unit v entrepreneurship

Management & Entrepreneurship

(Course Code:10AL51)

Department of IE & M

JSS Academy of Technical Education, Bengaluru-560060

Entrepreneurship

CHAPTER 5: Entrepreneurship

• Introduction – Meaning and Evolution.

• Functions and characteristics of an Entrepreneur, Types of Entrepreneur.

• Development of Entrepreneurship, Stages in entrepreneurial process.

• Role of entrepreneurs in Economic Development.

• Entrepreneurship in India; Entrepreneurship – its Barriers.

Course outline

Introduction

Introduction - Entrepreneurship

The concept of entrepreneurship was first established in the 1700s.

Many simply equate it with Starting one’s own business.

Most economists believe it is more than that.

The word entrepreneur is derived from the French word ‘enterprendre’ it

means “to undertake”

Introduction - Entrepreneurship

Entrepreneur is an individual who takes risk and starts something new.

Entrepreneurship - A purposeful activity to initiate and develop a profit

oriented business.

Economists View

Entrepreneurs develop new goods or processes that the market demands and

are not currently being supplied.

Who is an Entrepreneur?

Richard Cantillon (1725) • An entrepreneur is a person who undertakes to do a job.

Adam Smith(1776)

• An entrepreneur is a person who acts as agent in transforming demand into supply.

John Stuart Mill (1848) • An entrepreneur is a prime mover in the private enterprise.

Jean Babtiste(1803)

• An entrepreneur is a person who shifts resources from an area of low productivity to high productivity.

Who is an Entrepreneur?

Carl Menger (1871)

• Economic agent who transforms resources into products and services.

Peter Drucker(1964)

• An entrepreneur searches for change, responds to it and exploits opportunities.

E.E.Hagen• An entrepreneur is an economic man who tries to maximize

his profits by innovation.

J Schumpeter• An entrepreneur is an Innovator who Introduce something

new in the economy.

Entrepreneurship

Entrepreneur Entrepreneurship Enterprise

Person / an Individual Process The Outcome

Benefits of Entrepreneurship

The opportunity to:

• Create your own destiny / own boss / Pursue own idea.

• Make a difference.

• Reach your full potential.

• Reap impressive profits / Financial benefits.

• Contribute to society and to be recognized for your efforts.

Drawbacks of Entrepreneurship

Uncertainty of income.

Risk of losing your entire investment.

Long hours and hard work.

High level of stress.

Complete responsibility.

Definition

Definition - Entrepreneur

Entrepreneur is an individual who establishes a new entity to offer a new

product or service into a new or existing market, whether it is for a profitable

or non-profitable outcome.

One who creates a new business in the face of risk and uncertainty for the

purpose of achieving profit and growth by identifying opportunities and

assembling the necessary resources to capitalize on them.

Definition - Entrepreneurship

Entrepreneurship is the process of seeking businesses opportunities under

conditions of risk.

Process of creating something new and assuming the risks and rewards.

Entrepreneurship is the process of creating something new of value by devoting

the necessary time and effort, by accepting and acknowledging the necessary

risks (financial, psychological, and social), and receiving the resulting

rewards(monetary and personal satisfaction).

Definition – Entrepreneur and 10 Key action roles

Ent

repr

eneu

rsare creative and innovative

are persons who makes significant difference

Spot and exploit opportunities

Find resources and competencies to exploit opportunities

are good team builders and networkers

are determined in the face of adversity and competition

Manage change risk

Have control of the business

Puts customer first

Creates capital

Characteristics of Entrepreneur

Entrepreneurship

Process Entrepreneur

Innovation

CreationCreating

Value

Profit or non profit

Growth

Uniqueness

Personal Initiative Who has strong personal initiative is able to act immediately on available opportunities and choose best strategy when he faces a problem.

Characteristics

Seize Opportunities Identifies and exploits business opportunities for sustainability.

Information seeker Gather and Analysis the information pertaining to the market.

High Work Quality Best way possible to produce products of the best quality.

Commitment towards work Taking full responsibility in completing a task.

Efficient Use/Apply business information and management methods to improve his

efficiency in business.

Systematic Planning Arranging business strategies to achieve business goals.

Creative Problem Solving

Smart steps to solve the problems / looking and thinking of innovative new ideas / creative problem solving methods.

Characteristics

Self Confidence Feeling of confidence towards his capability in solving certain tasks and challenges.

Characteristics

Vision

Knowledge

Desire to succeed

Independence

Optimism

Value addition

Innovation

Risk taking

Decision Making

Leadership

Business planning

Organization building

Self confidence

Hard working

Characteristics

Often operates on the frontiers of technology so understand multiple aspects of

the environment.

