Entrepreneurship Developement (1)

7/28/2019 Entrepreneurship Developement (1)

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Prof. Shikhar Srivastava


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Meaning & Definition Of Entrepreneur

Someone who exercises initiative byorganizing a venture to take benefit of an opportunity and, asthe decision maker, decides what, how, and how much of

a good or service will be produced.

An entrepreneur is a risk taker,and monitors and controls the business activities.


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The entrepreneur is usually a sole proprietor, a partner, or theone who owns the majority of shares inan incorporated venture.

According to Oxford dictionariesa person who sets up a business or businesses,taking on financial risks in the hope of profit.


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So The entrepreneur is the one who wants ultimately.


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FUNCTIONS OF AN ENTREPRENEUR

Planning of the project:He is the organizer to conceive

the idea of launching the project and to program the structureof business.

Management: The entrepreneur is also responsible for themanagement of business. He tries to have a least cost

combination of factors of production.

To Face Risks: He faces uncertainly and bears risks in hisbusiness uncertainly comprising those risks against which it isnot possible to insure. He also faces the risk of other producers

may enter the market.

Distribution of Rewards: He is responsible ofdistributing the rewards to all factors of production. He paysthe reward in the shape of rent, wage, and interest and bears

the risk of profit or loss himself.


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Sale of Products: An entrepreneur is also responsible ofmarketing, advertising. He wants to maximize his profits byselling his product in the market.

Scale of Production: He decided the scale of business inaccording with the provision of capital. Then, he takes thedecision of what where and how to produce goods.

Identifying entrepreneurial opportunity There are manyopportunities in the world of business. These are based onhuman needs like food, fashion, education, etc., which areconstantly changing. These opportunities are not realized bycommon man, but an entrepreneur senses the opportunities

faster than others do. An entrepreneur therefore, has to keephis eyes and ears open and require imagination, creativity andinformativeness.


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Turning ideas into action An entrepreneur should becapable of turning his ideas into reality. He collects informationregarding the ideas, products, practices to suit the demand inthe market.

Feasibility study The entrepreneur conducts studies toassess the market feasibility of the proposed product orservices. He anticipates problems and assesses quantity, quality,cost and sources of inputs required to run the enterprise. Such ablue print of all the activities is termed as a 'business plan' or a

'project report'.

Resourcing The entrepreneur needs various resources interms of money, machine, material, and men to running theenterprise successfully. An essential function of an

entrepreneur is to ensure the availability of all these resources. Setting up of the Enterprise For setting up an enterprise the

entrepreneur may need to fulfill some legal formalities. He alsotries to find out a suitable location, design the premises, installmachinery and do many other things.


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Managing the enterpriseOne of the important functionof an entrepreneur is to run the enterprise. He has to managemen, material, finance and organize production of goods and

services. He has to market each product and service, afterensuring appropriate returns (profits) of the investment.Only a properly managed organization yields desired results.

Growth and DevelopmentOnce the enterprise achievesits desired results, the entrepreneur has to explore anotherhigher goal for its proper growth and development. Theentrepreneur is not satisfied only with achieving a set goalbut constantly strives for achieving

excellence.


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nterna an xterna actors o

Entrepreneurship

There are things, events, or situations that occur that affectthe way a business operates, either in a positive or negativeway. These things, situations, or events are called "drivingforces or environmental factors or forces

There are two kinds of driving forces; Internal drivingforces, and external driving forces.


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Internal driving forces are those kinds of things, situations,or events that occur inside the business, and are generallyunder the control of the company.

Examples might be as follows;

machinery and equipment, technological capacity,

organizational culture, management systems, financial management employee morale.

E l d i i f h ki d f hi


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External driving forces are those kinds of things,situation, or events that occur outside of the companyand are by and large beyond the control of thecompany.

Examples of external driving forces might be, theindustry itself the economy,

demographics, competition, political interference.

Whether they are internal or external driving forces,one thing is certain for both. Change will occur! Acompany must be cognizant of these changes, flexible,and willing to respond to them in an appropriate way.


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Entrepreneurial motivation and BarriersReasons or factors that are responsible for

entrepreneurial motive in a person

What is the intrinsic value that drives a person to start a newventure ?

Is it financial scarcity or financial abundance that motivatesan individual to start a business?

Is it family support, social status or dissatisfaction with thepresent life that motivates an entrepreneur to start a new

business venture?


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Maslows need Hierarchy theory:

Primary needs

Safety needsSocial needs

Esteem needs

Self Actualization need


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Factors Motivating the entrepreneurs into two types

Internal Factors:A. Desire to do Something

B. Education background

C. Experience External Factors:

A. Government assistance and Support

B. Availability of raw material and Labor

C. Encouragement from big business houses D. Promisingdemand for the Product

B i E hi


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Barriers to Entrepreneurship:

Environmental Barriers:

Raw Material Labor

Machinery

Land and building

Other infrastructure requirement

Financial Barriers

Personal Barriers:Lack of confidence

Lack of Dependability on others.

