Unit-1 Entrepreneurship

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Overview
Importance of Entrepreneurship Concept of Entrepreneurship & Various definitions of an Entrepreneur Characteristics of a successful Entrepreneur Distinction B/w Entrepreneur & Manager Classification of Entrepreneurs Factors affecting Entrepreneurial Growth Myths of Entrepreneurship Entrepreneurial Development Models Women Entrepreneurs Social and Rural Entrepreneurs
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Importance of Entrepreneurship

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Providing Leadership in the Industrial Development

An entrepreneur is the combination of two skills- an ideal person and a manager. There must be persons who have vision, take initiative and drive to utilize resources.

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Introducing Innovations and Change

Entrepreneur always looks for changes. He not only combines the factors of production but also introduces new combinations of factors.

Responds to changes and exploits it an opportunity.

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Increasing Productivity
The entrepreneur allocates scarce resources and co-ordinates the various factors of production. He employs each factor in right proportion. He uses best technical devices, division of labours, etc. He tries to eliminate waste in production.
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Providing Employment
Generates greater employment opportunities to unemployed youth which is the root of all socio-economic problems. It also generates organisation. revenue for the

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Increase the standard of living of the people

The entrepreneurs can contribute much to the growth of national income of the country:
by exploiting the natural resources, creating wealth and generating employment and revenue in the form of income tax, sales tax, export and import duties.

A country is said to have achieved economic development only when its people enjoy a high standard of living.
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Promoting balanced Regional Growth

Small scale enterprise is that they can be started with less financial resources. It also helps in reducing concentration of economic power in few hands.
Economy grows along with entrepreneurship.

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Increasing the Export Trade

Development of entrepreneurship helps to increase production. Hence market also grows and expands. Exports also go up.

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Concept of Entrepreneurship & Various definitions of an Entrepreneur

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Concept of Entrepreneurship
Entrepreneur is a person who creates an enterprise and Entrepreneurship is the process of creating an enterprise. The word entrepreneur was taken from French meant to designate an organiser for any musical or entertainment programme.
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Contd
Entrepreneur has its origin from the French verb enterprendre, it means to undertake.
16th Century, the French attributed entrepreneur to the people who organised and/or led military expeditions. 17th Century, person bearing risks of profits (loss) in a fixed price contract with the Govt. 18th 19th Century, An economic man who tries to maximize his profits by innovations.
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Definition
A person who takes initiative to bring new ideas, innovation, starts a new venture and act as a catalytic agent for a new project which create wealth. According to Webster dictionary: entrepreneur is one who assumes the risk and management of business An entrepreneur is a change agent for socioeconomic development.
Eg: JRD TATA, G.D. BIRLA ,DHIRUBHAI AMBANI, N.R NARAYAN MURTHY, AZIM H.PREMJI, SAM PITRODA etc.
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Various definitions of an Entrepreneur

Higgins defines entrepreneurship as:
A function of seeking investment, production of opportunity, organising an enterprise to undertake new production process, raising capital, hiring labour, arranging resources and introducing new organisation.

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Contd
Joseph A Schumpeter entrepreneurship as: defines

An Entrepreneur is the one who innovates, and introduces something new in the economy

Peter F Drucker defines entrepreneurship as:

An Entrepreneur searches for change, responds to it
and exploits opportunities. Innovation is the specific tool of an entrepreneur.
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Entrepreneurial Development Process

Five step process:
Perceiving, Identifying and Evaluating an opportunity Drawing a Business Plan Marshalling Resources Creating an Enterprise Consolidation & Management

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Characteristics of a successful Entrepreneur

Creativity Innovation Dynamism Leadership Teambuilding Desire for achievement Problem Solving Goal Orientation Risk taking and Decision-making ability Commitment
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Creativity & Innovation

Creativity is the ability to bring something new into existence. Innovation is the process of doing new things. It acts as a tool for the entrepreneur. Creativity is the prerequisite to Innovation.
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Systematic Innovation
Monitoring following seven sources for innovative opportunity:
The unexpected: unexpected success or failure. The incongruity: between reality as it actually is and reality as it is assumed to be. Innovation based process need. Changes in Industry structure or market structure. Demographics- Population changes. Changes in Perception and meaning. New knowledge- both scientific and non-scientific.
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Dynamism
According to the potentialities of the enterprise, an entrepreneur sets attainable goals, which are to be accomplished within time frame.

