Unit-1

Introduction

Who is an Entrepreneur?

An entrepreneur is someone who has an original ideaand is able to change that idea into a business opportunity and make it work

“One who starts his own business”

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.

Evolution of Concept and Entrepreneurial personality

The word ‘entrepreneurs’ is derived from the French verb ‘entreprendre’. It means to ‘undertake’ it originally means that to designate an organize of musical or other entertainments.

As per Peter Drucker- “An entrepreneur is one who always searches for change, responds to it as an opportunity. Entrepreneurs innovate. Innovation is a specific instrument of entrepreneurship”.

Oxford dictionary in 18 “the director or a manager of a public musical institution, one who ‘gets up’ entertainment, especially musical performance”. In it the early 16th century entrepreneur was applied to those who were engaged in military expeditions. In the 17th century it was considered as to cover civil engineering activities such asconstruction and notification. It was only in 18th century the word entrepreneur was used to cover economic aspects. The term entrepreneur is used in various ways and terms.

The views are broadly classified in three ways.

Risk bearer

Organizer and

Innovator

1.Risk Bearer:

In 18th century Richard Cantillon an Irish man living inFrance, was first used entrepreneur and defined as An agent who buys factors of production at certain prices in order to combine them in to a product with a view entrepreneurs are risk bearing agents of product.Knight also described entrepreneur to be a specialized group of persons who bear uncertainty. Uncertainty can be defined as a risk which cannot be in insured against and is incalculable.

2.As an Organizer:

Jean Baptiste says “One who combines the land of one the labour of another and capital of yet another and thus produces a product. By selling the product in the market he pays interest on capital, rent on land wages to laborers and what remains is his/her profit. Thus he made a clear distinction between the role of capitalist as a financed and entrepreneurs as a organizer.

3.As an Innovator:

Joseph A Schumpeter in 1934 in his book “theory of economic development” he says economic development as a discrete dynamic change brought entrepreneur by instituting new combination of production i.e, .innovations. According to him introduction of new product may occur in any of following five norms:

1. Introduction of new product in the market

2. The instituting of new production technology which is not yet tested by experience in the branch of manufacture.

3. Opening of new market into which the specific product has not previously entered.

4. The discovery of new source of supply raw material

5. The carrying out of the new form of organization of any industry by creating of monopoly position or the breaking of it. 1individual who, rather than working as an employee, runs a small business and assumes all the risk and reward of a given business venture, idea, or good or service offered for sale. The entrepreneur is commonlyseen as a business leader and innovator of new ideas and business processes.

The attributes underlying entrepreneurship include:

_ Self-direction

_ Self-nurturing

_ Action-oriented

_ High energy level

_ Tolerant of uncertainty

Entrepreneurship as a Career.

Entrepreneurship can play a major role in alleviating poverty, unemployment and underemploymentin many developing countries. Entrepreneurship is becoming an increasingly popular alternative career choice in the current economic slowdown. If you are planning to become an entrepreneur you will not be alone and will have plentyof company.

Many have gone the entrepreneur route due to external factors including layoffs, frustration in their current workplace culture, or the need for greater flexibility in their lives. However, it is most important to go with your own "internal factors," which include passion, wanting to be independent, wanting to accomplish, building an enterprise, enjoying freedom, a burning desire to make a profession out of a hobby and enjoying the challenges.

Positive aspects of entrepreneurship

  • Being the boss if his own business, he enjoys unlimited powers.
  • He can do things in his own way and he need not take orders from someone else.
  • He can make his own decisions and act on them.
  • There are numerous opportunities for his self- development.
  • Working on one‟s own and thus getting rewards yields immense satisfaction and pleasure for more than what he can get in a job.
  • Monetary rewards can be more than commensurate with his capacity and capabilities.
  • He can command deference and respect of his immediate family and friends. It is a kind of intangible reward.
  • Instead of depending on others, he generates employment for others.
  • He can make significant contribution to the development of the country and be proud of taking part in nation building activities.
  • He can be a great achiever realising his goals and proving his achievements to the world. He can be recognised for his outstanding efforts.

Negative aspects

  • Though an entrepreneur is his own boss, in some aspects he is not. It is so because he is constrained by various people like his financiers, labourers, suppliers, customers and so on.
  • He may have to face frustration since the scope of his operations is limited by his limited resources.
  • He has to work long and hard hours from morning to dusk and his venture tends to absorb all his energy and time. This may affect his social and family life.
  • At times he may have to face disappointments and frustrations since everything in his venture may not always work the way he would like it to.
  • He has to always work with tension since there is always the risk of failure.

Entrepreneurship as a Career Option?

The greatest challenge before the youngsters in India today is to build the country into an economicglobal giant. The obvious questions that come to the minds of most of them are - "Why should we in Indiathink of being an entrepreneur? Why not work as part of a larger organisation where the opportunities andresources to scale ideas are perhaps far greater?

Entrepreneurship is important for two reasons. One, it furthers innovation to find new solutions to existing and emerging demands. Two, it offers far greater opportunities for wealth creation for self and the society than anything else. Entrepreneurship has its challenges. It is about 20 per cent luck and 80 per centeffort, clarity, courage, confidence, passion and above all smartness.

