Chapter 1 Entrepreneurship

The Foundations of Entrepreneurship
Chapter 1: Entrepreneurship
Copyright 2002 Prentice Hall Publishing Company
Entrepreneurial Activity Across the Globe

Percentage of Adult Population Working to Start a New Business
Unit ed St at es Canada Israel 5.4% 3.4% 3.3% 2.2% 2.0% 1.8% 1.6% 1.4% 6.8% 8.5%
Country
It aly Great Brit ain Germany Denmark France Japan Finland
0.0%
2.0%
4.0% Percent
6.0%
8.0%
10.0%
INTRODUCTION
The word Entrepreneurship is derived from the French verb ENTERPRENDRE. The French men who organized and led military expeditions in the early 16th Century were referred to as Entrepreneurs. Around 1700A.D. the term Entrepreneur was used for architects and contractors of public work.
What is an Entrepreneur?
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.
BASICS OF ENTREPRENEUR:ORGANISATION
URGE SKILL VISION
INNOVATION
RISK
ENTERPRISE
GROWTH MANAGEMENT
Motto for Entrepreneurs

Conceive it Believe it Achieve it!
Characteristics of Entrepreneurs
Desire for responsibility Preference for moderate risk Confidence in their ability to succeed Desire for immediate feedback High level of energy Future orientation Skilled at organizing Value achievement over money
The Type E Personality

Common Traits of Entrepreneurs:

Aggressively pursues goals; pushes self and others Seeks autonomy, independence and freedom from boundaries Sends consistent messages; very focused Acts quickly, often without deliberating

Keeps distance and maintains objectivity

Pursues simple, practical solutions Willing to take risks; comfortable with uncertainty Exhibits clear opinions and values; has high expectations Impatient; just do it mentality Positive, upbeat, optimistic; communicates confidence
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DEFINITIONS:ENTREPRENEUR
18th Century
Richard Cantillon: Coins term entrepreneur (go-between or between taker)
Beaudeau:
Entrepreneur bears risks and plans, supervises, organizes, and owns factors of production
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Continued
19th Century
Jean Baptiste Say: Proposed that profits from entrepreneurship were separate from profits of capital ownership
Francis Walker: Distinction made between those who supplied funds and earned interest and those who profited from managerial abilities
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20th Century
1961
Joseph Schumpeter: Described the entrepreneur as someone who is an innovator and someone who creatively destructs
David McClelland: Entrepreneur is an energetic risk taker.
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1964
1985
Peter drucker: Entrepreneur maximizes Opportunities through Systematic innovations.
Robert hisrich: Entrepreneur creates Something different With value by devoting Necessary time and Effort, assuming various Kinds of risks.
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CONCEPT OF ENTREPRENEURSHIP:ENTREPRENUR ENTREPRENEURSHIP ENTERPRISE
PERSON
PROCESS
OBJECT
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Common Themes in Definitions of Entrepreneurship

Process Uniqueness
The Entrepreneur
Growth
Defining Entrepreneurship
Innovation
Profit or Nonprofit
Creating Value
Organization Creation
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Myths About Entrepreneurship

1. Successful entrepreneurship takes only a great idea.
2. Entrepreneurship is easy.
3. Entrepreneurship is a risky gamble.

4. Entrepreneurship is found only in small businesses. 5. Entrepreneurial ventures and small businesses are identical.
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The Entrepreneurial Process

Starting the Venture:
Exploring the Entrepreneurial Context
Identifying Opportunities/Possible Competitive Advantage
Researching Feasibility
Planning the Venture Organizing the Venture Launching the Venture
Managing the Venture:

Managing Processes Managing People Managing Growth Special Issues
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ENTREPRENURIAL STRUCTURE
STRUCTURE V A L U E S TECHNOLOGY EXTERNAL ENVIRONME NT
SKILLS
PEOPLE
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Rewards of Being an Entrepreneur

High degree of independence freedom from constraints Get to use a variety of skills and talents Freedom to make decisions Accountable to only yourself Opportunity to tackle challenges Feeling of achievement and pride Potential for greater financial rewards
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Feeding the Entrepreneurial Fire

