Entrepreneurship

Entrepreneurship comes from a french word `Entrependre’ and the German

word `Uternehmen’ both meaning individuals who are `undertakers’ i.e. those
who took the risk of a new enterprise. Entrepreneurship is a dynamic activity
which helps the entrepreneur to bring changes in the process of production,
innovation in production, new usage of materials, creator of market etc. It is a
metal attitude to foresee risk and uncertainty and do something new in an
effective manner to achieve certain goals.

An entrepreneur is an economic change agent with knowledge, skills, initiative,

drive and spirit of innovation to achieve goals. He identifies and seizes
opportunity for economic benefits. He is a risk bearer, an organizer and an
innovator.

According to Economists → An entrepreneur is the one who brings resources,

labour, material and other assets into combination to produce a socially viable
product, and also one who introduces changes, innovation and new order.

According to Management → A person with a vision and action plan to achieve

it is an entrepreneur.

Functions of an entrepreneur →

Identification of opportunities
Introduction of a new product
Gathering resources or Introducing new methods of production
Developing new markets

Characteristics of an Entrepreneur →
Vision – He is able to visualize market demand, socio-economic environment and
the future of business venture.

Knowledge – He has sound conceptual knowledge about all the technicalities of

his business.

Desire to succeed – He has multiple goals and a seeks opportunities to be

productive.

Independence – He is independent in work and decision making

Optimism – He knows how to exploit opportunities.

Value addition – He does not follow the conventional rule of thumb, they have
a desire to create, innovate and add value.

Initiative – He takes the initiative to make an action plan from limited resources.

Goal setting – He sets realistic goals.

Problem solver – He is creative in problem solving.

Good human relations – He is a good leader, motivator and team builder.

Communication skills – He has the ability to persuade others.

Types of Entrepreneur →
(i) According to Clarence Banhof →

♦ Aggressive/Innovative entrepreneur – The one who uses various

combinations of information and factors of production to assemble and engineer
new and innovative products.

♦ Immitative/Adoptive entrepreneur – The one who simply adopts a successful

innovation introduced by other entrepreneurs.

♦ Fabian entrepreneur – The one who is timid and cautious in making bold
decisions. Such an entrepreneur adopts innovations in his business only when he
fears that not innovating may damage his business.

♦ Drone entrepreneur – A drone entrepreneur is one who refuses to adopt new

innovations even at the cost of reduced returns.

(ii) According to Authur H. Cole →

♦ Empirical entrepreneur – An entrepreneur who does not innovate and follows

the rule of thumb.

♦ Rational entrepreneur – An rational entrepreneur is one who keeps himself

updated with his business, the market and economic conditions, and introduces
revolutionary ideas.

♦ Cognitive entrepreneur – An entrepreneur that seeks advice and services of

experts to make changes which are revolutionary and reflect a complete shift from
its existing structure.

(iii) According to Ownership →

♦ Public entrepreneurship – These are individuals who partner with the
government to create enterprises which serve the public in innovative ways.

♦ Private entrepreneurship – These entrepreneurs are profit oriented and do not

enter market which have low monetary rewards associated with it.

(iv) According to Scale of enterprise →

♦ Large scale entrepreneur – Large scale entrepreneurs are usually found in

developed countries. These entrepreneurs introduce revolutionary ideas and are
able to sustain high profits and develop new technologies as they possess the
financial capacity and necessary resources to do so.

♦ Small scale entrepreneur – Small scale entrepreneurs do not have the

necessary funds and technology to initiate large scale production and introduce
revolutionary ideas.

Nature of Entrepreneurship →
♦ Creation of an enterprise – It involves creation and operation of an enterprise.

♦ Organizing function – It brings together various factors of production for

economic use.

♦ Innovation – It is an automatic, spontaneous and creative response to changes

in the environment.

♦ Risk bearing capacity – It assumes uncertainty of future.

♦ Managerial and leadership function – It is responsible for controlling and

coordinating the human resource and giving direction to an enterprise.

♦ Gap filling – It fills the gap between human needs and available products and
services.

Process of Entrepreneurship →
(A) Identify an opportunity – An Entrepreneur senses opportunities and
visualizes a market since they are creative and open to new ideas and seek
challenges. They look for needs, wants, problems and challenges that are not met
or dealt effectively. Since their ideas are innovative they gain first movers
advantage which provides product identification and higher credibility in the
market.
(B) Establishing a vision – It involves generation of ideas using past experience
and creativity to develop new and innovative ways to solve a problem, or satisfy
a need. Out of many ideas the most feasible and profitable are chosen and
narrowed to one best idea. He evaluates different opportunities and the business
environment to assess the (i) Real and Perceived value of the product/service (ii)
Risks and rewards associated with the project (iii) and differential advantage in
its competitive environment.