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Leadership
The qualities are:
Mode of handling problem Generating resources Taking others into own stride

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Teambuilding
A team is a group of individuals with a common purpose i.e. focused and aligned to achieve a specific task or set of outcomes. A good team will be able to share knowledge, core competencies and work to achieve goals. Teambuilding skills are:
Feel better Identify problems and needs of the enterprise Create a vision for the enterprise Set goals for the group Review progress
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Desire for achievement

Entrepreneurs have a high need for achievement and are guided by their inner self, motivating their behaviour towards accomplishment.

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Problem Solving
An entrepreneur should be able to solve problems not avoid them. A formal Problem-solving model helps entrepreneurs to solve any problem on a logical manner. This model consists of :
Define the problem Gather Information Identify various alternatives/solutions Evaluate/assess alternatives and select the best one Take proper action Evaluate the action taken
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Goal Orientation
It is the achievement of targets and objectives for successful performance of an entrepreneur, both in long run and short run. It helps to measure the performance of individuals or groups. The goal-setting process requires three steps:
Define goal Specific goal Feedback about achieved goal
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Risk taking and Decision-making ability

An entrepreneur takes decision under conditions of uncertainty, which leads to bear risks. A good entrepreneur should avoid excessively high as well as low risk situations. The focus should always be on the market.
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Commitment
A good quality of an entrepreneur is his willpower. Strong determination with sound thinking helps the entrepreneur to grow up.

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Distinction B/w Entrepreneurs & Managers

Points
Motive Status Risk Bearing Rewards Innovation Qualification

Entrepreneurs
Start a venture by setting an enterprise The owner of enterprise Bears all risks Profit is the reward Meet the ever-changing demands of customers is more qualitative and non measurable

Managers
To render the services in an enterprise The employee of enterprise Does not bear all risks Salary is the reward Implement, what is executed as, a plan is quantitative and measurable

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Classification of Entrepreneurs
(a) Based on Functional Characteristics: means readiness to adapt to
new technologies, products, or markets. 1. 2. 3. 4. Innovative entrepreneur Imitative or Adoptive entrepreneur Fabian entrepreneur Drone entrepreneur

(b) Based on the Developmental

1. Prime mover

Angle: integrates sociological,

psychological, and economic perspective of entrepreneurship development.

2. 3. 4. 5.

Manager Minor Innovator Satellite Local trading

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Contd
(c )Based on Types of Entrepreneurial Business:
1. 2. 3. 4. 1. 2. 3. 4. 5. 6. 7. 8. 9. Manufacturing Wholesaling Retailing Service The Improver The Advisor The Superstar The Artist The Visionary The Analyst The Fireball The Hero The Healer
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(d) Based on the Nine Personality Types of Entrepreneurs:

Contd
(e) Based

on schools of thought on Entrepreneurship:

Six schools of thought on entrepreneurship each with its own underlying set of belief: Great Person school: Born with intuitive ability a sixth sense Personal qualities driven

Psychological Characteristics school: Have unique values, attitudes and needs which drives them Risk taking, need for achievement Personal qualities driven
Classical school: Central characteristic is innovation, creativity and discovery Start up and get early growth Opportunity driven

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Contd
Management school: Entrepreneurs are organisers of economic venture Organise, own, manage and assume the risk Methodical production planning, people org.,capitalisation and budgeting Early growth and maturity Act and manage the show Leadership school: Leaders of people Ability to adapt the style to the needs of people Motivating, directing and leading type Act and manage the show Non-technical side of the mgt school