What leads a person to take up entrepreneurship as a career option? There can be a number ofreasons including displacement from a job, frustration in the present job, not getting a job of his/her choice, etc. Sometimes a person realizes much in advance that his/her job is in jeopardy, as the organization is moving towards closure. At times a deserving employee getting superseded in promotion is compelled to quit the job and look for doing something on his own. Some people object to a system wherein reward is often based on seniority rather than merit.

Characteristics of an Entrepreneur:

The features of successful entrepreneurs are:

1. Hard work:

Willingness to work hard differentiates a successful entrepreneur from unsuccessful one. The entrepreneur with his teious saeat-filled hours and perseverance revive their business even from on verge of failure.

2. Desire for high achievement

The entrepreneurs have strong desires to achieve high goals in business.

3. Highly optimistic

The successful entreoreneurs are not disturbed by the present problems faced by them.They are highly optimistic for future that the situations will become favourable to business in future.

4. Independence

One of the common characteristics of the successful entrepreneurs has been that they do not like to be guided by others and to follow their routine.

5. Foresight

The entrepreneurs have a good foresight to know about future business environment. They visualize the changes in market conditions, consumers, and technology developments.

6. Good organizer

Different resources required for production are divorced from each other.It is the ability of the entrepreneurs that brings together all resources required for starting up an enterprise and then to produce goods.

7. Innovation

Production is meant for meant to meet customers requirements.In view of the changing taste of customers from time to time the entrepreneurs initiate research and innovative activities to produce goods to satisfy the customers changing demand for the products.

8. Capacity to take risk

9. Mobility and drive

10. Creative Thinking.

11. Strong need for achievement

12. Ability to Marshall resources

13. High degree of ambition

14. Will to prove superior to others.

Functions of Entrepreneurs:

An entrepreneur does perform all the functions necessary right from the genesis of an idea upt the establishment of an enterprise. These can be listed in the following manner:

1. Idea generation and scanning of the best suitable idea.

2. Determination of the business objectives.

3. Product analysis and market research

4. Determination of form of ownership/ organization

5. Completion of promotional formalities

6. Raising necessary funds.

7. Procuring machine and material

8. Recruitment of men.

9. Undertaking the business operations.

The functions of entrepreneurs can be also classified as under:

1. Risk bearing

2. Organization

3. Innovation

1. Risk-bearing function:The function of an entrepreneur as risk bearer is specific in nature. The entrepreneur assumes all possible risks of business which emerges due to the possibility of changes in the tastes of consumers, modern techniques of production and new inventions. Such risks are not insurable and incalculable. In simple terms such risks are known as uncertainty concerning a loss.

2. Innovative Function:The basic function an entrepreneur performs is to innovate new products, services, ideas and information for the enterprise. As an innovator, the entrepreneur foresees the potentially profitable opportunity and tries to exploit it. He is always involved in the process of doing new things.

3. Organizing Function: According to him, an entrepreneur is one who combines the land of one, the labour of another and the capital of yet another and thus produces a product. By selling the product in the market, he pays interest on capital, rent on land and wages to labourers and what remains is his/her profit. In this way, he describes an entrepreneur as an organizer who alone determine

4. Decision Making Function:The most vital function an entrepreneur discharges refers to decision making in various fields of the business enterprise. He is the decision maker of all activities of the enterprise.

5. Managerial functions:Entrepreneur also performs a variety of basic managerial functions. He undertakes POSDCORB functions. i.e planning, organising, co-ordinating, staffing, directing, reporting, budgeting ,motivating and controlling in the enterprise.

Skills for an Entrepreneur

  • Management skills – the ability to manage time and people (both oneself and others)
  • Communication skills (e.g. the ability to sell ideas and persuade others)
  • Able to research effectively (e.g. available markets, suppliers, customers and the competition)
  • Self-motivated and disciplined (He should be self motivated)
  • Decision Making Skills (the ability to take correct decisions)
  • Interpersonal Skills ( ability to get along with other persons)
  • Financial skills, such as book-keeping and calculating tax
  • Time Management - This goes hand in hand with Self Motivation. You as the entrepreneur need to schedule your day and stick to that schedule
  • Self Confidence

Every entrepreneur needs to be confident in themselves, their product and their business.

  • Sales

As an entrepreneur it is his job to develop the types of sales that will work best for his business and implement them. A continuous effort should also be put on improving sales skills.

Classification of Entrepreneurs(Types)

The entrepreneurs have been broadly classified according to,

Types of business

Use of professional skill

Motivation

Stages of development

1.Entrepreneurs According to Types of Business

Business entrepreneursare those individuals for a new product or service and then translate the same into business reality. Tap both production and marketing resources to develop a new business opportunity. Setup big establishment or small unit such as printing press, textile processing house, advertising agency, readymadegarments or confectionery.