Entrepreneurs as heroes Entrepreneurial education Demographic and economic factors Shift to a service economy Technological advancements Independent lifestyles E-Commerce and the World Wide Web International opportunities
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Challenges of Being an Entrepreneur

Must be comfortable with change and uncertainty Must make a bewildering number of decisions
May face tough economic choices

Must be comfortable with taking risks Need many different skills and talents Must be comfortable with the potential for failure
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Nine Deadly Mistakes of Entrepreneurship

1.
2. 3. 4. 5.
Management incompetence Lack of experience Poor financial control Failure to develop a strategic plan Uncontrolled growth
21
Nine Deadly Mistakes of Entrepreneurship

(continued)
6.
7. 8. 9.
Poor location Improper inventory control Incorrect pricing Inability to make the entrepreneurial transition
22
BARRIERS TO ENTREPRENEURSHIP:KARL H VESPER has identified the following entrepreneurship barriers:

Lack of viable concept. Lack of market knowledge. Lack of seed capital. Lack of technical skills. Lack of business know how. Complacency- lack of motivation. Social stigma. Monopoly and protectionism.
23
TEN STEPS TO BREAK THE BARRIERS:
START AT THE TOP. LEAD THE ENTERPRISE
ATTUNE TO A CULTURE OF INNOVATION. REMOVE THE HIDDEN OBSTACLES. CREATE AN INTEGRATED ENTERPISE CULTURE. CREATE A MARKETING CULTURE. CREATE A LISTENING ENVIRONMENT. ABSORB COMPETING TECHNOLOGIES AND INVOLVE PEOPLE. DONT LET PRODUCT INNOVATIONS FOOL YOU. BE FLEXIBLE AND OPE FOR DIVERSIFICATION AND NEW IDEAS. ALWAYS BE READY TO CHANGE THE CULTURES.
24
DIFFERENT VIEWS ON ENTREPRENEURS:ECONOMISTS VIEW:According to the economist entrepreneurship and economic growth will take place in those situation where particular economic conditions are most favorable. According to J.S Mill:- he has listed 3 basics functions of an entrepreneurSuperintendence Control Direction
25
CONTINUED
According to Harvey leibenstein:- entrepreneur is an individual or group of individuals with 4 major characteristicsConnects different markets. Capable of filling the market gaps. Input completer. Time manager. According to J.B.Say rationally combining the forces of production into a new producing organization is the function of an entrepreneur.
26
CONTINUED
According to B.C Tondon:- he has discussed entrepreneur in context to developing nation and kind of environment he has to face during his business. In his words an entrepreneur must b of ideal type rather than social type. According to Knight:- identified entrepreneurship with control and social responsibility.
27
SOCIOLOGISTS VIEW:
They consider the entrepneur as a role performer corresponding to the role expected by the society. It emerges under a specific social culture. According to sociologists social sanctions, cultural values and role expectations are responsible for the emergence of entrepreneurship. Society values are most important determinants of attitudes and role expectation. According to Flavia ,the function of an entrepreneur is to co-ordinate at every stage i.e. beginning, maintenance and expansion.
28
CONTINUED
Every entrepreneur needs two qualities they are Optimistic outlook and Dynamism.
e.g. Protestant ethic from west emerge as new class of industrialist . Samurai from Japan , Christians from Lebanon, Halai Memon Industrialist in Pakistan , Marwaris & Parsis in India
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The Psychologists view:
It is most likely to emerge when a society has sufficient supply of individuals possessing particular psychological characteristics. Its the high need for achievement which drives people towards entrepreneurial activities . Individual with high achievement motive tend to take keen interest in situation of high risk ,desire for responsibility and desire for task performance.
30
CONTINUED
Entrepreneur possesses three things i.e. an institutional capacity to see things in a way which later proves to be true, a kind of effort of will and mind to overcome fixed habits of thinking, lastly the capacity to overcome social opposition against doing something new. Frank Young describes an entrepreneur as a change agent T.V. Rao describes entrepreneurship as a creative and innovative response to environment.
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Managerial Views:
This view gives more importance to the managerial aspects like perception of market opportunities and operational skills as qualities required to carry out an enterprise. Entrepreneurship is the out come of complex and varying combination of socio economic, psychological and other factors.
32
FACTORS AFFECTING ENTREPRENEURIAL GROWTH