Has a vision.

Possesses flexibility, Problem solving skills and uses multi-disciplinary approach.

Encourages open discussion and team work.

Builds a coalition of supporters.

Common Traits of Entrepreneurs:

Aggressively pursues goals; pushes self and others.

Seeks autonomy, independence and freedom from boundaries.

Very focused.

Acts quickly, often without deliberating.

Pursues simple, practical solutions.

Willing to take risks; comfortable with uncertainty.

Exhibits clear opinions and values; has high expectations.

“just do it” Positive, optimistic; communicates confidence.

E-Traits / “Type E” personality

Knowledge and Skill Requirements

Technical Skills

Writing/Oral

Listening

Ability to organize

Interpersonal skills

Team player

Business Management Skills

Planning & Goal setting

Decision Making

Human resources

Marketing/Finance/Accounting

Management

Entrepreneurial Skills

Inner control/Disciplined

Risk taking

Innovative

Change oriented

Ability to Manage change

Knowledge and Skill Requirements

Personal Characteristics Courage Creativity Curiosity Determination Discipline Responsiveness Enthusiasm Flexibility Honesty Patience Responsibility

Skills

A skill is an ability that’s learned through training and practice. Business Skill Communication Skill Computer Skill Decision-Making and Problem-Solving Skills Mathematical Skill Organizational Skill People Skills

Characteristics of Successful Entrepreneurs

creativity leadership Goal orientation innovation

Team building Risk taker Dynamism Problem

solver

commitment

Characteristics of an “IDEAL” entrepreneur

Functions of Entrepreneur


Innovation

Risk Taking

Organization Building

Absorb uncertainty

Frame the Challenge

Build Commitment


Idea generation • Implies product selection and project identification.

Determination of business objectives

• Formulate the business objectives.• Clear about the nature and type of business.

Rising of funds• Raise the fund from internal source as well as external

sources.

Procurement of machines and

materials• Identify and regularize the sources.


Market research• Undertake market research to know the details of the

intending product.

Determining form of enterprise

• Based on the nature of the product, volume of investment, etc.

Recruitment of manpower • Requirement for short term and long term.

Implementation of the project

• Develop schedule and action plan for the implementation of the project within the time bound.

Entrepreneur v/s Manager

Factors Entrepreneur Manager

Decisions Strategic. Day to day.

Risk Assumes risk and uncertainty. Careful / avoid.

Rewards Profits, which are highly uncertain and not fixed. Salary which is certain and fixed.

Innovation Acts as innovator / change agent. A manager simply executes plans prepared by an entrepreneur.

Role Start-up. Implementation.

Time-span Long term. Short or medium term.

Failures and mistakes Deals with them as learning experience. Strives to avoid them.

Entrepreneur v/s Manager

Small Business v Entrepreneurial Ventures

Small Businesses v/s Entrepreneurial Ventures

Small Business Entrepreneurial Ventures

Independently owned, operated and financed. Innovative practices.

Less than 100 employees. Goals are profitability and growth.

Doesn’t emphasize new or innovative practices. Seeks out new opportunities.

Little impact on industry. Willingness to take risks.

INTRAPRENEURS v/s ENTRAPRENEURS

An intrapreneur - “any of the dreamer who do”.

• Those who take hand on responsibility of creating innovation of any kind within

the organisation.

• The intrapreneur may be creator or inventor but he is always a dreamer who

finds out how to turn an idea into a profitable reality.

INTRAPRENEURS

INTRAPRENEURS v/s ENTRAPRENEURS

Intrapreneurs Entrepreneurs

DependencyHe is dependent on theentrepreneurs i.e. owner Independent

Risk He does not fully bear the riskinvolved in the organization

Entrepreneurs bears the riskinvolved in the business.

Operation An intrapreneur operates frominside.

An entrepreneur operates fromoutside.

Intrapreneurs takes the responsibility

of creating innovation

Entrepreneurs converts the ideasinto viable opportunities.

Intrapreneur Qualities

Innovator Visionary Knowledgeable Flexibility

Encourage teamwork Diplomatic

Open to discussion and

ideaMotivator

Some of the companies started by Intrapreneur

Entrepreneurial Process

Steps in the Entrepreneurial Process

Discovery

Concept Development

Resourcing

Actualization

Harvesting

Discovery • Entrepreneur generates ideas, recognizes opportunities, and studies the market.

Concept Development

• Develop a business plan: a detailed proposal describing the business idea and Choose business location.

Resourcing • Entrepreneur identifies and acquires the financial, human, and capital resources needed for the venture startup, etc.