(C) Persuade others – He forms a foundation team which consists of a group of

individuals who work together to turn his vision into reality. They may be
partners, financiers, family members etc.

(D) Gathering Resources – It involves using a business plan to attract investors,

venture capitalists, partners, financial institutions, promoters etc. The main task
is to research and identify resources that are needed to turn the idea into a viable
venture.

Resources can be categorized into –

• Financial Resources – Personal savings, retained capital, banks, government

institutions, family, friends, partnerships, venture capital, public issue.

• Operating Resources – They can be Tangible or Intangible.

Tangible – (a) machines (b) raw materials (c) land and building (d) office
equipments (An entrepreneur has to make a decision to buy, rent or hire them).

Intangible resources – (a) company’s image (b) operating procedures (c)

transportation (d) management

• Human – Temporary/permanent employees, Amount of man power needed,

Recruitment, Selection and Training of staff, Compensation, Organization
culture.

• Information – An efficient management information system is needed in order

to have timely info about customers, markets, competitors and external
environment. All the data is networked on real time basis to speed up actions
based on information.

(E) Create new Venture – When all the resources have been arranged, the next
step is Creation and establishment of a new venture and running the business
venture successfully. It requires a lot of enthusiasm and persuasion to gather
optimum resources and it requires a lot of perseverance and passion to believe in
self.
(F) Change/Adapt with time – It is necessary to monitor and upgrade the
organization with changing market conditions. It requires availability of funds to
make changes and the adaptability of human resource towards changed
environment.

Functions of Entrepreneurship →
(A) Primary Functions –

Planning
Organizing
Decision Making
Managing
Innovating
Risk bearing

(B) Secondary Functions –

Diversification of production
Expansion of the enterprise
Maintaining cordial employer and employee relations
Tackling Labour problem
Co-ordinating and communicating with third parties

(C) Other Functions –

Managing of scarce resources

Dealing with public bureaucracy
Identifying parallel opportunities
Building Strong customer relations

Barriers to Entrepreneurship →
(i) Environmental Barriers →

(a) Raw Material – Non-availability of raw materials required for production

during peak seasons. It leads to increase in price of raw materials due to
competition.

(b) Labour –

Lack of skilled labour

Lack of committed and loyal employee
Quality and Quantity of labour
(c) Machinery – Machines are necessary but they are also costly and due to rapid
change in technology they become obsolete and require replacement which
requires cash in hand. It becomes very difficult for small business organization
to keep updating its production process.

(d) Land and Building – Acquisition of land and construction of building at a

prime location require heavy expenditure. If the land is taken on rent, it becomes
a fixed cost and a constant concern for the entrepreneur.

(e) Infrastructure support – Adequacy of power, proper roads, water and drainage
facilities etc. There is less support from development authorities due to red-
tapism and corruption.

(ii) Financial barrier → Availability of funds is a major concern. A delay in

source of finance results in delay of starting or running business.

(iii) Personal Barrier → They are caused by emotional blocks of an

individual. They cause a mental obstruction. They are :-

(a) Lack of confidence – They think they will never find a successful business
idea and would be unable to attract necessary resources. Therefore, they dismiss
the thought of being self-employed.

(b) Lack of Dependability on others – They aim to gain their additional expertise
through trail and error and experience, rather than seeking further development
or personal assistance from others.

(c) Lack of Motivation – Lose interest and motivation when ideas don’t work.

(d) Lack of Patience – When desire to achieve success in first attempt or to

become rich instantly are confronted with business challenges/problems they lose
interest. They give up at during initial losses.

(e) Inability to Dream – Sometimes they are short of vision or satisfied with what
they have achieved and lose interest in further expansion of business.

(f) Sense of Pride/Embarrassment – they are too proud or too embarrassed to take
help.

(iv) Societal Barrier →

• Socio-cultural norms and values

• Degree of approval or disapproval of entrepreneurial behaviour
• Financial stability and family background
 • Caste and religious affiliation

(v) Political Barrier →

• Government incentives and concessions

• Facilitating socio-economic setting
• interest in economic development of society

Scope of Entrepreneurship in India →

Individuals are opting for entrepreneurship as a career due to reasons such as –

Desire of control over one’s future

More profits
Lack of employment opportunity
Government measures to promote entrepreneurship

Entrepreneurship provides employment and source of earning to people. It helps

in reducing the monopoly of rich businessman and achieving a balanced regional
development and growth in economy. Government of India is conducting
development programmes to identify entrepreneurial potential and assistance
from financial and non-financial institutions are being provided to entrepreneur.
Entrepreneurship training institutes have been established and financial and
operational support is being provided to young entrepreneurs in India