Trading entrepreneur:Undertakes trading activities; concerned with marketing (Domestic and international level)

Industrial entrepreneursare essentially a manufacturer who identifies potential needs of customers and products or service to meet the marketing needs. He should have the ability to convert economic resources and technology into a profitable venture. Undertakes manufacturing activities only; new product development etc (textile, electronics, etc)

Corporate entrepreneuris an individual who demonstrates his innovative skill in organizing and managing corporate undertaking. He plans, develop and manage a corporate body. Interested in management part of organisation; (Ambani, Tata families)

Agricultural entrepreneurare the ones who undertake agricultural activities such as raising and marketing of crops, fertilizers and other inputs of agriculture. They are motivated to improve agriculture through mechanization, irrigation, and application of technologies for dry land agricultural products.

2.Entrepreneurs in Technology

Technical entrepreneuris the one who is essentially a craftsman. He develops improved quality of goods because of his craftsmanship. He concentrates more on production than on marketing. He demonstrates his innovative capabilities in matter of production of goods and rendering of services.

Non- technical entrepreneurare those who are not concerned with the technical aspects of the product in which they deal. They are concerned only with developing alternative marketing and distribution strategies to promote their business.

Professional entrepreneuris interested in establishing a business but does not have interest in managing or operating it once it is established. He sells out the running business and starts anotherventure with the sales proceeds. (Uses the proceeds from sale of one business to start another one. Brimming with ideas to start new ventures)

3.Entrepreneur and Motivation

An entrepreneur is motivated to achieve or prove his excellence in job performance. He influences others by demonstrating his business acumen.

Pure entrepreneuris an individual who is motivated by psychological and economic rewards. He undertakes entrepreneurial activity for his personal satisfaction in work, ego and status.

Induced entrepreneuris one who is induced to take up anentrepreneurial task due to policy measures of the government thatprovides assistance, incentives, and concessions and other facilities tostart a venture. Enter business due to financial, technical and otherfacilities provided to them by the state agencies to promoteentrepreneurship.

Motivated entrepreneur:they come into being because of the challenge involved in developing and marketing a new product for the satisfaction of consumers. If the product succeeds, the entrepreneur is further motivated for launching of newer products.

4.Entrepreneur and Stages of Development

First generation entrepreneuris the one who starts an industrial unit by his innovative skill. He is the one who combines different technologies to produce a marketable product or services.

Modern entrepreneuris one who undertakes those ventures which go well with the changing demand in the market. He undertakes those ventures that suit the current market needs

Classical entrepreneuris one who is concerned with maximizing the economic returns at consistent level. He is concerned more about the survival of the firm with or without an element of growth. Apart from the above, there are entrepreneurs who can be classified into innovative and imitative categories.

Others

Area-Rural and Urban entrepreneur

Gender-Age Men and Women entrepreneur

Scale -Small and Large scale entrepreneur

5.Clarence Danhof, have classified the entrepreneurs asfollows:

1.Innovating Entrepreneurs:

An innovating entrepreneur is one who introduces new goods, inaugurates new method of production, discovers new market and reorganizes the enterprise.

2.Imitative Entrepreneurs:

These are characterized by readiness to adopt successful innovations inaugurated by innovating entrepreneurs. Imitative entrepreneurs do not innovate the changes themselves, they only imitate techniques and technology innovated by others.

3.Fabian Entrepreneurs:

Fabian entrepreneurs are characterized by very greatcaution and skeptic in experimenting any change in their enterprises. They imitate only when it becomes perfectly clear that failure to do so would result in a loss of the relative position in the enterprise.

4.Drone Entrepreneurs:

These are characterized by a refusal to adopt opportunities to make changes in production formulae even at the cost of severely reduced returns relative to other like producers. Such entrepreneurs may even suffer from losses but they are not ready to make changes in their existing production methods.

Following are some more types of entrepreneurs listedby some other behavioral scientists:

i.Solo operators:

These are the entrepreneurs who essentially work aloneand it needed at all, employ a few employees. In the beginning most of entrepreneurs start their enterprise like them.

ii.Active partners

Active partners are those entrepreneurs who start/carryon an enterprise as a joint venture. It is important that all of them actively participate in the operations of the business.

iii.Inventors:

Such entrepreneurs with their competence and inventiveness invent new products. Their basic interest lies in research and innovative activities.

iv.Buyers

These are those entrepreneurs who do not like to bear much risk. Hence, in order to reduce risk involved in setting up a new enterprise, they like to buy the ongoing one.

v.Lifetimers:

These entrepreneurs take business as an integral part oftheir life. Usually, the family enterprise and businesses which mainly depend on exercise of personal skill fall in this type/category of entrepreneurs.

Distinction between an Entrepreneur and aProfessional Manager:

A professional manager is one who specializes in thework of planning, organizing, leading and controlling the efforts of others by the systematic used of classified knowledge and principles.Both managers and entrepreneurs are answerable for producing results.

Both have to produce results through people working with them though they deal with different sets of people. Both are decision makers but the decisions are different as their tasks vary. Both have to operate under constraints which are understandably different. To be effective in their respective roles, both have to followsound principles of management like planning, staffing, delegation and control.