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Actualization • Entrepreneur operates the business and utilizes resources to achieve its goals/objectives.

Harvesting • Entrepreneur decides on venture’s future growth, development, or demise.

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Reasons why many small businesses fail.

Classification of Entrepreneur


Classification of Entrepreneur on the following basis:


Functional Characteristics Use of Technology Type of Business Size of Enterprise

Innovative Entrepreneur

Adoptive Entrepreneur

Fabian Entrepreneur

Drone Entrepreneur

Technical

Non-technical

Manufacturing

Trading

Agricultural

Small scale

Medium Scale

Large Scale

Innovative entrepreneur

Innovators are the people who introduce new product or service or initiate a new system in the economy or the environment.

Classification of Entrepreneur – Functional Characteristics

Adoptive / Imitative entrepreneur

Instead of innovation, may just adopt the technology and methods innovated by others.

Fabian entrepreneur

Second generation Entrepreneurs, and are very skeptic about taking a step unless and until they are definite.

Drone entrepreneur

They prefer to run the enterprise the way it is, regardless of the change in demand and the trend in the market.

Tradingentrepreneur

• Undertake the trading activities. • Procure the finished products from the manufacturers and sell these to

the customers directly or through a retailer.

Classification of Entrepreneur – Type of Business

Manufacturing entrepreneur

• Manufacture products. • Identify the needs of the customers and, then, explore the resources

and technology to be used to manufacture the products.

Agricultural entrepreneur

• Undertake agricultural pursuits.• Covers a wide spectrum of agricultural activities like cultivation, marketing of

agricultural produce, irrigation, mechanization, and technology.

Technicalentrepreneur • Who establish and run science and technology-based industries.

Classification of Entrepreneur – Use of technology

Non-Technical entrepreneur

• Their enterprises is not of science and technology.• They are concerned with the use of alternative and imitative methods.

Small scaleentrepreneur • Investment in plant and machinery up to Rs. 1.00 crore

Classification of Entrepreneur – Scale of Enterprise

Medium scale entrepreneur • Investment in plant and machinery above Rs. 1.00 crore

Large scale entrepreneur • Investment in plant and machinery more than Rs. 5.00 crore.

Pure Entrepreneur• An individual who is motivated by psychological & economic

rewards.

Motivated Entrepreneur • Motivated by the desire of self fulfillment.

Induced Entrepreneur

• Who induced to take up entrepreneurial task due to the policy measures of the Govt.

Spontaneous Entrepreneur • Who start their business by natural talents (inborn abilities).

Classification of Entrepreneur – According to Motivation

Role of Entrepreneurship in Economic Development

Role of Entrepreneurship in Economic Development

Optimum utilization of Resources

Employment opportunities

Standard of living

Economy- Strong & Stable

Increases GDP

Adequate distribution of Wealth

Generates foreign Exchange

Up-lift of Regions

Barriers to Entrepreneurship



Personal Barrier

Societal Barrier

Environmental Barrier


Personal Barrier

• Lack of confidence, Motivation, Patience.• Dependability.

Environmental Barrier

• Raw Materials, Labours, Machinery, Land and Building, etc.• Financial Barriers.• Other infrastructure requirements.

Societal Barrier• Need to overcome External pressures.• Graduates prefer to “get a real Job”.• Need to raise awareness of the option of starting a business.

Role of Entrepreneur in Economy

Role of Entrepreneur in

Economy

Creation of Employment

Standard of living

Mobilize Capital resources

New Technology

New Ideas bring Success

Develop New Market

New Product in market

Role of Entrepreneur in Economy

Inventor and Innovator

Inventoris a person creates new Thing.

Innovator is a person who brings something new in business.

Inventor and Innovator

Increasing Your Potential


Increase your business and entrepreneurial potential by focusing on six specific areas.

Business Knowledge

• Reading Magazines and Newspaper articles, search internet, talk with business owners, etc.

Financial Skills • Strengthen your math skills.

Career Exploration • Evaluate your strength and weakness, explore career interest.

Community Awareness • Look for volunteering opportunities and internship programs.

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Education Obtaining a good education benefits you personally and open doors to more career opportunities.

Relationship • Spend time with people who believe in you and inspire you.


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FACTORS RESPONSIBLE FOR ENTREPRENEURS

FACTORS RESPONSIBLE FOR ENTREPRENEURS

INTERNAL FACTORSDesire to do something newEducational BackgroundExperience

EXTERNAL FACTORS

Govt. assistance and support.Availability of labor and raw material.Encouragement from big business houses.Promising demand for the product.

desire

vision

determination

courage

success

Success steps

End of Module