1.
ECONOMIC FACTORS
Lack of adequate overhead facilities: Profitable innovations require basic facilities like transportation, communication power supply etc. They reduce cost of production and increase profit.
33
a)
b)
c)
Non availability of capital Inventions are capital oriented. In less developed countries most capital equipment have to be imported which involves foreign exchange which acts as a difficult problem. Great risk Risk is high in case of less developed countries as there is lack of reliable information, markets for good and services is small etc.
34
d)
Non availability of labor and skills Though there is abundant labor supply there is generally scarcity of skills at all levels.
2.
SOCIAL FACTORS A society that is rational in decision making would be favorable for decision making. Education, research and training is given less importance in less developed countries therefore there is very little vertical mobility of labor. 3. CULTURAL FACTORS if the culture is economically or monetarily oriented entrepreneurship would be applauded and praised. In less developed countries people are not economically motivated. People have ample opportunities of attaining social distinction by non economic pursuits.
35
4.
PERSONALITY FACTORS In less developed countries the entrepreneur is looked upon with suspicion. Public opinion in the less developed nations sees in the entrepreneur only a profit maker and exploited.
36
MOTIVATION: Motivation refers to the way in which urges ,drives, desires,aspirations,strivings or needs direct, control or explain the behaviour of human beings. If the entrepreneur feels motivated his behaviour will bring about the desired action.
37
MOTIVATING FACTORS
P.N Sharma identified nine motivating factors which are as follows:

Education background Occupational experience Family background Desire to branch out to manufacturing. Desire to work independently in manufacturing line Assistance from government. Assistance from financial institution Availability of technology/raw materials Other factors- like demand for particular product,utilisation of excess money earned, foreign policy of government etc.
38
Continued
First five factors termed as internal because all these make the personality of the entrepreneur, and generate an inclination to adopt entrepreneurial activity. Last four are termed as external because all these serve as a spark in the lightening of the entrepreneurial idea.
39
other classified factors are: A.
R.A Sharma has classified the factors which prompted to the new entrepreneurs to enter the industry as:INTERNAL FACTORS:-
Strong desire to do something independently in life. Technical knowledge. Business experience in the related field. B. EXTERNAL FACTORS: Financial assistance from institutional sources. Accommodation in industrial estates. Machinery on hire purchase. Attitude of the government to help the units. Heavy demand. Profit margin. Unsound units available at cheap price.
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ENTREPRENEURIAL CULTURE:MEANING:- Implies a set of values, norms and traits that are conducive to the growth of entrepreneurship. Entrepreneurial culture is different from administrative culture. Administrative culture is the corporate culture which focus on existing oppurtunities,organisational structures and control procedures.
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BASIS
STRATEGIC ORIENTATION COMMITMENT TOWARDS OPPORTUNITIES
ENTREPRENURIAL
PERCEPTION OF OPPORTUNITIES. REVOLUTIONARY,WITH SHORT DURATION.
ADMINISTRATIVE
CONTROLLED RESOURCES. EVOLUTIONARY,WIT H LONG DURATION.
COMMITMENT TO RESOURCES
MANY STAGES WITH MINIMAL EXPOSURE AT EACH STAGE.
A SINGLE STAGE, WITH COMPLETE COMMITMENT OUT OF DECISION.
MANAGEMENT STRUCTURE
FLAT,WITH MULTIPLE INFORMAL NETWORKS.

HIERARCHY
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SUB-CULTURES OF ENTREPRENEURSHIP:CULTURE OF BUSNIESS. BUSNIESS ETHICS. PRODUCTIVITY CULTURE. TOTAL QUALITY CULTURE. ORGANISATIONS CULTURE.
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TYPES OF ENTREPRENEURS:1.
ACCORDING TO THE TYPE OF BUSINESS:Business entrepreneurs Trading entrepreneurs Industrial entrepreneurs( large, medium and small) Corporate entrepreneur Agricultural entrepreneur Retail entrepreneur Service entrepreneur.
2.
ACCORDING TO THE USE OF TECHNOLOGY:Technical entrepreneur Non-technical entrepreneur Professional entrepreneur High tech entrepreneur Low-tech entrepreneur
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CONTINUED
3.
ACCORDING TO THE STAGES OF DEVELOPMENT:First generation entrepreneur Modern entrepreneur Classical entrepreneur
4.