Lack of Motivation.

Lack of Patience


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Classification of Entrepreneurs

Based on Functional Characteristics. Based on Developmental Angle.

Based on Types of Entrepreneurial Business.

Based on the nine Personality Types ofEntrepreneurs.

Based on Types of Motivation.

Based on Types of Area.

Based on Types of Gender.


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Based on Functional Characteristics Innovating Entrepreneur: One who introduces new

goods, inaugurates new methods of production,discovers new market and reorganizes the enterprise.

Imitative Entrepreneur: One who is ready to adopt

successful innovations inaugurated by innovatingentrepreneurs.

Fabian Entrepreneur: One who is very cautious andskeptical about experimenting any change in theenterprise.

Drone Entrepreneur: One who refuses to adoptopportunities to make changes in production even at thecost of severely reduced returns.


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Based on Developmental Angle

Prime Mover: this entrepreneur sets in motion a powerful

sequence of development, expansion, and diversification of

business.

Manager: Such an entrepreneur does not initiate expansion and is

content just staying in business.

Minor innovator: this entrepreneur contributes to economic

progress by finding better use for existing resources.

Satellite: This entrepreneur assumes a suppliers role and slowly

moves towards a productive enterprise.

Local trading: Such an entrepreneur limits his enterprise to the

local market.


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Based on Types of Entrepreneurial Business

Manufacturing: an entrepreneur who runs such a businessactually produces the products that can be sold using resources

and supplies.

Wholesaling: An entrepreneur with such a business sells products

to the middle man. Retailing: An entrepreneur with such a business sells products

directly to the people who use or consume them.

Service: An entrepreneur in this business sells services rather

than products.


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Based on the nine Personality Types of

Entrepreneurs

The Improver: if you operate your business predominately in theimprover mode, you are focused on using your company as means

to improve the world.

The Advisor: This business personality type will provide an

extremely high level of assistance and advice to customers. The Superstar: Here the business is centered on the charisma and

high energy of the superstar CEO.

The Artist: This business personality is the reserved but a highly

creative type. As an artist type youll tend to build your businessaround the unique talents and creativities that you have.


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Entrepreneurs

The Visionary: A business built by a visionary will often be based

on the future vision and thoughts of the founder.

The Analyst: if you run a business as an Analyst, your company

focus in on fixing problems in a systematic way. Often the basis

for science, engineering or computer firms, analyst companies

excel at problem solving.

The Fireball: A business owned and operated by a fireball is full

of life, energy and optimism.


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Entrepreneurs

The Hero: You have an incredible will and

ability to lead the world and your business

through any challenge.

The Healer: If you are a healer, you provide

nurturing and harmony to your business. You

have an uncanny ability to survive and persist

with an inner calm.


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Based on Types of Motivation

Pure Entrepreneur: Individual who is motivated bypsychological and economic rewards. The basicobjective is to earn profit.

Induced Entrepreneur: One who is induced to take

up entrepreneurship due to government assistance,rewards, concessions etc.

Motivated Entrepreneur: Motivated by the desirefor self-fulfillment & self-actualization.

Spontaneous Entrepreneur: These entrepreneursstart business by their natural talent.


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Based on Types of Area

Urban Entrepreneur: One who has his industrialunit in urban area and has engaged workers

from that area.

Rural Entrepreneur: One who has its industrialset up in rural area and has engaged workers

from the same area.


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Based on Types of Gender

Male Entrepreneur.

Women Entrepreneur.


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THEORIES OF

ENTREPRENEURSHIP


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Entrepreneurship is an evolved thing. With theadvancement of science and technology it has undergonemetamorphosis change and emerged as a critical input for

socio-economic development. Various writers havedeveloped various theories on entrepreneurship andpopularized the concept among the common people. Thetheories propounded by them can be categorized as

under-

Sociological theoriesEconomic theoriesCultural theoriesPsychological theories

Sociological Theories


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Sociological TheoriesThe following theories explain how sociological factorsacclelerate the growth of entrepreneurs:1-Theory of religious beliefs

2- Theory of social change

Theory of religious beliefsMax Weber has propounded the theory of religious belief.

According to him, entrepreneurism is a function of religiousbeliefs and impact of religion shapes the entrepreneurialculture. He emphasized that entrepreneurial energies areexogenous supplied by means of religious beliefs. theimportant elements of Webers theory are discussed further-


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1- Spirit of Capitalism-in the Webrian theory, spirit of capitalism is highlighted. We allknow that capitalism is an economic system in which economic

freedom and private enterprise are glorified, so also theentrepreneurial culture.2- Adventurous Spirit-Weber also made a distinction between spirit of capitalism andadventurous spirit. According to him, the former is influenced by

the strict discipline whereas the latter is affected by free force ofimpulse. Entrepreneurship culture is influenced by both thesefactors.3- Protestant ethic-according to Max Weber the spirit of capitalism can be grown only

when the mental attitude in the society is favorable to capitalism4 -Inducement of profit-Weber introduced the new businessman into the picture oftranquil routine. The spirit of capitalism intertwined with themotive of profit resulted in creation of greater number of businessenterprises.