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Contd
Intrapreneurship school:

evolved in response to the lack of innovativeness within organisations

Intrapreneurship is a team model whereby individuals are asked to work together to solve problems and create opportunities

development of independent units to create market and expand services

alertness to opportunities

maturity and change

maximizing decision making
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Innovative entrepreneur
One who introduces new goods, inaugurates new method of production, discovers new market and reorganizes the enterprise. Such entrepreneurs can work only when a certain level of development is already achieved. Belongs to developed countries. Brijmohan Lall Munjal (Hero Motocorps), Capt G R Gopinath (Air Deccan), G D Birla, J R D Tata (Air India and Tata Group), Kiran Mazumdar Shaw (Bicon), Sabeer Bhatia (Hotmail), Dhirubhai Ambani (Reliance)
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Innovative entrepreneurs of India

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Imitative or Adoptive entrepreneur

Ready to adapt successful innovations (i.e. techniques and technologies) done by innovating entrepreneurs.

Do not innovate the changes by themselves.

Mainly belong to underdeveloped countries as adoption saves costs of trial and error.

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Fabian entrepreneur
Is one who is very cautious in taking the decisions, very skeptical, and takes calculative steps. They imitate only in situations where it becomes necessary to do so. Lazy and shy. Lack of willingness to adopt to new methods of production.
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Drone entrepreneur
suffer losses, as they refuse to make any modifications in the existing production methods. These entrepreneurs orthodox in outlook. are conservative or

They always feel comfortable with their oldfashioned technology of production even though the environment as well as the society have undergone considerable changes.
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Prime Mover
Sets in motion a powerful sequence of development, growing, expanding and diversification oriented business.

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Manager
Keeps the business unit running, handles the environment effectively, but does not initiate development for expansion.

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Minor Innovator
Contributes to an economic progress by finding better use of the societys resources although his individual contribution may be small.

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Satellite
Enters in the diffusion process of innovation and slowly development begins towards a productive enterprise.

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Local Trading
Outlook is limited to a local market, hesitant to try beyond that.

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Manufacturing
Runs business by producing products that can be sold using resources and supplies.

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Wholesaling
Sells products to the retailers.

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Retailing
Sells products directly to the consumers.

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Service
Sells service rather than products.

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The Improver
- Operate business predominantly in the improver mode. - Motto: morally correct companies will be rewarded working on a noble cause. - High integrity and ethics. - Anita Roddick, founder of The Body Shop.

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The Advisor
- Provides an extremely high level of assistance and advice to customers. - Motto: customer is right and we must do everything to please him. - Company build by advisors becomes customerfocused. - John W. Nordstrom, founder Nordstrom

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The Superstar
- Business is centered on the charisma and high energy of superstar CEO. - To build business around your own personality type. - Donald Trump, CEO of Trump Hotels & Casino.

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The Artist
- Reserved but highly creative type. - Often in business demanding highly creativity such as web design, ad agencies, software development etc. - Scott Adams, Creator of Dilbert

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The Visionary
- Future vision and thoughts of the founder - High degree of curiosity to understand world around you - Set-up plans to avoid landmines - Personality alert: Too much focused on the dream with little focus on reality. Action must precede the vision. - Bill Gates- Founder of Microsoft

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The Analyst
- Focus on fixing problems in a systematic manner . - Deals with Science, engineering and computer firms. - Excel in problem solving - Personality alert: Be aware of analysis paralysis. Work on trusting others. - Gordon Moore - Founder of Intel.

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The Fireball
- Full of life, energy and optimism - Customers feel company has get it done attitude. - Malcolm Forbes, Publisher of Forbes Magazine

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The Hero
- Incredible will power and ability to lead the world and the business. - You are the essence of entrepreneurship. - Assemble great companies. - Jack Welch, CEO of GE.

