Infrastructural
• Location • Non-availability or irregular supply of
• Power critical raw materials or other inputs
• Water • Transport bottlenecks
• Post Office and so on
• Communication
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 ENTREPRENEURSHIP
PROBLEMS FACED BY ENTREPRENEURS (Contd…)
B) External Problems of Entrepreneurs (Contd..)
(b) Financial
• Capital
• Working capital
• Long-tern funds
• Recovery
(c) Marketing
(d) Taxation
(e) Raw material
(f) Industrial and financial regulations
(g) Inspections
(h) Technology
(i) Government policy
(j) Administrative hurdles
(k) Rampant corruption
(I) Lack of direction
(m) Competitive and volatile environment 29
PROBLEMS FACED BY ENTREPRENEURS (Contd…)
C) Other Problems or Specific Management Problems
Besides internal and external problems of entrepreneurs, some specific
problems faced by the entrepreneurs are discussed below.
• Management deficiency: With growing sophistication and
modernisation of market requirements for their products, it is very
important for entrepreneurs to employ modem methods of
management. The new entrants in the field of small industries in
general do not have any prior training
or background in the management of their units.
• Finance: Financial inadequacy is also reported to be one of the most
important causes leading to sickness of small-scale units
• Manufacturing and technical problem: Most units face production
problems due to lack of raw material availability, skilled labour
shortage, under-utilisation of capacity and time and cost overrun.
• Product planning : The selection of product depends on technical
know-how, infrastructure facilities available and technical and
managerial abilities of entrepreneurs to complete a project
successfully. No product planning is done by most SSI units. 30
 ENTREPRENEURSHIP
PROBLEMS FACED BY ENTREPRENEURS (Contd…)
C) Other Problems or Specific Management Problems (Contd…)
• Selection or equipment, plant and machinery: No detailed scrutiny
is done before selecting equipment, plant and machinery.
• Human resource Development: Most SSI units do not give any
consideration to human resource development.
• Technical know-how: Most SSI units are neither technically
equipped nor do they possess technical know-how.
• Preparation or project report: A project report is usually not
prepared on scientific lines

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 ENTREPRENEURSHIP
CAPACITY BUILDING FOR ENTREPRENEURSHIP
Capacity building is committing to create the right environment to develop
successful business builders. To do this, India must focus on four areas.
1. Create the right environment for success: Entrepreneurs should find it
easy to start a business. The first challenge for the country is to create a
handful of areas of excellence-the breeding ground for ideas to grow into
businesses. These areas of excellence need strengthening before they can
claim to be one. One way of strengthening these areas is to consider the
role of universities and educational institutions-places where excellence
typically thrives. Creating such educational institutions by strengthening the
Indian Institutes and starting new ones is going to be very important.
2. Ensure that entrepreneurs have access to the right skills: The most
Indian start up businesses face two skill gaps: entrepreneurial (how to
manage business risks. build a team. identify and get funding) and
functional (product development know-how. marketing skills. and so on).
India can move towards ensuring that the curriculum in universities is
modified to address today's changing business landscape, particularly in
emerging markets, and build "centres of entrepreneurial excellence" in
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institutes that will actively assist entrepreneurs.
 ENTREPRENEURSHIP
CAPACITY BUILDING FOR ENTREPRENEURSHIP (Contd..)
3. Ensure that entrepreneurs have access to "smart" capital: For a long
time, Indian entrepreneurs have had little access to capital. It is true that in
the last few years, several venture funds have entered the Indian market.
And, while the sector is still in its infancy in India, VCs(Venture Capital) are
providing capital as well as critical knowledge and access to potential
partners, suppliers, and clients across the globe. India's third challenge is
creating a global support network of "angels" willing to support young
businesses should be quickly achieved.
4. Enable networking and exchange: Entrepreneurs learn from experience-
theirs and that of others. Much of the success of Indians in Silicon Valley is
attributed to the experience, sharing, and support TIE(India Angel Forum)
members have extended to young entrepreneurs. India would benefit from
creating a strong network of established entrepreneurs and managers that
entrepreneurs could draw on for advice and support.

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