ACCORDING TO THE AREA:Urban entrepreneur Rural entrepreneur
5.

ACCORDING TO THE GENDER:Male entrepreneur Women entrepreneur
6.
ACCORDING TO THE SCALE OF OPERATION:45
Small scale entrepreneur Large scale entrepreneur Chapter 1: Entrepreneurship
CONTINUED
7. OTHERS OR UNCLASSIFIED :
Innovating entrepreneur Imitating entrepreneur International entrepreneur Bureaucratic entrepreneur Intrapreneur entrepreneur
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Chapter 1 Entrepreneurship

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Chapter 1 Entrepreneurship

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The Foundations of Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

Entrepreneurial Activity Across the Globe

It aly Great Brit ain Germany Denmark France Japan Finland

Copyright 2002 Prentice Hall Publishing Company

Copyright 2002 Prentice Hall Publishing Company

URGE SKILL VISION

Copyright 2002 Prentice Hall Publishing Company

Motto for Entrepreneurs

Copyright 2002 Prentice Hall Publishing Company

Copyright 2002 Prentice Hall Publishing Company

The Type E Personality

Keeps distance and maintains objectivity

Richard Cantillon: Coins term entrepreneur (go-between or between taker)

Copyright 2002 Prentice Hall Publishing Company

Copyright 2002 Prentice Hall Publishing Company

David McClelland: Entrepreneur is an energetic risk taker.

Copyright 2002 Prentice Hall Publishing Company

Peter drucker: Entrepreneur maximizes Opportunities through Systematic innovations.

Copyright 2002 Prentice Hall Publishing Company

CONCEPT OF ENTREPRENEURSHIP:ENTREPRENUR ENTREPRENEURSHIP ENTERPRISE

Copyright 2002 Prentice Hall Publishing Company

Common Themes in Definitions of Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

Myths About Entrepreneurship

3. Entrepreneurship is a risky gamble.

Copyright 2002 Prentice Hall Publishing Company

The Entrepreneurial Process

Exploring the Entrepreneurial Context

Identifying Opportunities/Possible Competitive Advantage

Managing the Venture:

Managing Processes Managing People Managing Growth Special Issues

Copyright 2002 Prentice Hall Publishing Company

Copyright 2002 Prentice Hall Publishing Company

Rewards of Being an Entrepreneur

Copyright 2002 Prentice Hall Publishing Company

Feeding the Entrepreneurial Fire

Challenges of Being an Entrepreneur

May face tough economic choices

Copyright 2002 Prentice Hall Publishing Company

Nine Deadly Mistakes of Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

Nine Deadly Mistakes of Entrepreneurship

Copyright 2002 Prentice Hall Publishing Company

BARRIERS TO ENTREPRENEURSHIP:KARL H VESPER has identified the following entrepreneurship barriers:

TEN STEPS TO BREAK THE BARRIERS:

START AT THE TOP. LEAD THE ENTERPRISE

Copyright 2002 Prentice Hall Publishing Company

Copyright 2002 Prentice Hall Publishing Company

Copyright 2002 Prentice Hall Publishing Company

Copyright 2002 Prentice Hall Publishing Company

The Psychologists view:

Copyright 2002 Prentice Hall Publishing Company

Copyright 2002 Prentice Hall Publishing Company

FACTORS AFFECTING ENTREPRENEURIAL GROWTH

Copyright 2002 Prentice Hall Publishing Company

Copyright 2002 Prentice Hall Publishing Company

Copyright 2002 Prentice Hall Publishing Company

Copyright 2002 Prentice Hall Publishing Company

Copyright 2002 Prentice Hall Publishing Company

other classified factors are: A.

Copyright 2002 Prentice Hall Publishing Company

Copyright 2002 Prentice Hall Publishing Company