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The Healer
- Provide nurturing and harmony to your business. - Very calm process and the ability to survive and sustain. - Ben Cohen, Co-founder of Ben & Jerrys Icecream. - Personality alert: You may avoid outside realities and use wishful thinking.

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Factors affecting Entrepreneurial Growth

Economic Factors:

Lack of adequate overhead facilities Non availability of Capital Great Risk Non-availability of Skilled labours
Social Factors Cultural factors Personality Factor Motivational Factor
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Non-Economic Factors:

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.

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Contd
Non availability of Capital :
Inventions are capital oriented. In less developed countries, most capital equipments have to be imported from other countries, which involve foreign exchange acts.

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Contd
Great Risk:
Risk is high in less developed countries as there is a lack of reliable information, markets are small for goods and services.

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Contd
Non-availability of Skilled labours:
In less developed countries, there is a scarcity of skilled labours at all levels of management.

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Non-Economic Factors
Social Factors: A society that is rational in decision making would be favourable.
Education, training & research is given less importance in less developed countries therefore there is very little vertical mobility of labour.

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Contd
Cultural Factors: Religious, Social and Cultural factors also influence the individual taking up an entrepreneurial career, in some countries there is religious and cultural belief that high profit is unethical. This type of belief inhibits the growth of an entrepreneur.

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Contd
Personality Factors: In less developed countries, the entrepreneur is looked upon with suspicion.
Public opinion in less developed countries sees in the entrepreneur only a profit maker and exploited.

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Contd
Motivational Factor: Motivation is the act of stimulating someone or self to get desired course of action, to press the right button to get the desired result. Following are the factors:
Educational Background Occupation Family Background Desire to work independently Assistance from Financial Institutions Availability of technology
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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 success. My best friend will be a great business partner. Having no boss is great fun. I can make lots of money. Ill definitely become successful. Life will much simpler if I work for myself.
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Comment on the statement:

It is not rosy to start your own business, so before you take the plunge with an overdose of optimism, be sure you do not fall for any of these myths

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Entrepreneurial Development Models

Psychological Models:
McClelland (1961) identified determinants of entrepreneurship Achievement motives were given more importance Suggested Motivational Training Programme as the policy measure
Everett Hagens theory of social change lays emphasis on creative personality as a casual link in entrepreneurial behavior and status withdrawal as the determinant of creative personality. John Kunkel (1965) suggested behaviorist model Entrepreneurial behavior is a function of the surrounding social structure (both past and present) influenced by manipulating economic and social incentives His model based on experimental psychology, which identifies sociological variables as the determinants of entrepreneurship

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Contd
Sociological Models:

Frank W Young devised theory of entrepreneurship as a theory of change based upon societys incorporation of relative subgroups. suggested the creation of supporting institutions in the society as the determinant of entrepreneurship.

Integrated models:

T.V. Rao (1975) has included the following factors: Need for motive is dynamic Long term involvement is the goal (thinking or activity level) Personal, social and material resources Socio-political system to be suitable
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B.S. Venkata Rao (1975) described Five stages for promoting small entrepreneurship are:
a) Stimulation:
Creation of industrial atmosphere Policy statement emphasizing the role of small industry Wide publicity of industrial development programmes Formation of special schemes and creation of support institutions Create awareness in backward regions

b) Identification:
Identifying prospective entrepreneurs Rural talents, factory workers, person with formal training in engineering and technology, MBA graduates etc.
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Contd
c) Development:
Organisation of motivation and EDPs and MDPs Formulation of bankable project, location and so on.

d) Promotion:
Govt. policy initiatives for promoting small entrepreneurship

e) Follow up:
Follow-up with a view to make them more effective

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M.P. Akhori suggested the entrepreneurship development cycle:

Stimulatory Activities Support Activities

Entrepreneurial Development Cycle

Sustaining Activities

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Contd
Stimulatory Activities:
Ensure the emergence of entrepreneurs in the society. Generate initial motivation and offer opportunity to acquire skills. This can be achieved by following activities:
Entrepreneurial education Planned publicity for opportunities Identify potential entrepreneurs Motivational training to new entrepreneurs Creating entrepreneurial forums Recognition to entrepreneurs
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Contd
Support Activities:
Registration of company Financial Support Acquiring land, power, water, etc. Supply of raw materials Getting licenses/import licenses Granting tax relief or other subsidy Offering management consultancy services Help to market the product Provide information
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Contd
Sustaining Activities:
Help modernisation Help diversification/ expansion Support industry-institute interaction through consultancy Promoting quality of the product Need-based common facilities centres

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Entrepreneurship Development Programme (EDP)

Agencies active in EDP are:
1. SISI Small Industries Service Institute 2. DIPP Department of Industrial Policy & Promotion 3. SIDCO- Small Industries Development Corporation 4. SIDO- Small Industries Development Organisation 5. DIC District Industry Centres 6. SSIB- Small Scale Industries Board

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Contd
Institutions for Entrepreneurial Development:
EDII : Entrepreneurship Development Institute of India in 1983 at Ahmedabad NIESBUD : National Institute of Entrepreneurship and Small Business Development in 1983 at New Delhi. RED: Rural Entrepreneurship Development in 1983 at Ranchi MDI: Management Development Institute , Gurgaon SIDO: Small Industries Development Organisation STEP: Science and Technology Entrepreneurship Parks XISS: Xavier Institute of Social Sciences, Delhi TCO: Technical Consultancy Organisation

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Strategies/Steps for Capacity Building for Prospective Entrepreneurship

Positive Attitude Learn to handle money intelligently Expect No Completely Involved Remember the magic word in business- Ask Goal Setter Organised Enthusiastic
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Case Study
Entrepreneurship: Luck or Persistence

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Women Entrepreneurs
First Prime Minister of India said:
When women move forward, the family moves, the village moves and the Nation moves

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Definition
Govt. of India has defined
an enterprise owned and controlled by women having a minimum financial interest of 51% of the capital and giving at least 51% of the employment generated in the enterprise to women

Kamal Singh has defined

A woman entrepreneur is - confident - innovative and creative - capable of achieving self economic independence individually or in collaboration - generate employment opportunities for others through initiating, establishing and running the enterprise by keeping pace with her personal, family and social life
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Importance of Woman Entrepreneur

To raise
economic status of the family as well as the country social status employability

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Factors influencing Women Entrepreneurs

Economic Independence Establishing own Creativity and Identity Building Confidence Developing Risk-taking ability Motivation Equal status in the society Greater Freedom and Mobility Achievement of Excellence
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Women Entrepreneurs in India

Significant contribution to Indian economy. Women with small families are more interested to become entrepreneurs. Highly Focused on family businesses in the form of unpaid effort and skills. Many women entrepreneurs belong to the low-income group as the working capital is low and profit margins are slow.
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Contd
Womens hard work is responsible for the launch and sustainability of the business. Gender discrimination is encountered at every stage of business development. Women entrepreneurs in INDIA are more security-oriented rather than growth-oriented. Prefer stabilization of income and minimization of risks. Minimum involvement in production sectors or technology-based enterprises.
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Survey Report
Women Entrepreneurs

25%

60% 15%

SME Sector

Large-Scale Manufacturers

Cottage and Micro Enterprises

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Challenges for Women Entrepreneurship

Lack of Confidence in their capability Problems of Finance and Working capital Socio-Cultural Barriers Production Problems Inefficient Marketing Arrangements

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Strategies for the growth of Women Entrepreneurship

Strong will power, maintain cool-mind and persistently convince family members without confronting, regarding the benefits (inflow of money) of establishing an enterprise. Co-operation and co-ordination must be required from family members to run the business. A woman can set up home-based business.
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Contd
Women must acquire vocational education and go through confidence-building training programs to get rid of feelings of inferiority and dependent on men. For Marketing, Women entrepreneurs must establish their credibility in terms of quality and competitiveness of product or service. They should acquire relevant techniques and skills to win customers loyalty. Use of IT (Internet) can help in assimilating info about the variety, quality (say competing products, publicity and marketing) of the product or service.

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Contd
Workshops and seminars should be conducted frequently between financial support agencies and women entrepreneurs to make cordial relationships. Procedures for financial assistance by banks and govt organisations should be simplified. Subsidies should be given at the initial stage of the business

Group entrepreneurship is viable option to overcome poverty in the society.

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Institutions supporting Women Entrepreneurs in India

Consortium of Women Entrepreneurs of India (CWEI) started in 2001. Federation of Indian Women Entrepreneurs (FIWE) started in 1993. Federation of Ladies Organisation (FLO) is the womens wing of FICCI started in 1983 with basic objective women empowerment. Womens India Trust (WIT) launched in 1968. National Bank of Agriculture and Rural Development (NABARD). Small Industries Development Bank of India (SIDBI).
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Self-helf Group (SHG)

A scheme for entrepreneurship which enables the rural/urban poor people to earn their livelihood besides participating in the process of development. In India-2,60,000 SHGs. Out of which 20,000 SHGs are in M.P.

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SHG Contd
SHG is a
small, economically homogeneous and significant group of rural/urban poor people, voluntarily formed to save and mutually agreed to contribute to a common fund, to be lent to its members as per group decisions.

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Successful Women Entrepreneurs in India

Vidya Chhabria- Chairperson of the $2billion and 28 company Jumbo Group, which has operations in 25 countries. Anu Aga- Chairman of Rs 777 crore Thermax Group. Ranjana Kumar Chairperson & MD of Indian Bank and also appointed as Chairperson of NABARD.
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Contd
Sulajja Firodia Motwani- Sulajja Firodia Motwani is Joint Managing Director of Kinetic Engineering Ltd. Ekta Kapoor - creative head of Balajji Telefilms, is the daughter of actor Jeetendra, and sister of actor Tushar Kapoor.

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Social Entrepreneur
Social Entrepreneurs are:
change agents of the society, creators of innovations that disrupt the status quo and transform the world for the better.

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Challenges for Social Entrepreneurs

Economic and Social Equity Environmental Sustainability Access to basic Health care Institutional Responsibility Peace and Security Tolerance and Human Rights

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Economic and Social Equity

share their good fortune by investing in opportunities for those who are less fortunate. Return on investment will be better.

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Environmental Sustainability
Preserve the earths ecological systems Plan future development with care Use technology wisely Encourage political stability in developing nations

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Health Care
Everyone has access to basic health care and protection from environmental hazards.

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Institutional Responsibility
Social entrepreneur can work toward a world where the institutional responsibility of corporations, governments, foundations and other powerful interests can be upheld through standards for transparency, citizenship and sustainability. Good social and environmental citizenship has a place in the global markets and ultimately enhances financial bottom lines. Corporations, governments, and multinational agencies, as well as charitable, religious and educational institutions can engage productively in a market-based economy to enhance universal prosperity, rather than concentrating wealth in the hands of a few stakeholders. Shareholders and constituents can and should hold powerful institutions accountable.
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Peace and Security

Social entrepreneurs work toward a world where forging cross-cultural understanding and respect for human dignity can lead to peace and security.

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Tolerance and Human Rights

Tolerance and Human Rights win over discrimination and persecution.

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Rural Entrepreneurship
Set up enterprises in rural areas. Rural Resources can be used as raw materials. Employ rural people in the production process.

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Constraints of Potential Rural Entrepreneurs

Low self-image and confidence. No faith on others include friends. No exposure to industry/business. Who to contact for starting a venture and what formalities and procedures are to be followed? How to know whether the identified business is a viable and sound proposition? How does one carry out bank operations? How to manage the business?
How to read and write accounts? Almost no technical skills
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