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In fact, this theory suited the british rulers, who desired to encourageEuropean entrepreneursip in India. This theory was vehementaly criticizedby many researchers because of the unrealistic assumpitions.

Theory of Social ChangeEverett E. Hagen, in his theory of social change propounded how atraditional society becomes one in which continuing technical progresstakes place. The theory exhorts the following feature which presumes the

entrepreneurs creativity as the key element of social transformation andeconomic growth.Presentation of general model of the society- the theory reveals a generalmodel of the society which considers interrelationship among physicalenvironment, social structure, personality and culture.Economic Growth : product of social change and political change :

According to Hagen, most of the economic theories of underdevelopmentare inadequate.Rejection of followers syndrome : Hagen rejected the idea that the solutionto economic development lies in imitating western technology. So thefollowers syndrome on the part of the entrepreneur, is discouraged.


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Historic shift as a factor of initiating change- Hagen in his book, HowEconomic Growth Begins, depicts historic shift as the crucial force which hasbrought about social change technological progress thereby leading to theemergence of entrepreneurial class from different castes and communities.

Withdrawal of status respects as the mechanism for rigorousentrepreneurial activity-Closely consistent with the historic shift it is the social group that plunges intorigorous entrepreneurism which experiences the status withdrawal orwithdrawal of status respects.

hence, Hagens creative personality is the admixture of Schumpetersinnovation and McClellands high need for achievement.

but Hagens analysis fails to give policy measures for backward countrieswhich are striving for economic development as he identifies status withdrawal asthe causal factor in the emergence of creative presonality. Hagens thesis ofdisadvantaged minority groups ha its own limitations. There are many

disadvantaged minority groups in India which have not supplied a good numberof entrepreneurs.


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ECONOMIC THEORIES

Entrepreneurship and economic development are interdependent.Economic development takes place when a country' real rational income

increases overall period of time wherein the role of entrepreneurs is anintegral part.

Schumpeters Theory of InnovationSchumpeters theory of entrepreneurship is a pioneering work of

economic development. development in his sense, implies that carryingout of new combination of entrepreneurship is basically a creativeactivity. According to Schumpeter an entrepreneur is one who perceivesthe opportunities to innovate, i.e. to carry out new combinations orentreprise. In his views, the concept of new combination leading tiinnovation covers the following 5 cases-

1- The introduction of new goods, that is the one with which consumersare not yet familiar, of a new quality.2- The introduction of new method of production3- The opening of new market4- the conquest of new source of supply of raw material5-The carrying out of new organization


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In view of the above, Schumpeterian theory of entrepreneurship has gotthe following features-1- Distinction between invention and innovationSchumpeter makes a distinction between innovation and invention.Invention means craetion of new things and innovation means applical ofnew things onto practical use2- emphasis on entrepreneurial function- Schumpeter has given emphasison the role of entrepreneurial functions in economic development.in hisviews, development means basic tranformation of the economy that isbrought about by entrepreneurial functions.

3- presentation of disequilibrium situation through entrepreneurialactivity-the entrepreneurial activity represents a disequilibrium situation, adynamic phenomenonand a break from the rotine or a circular flow ortendenct towards equilibrium.4- entrepreneuralism dream and the will to found a private kingdom- themotives of creating things and applying these things into practice inspire

the entrepreneur to undertake innovation.


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5- Schumpeter remained silent about as to why some economics had moreentrepreneurial talent than others.However, despite the above criticisms, Schumpeterian theory is regarded asone f the best theories in the history of entrepreneurial development.

CULTURAL THEORIESAdvocates of cultural theories point out that entrepreneurship is the product ofculture. Entrepreneurial talents come from cultural values and cultural systemembedded into the cultural environment.

Hoselitzs TheoryHoselitz explains that the supply of entrepreneurship is governed by culturalfactors, and culturally minority groups are the spark-plugs of entrepreneurialand economic develoment.in many countries, entrepreneurs have emergedfrom a particular socio-economic class. He emphasized the role of culturallymarginally groups like Jews and the Greeks in medieval Europe, the Chinesein south Africa and Indian in east Africa in promoting economic development.

Psychological TheoriesPsychological theories centre's around the psychological characteristic so theindividual in a society. Psychological characteristics affect the supply ofentrepreneurs in the society.


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DRUCKER ON ENTREPRENEURSHIPPeter F. Drucker opined that an entrepreneur is one who always searches forchange, responds to it and exploits it as an opportunity. he laid emphasis ontwo important factors innovation and resource- that led to emergence of

entrepreneurship. According to him, innovation is the real hub ofentrepreneurship which creates resource. A thing is regarded as resource whenits economic value is recognized. For example, mineral oil was consideredworthless until the discovery of its use. Similarly, purchasing power wasconsidered an important resource by an American innovative entrepreneurwho invented installment buying.

According to Drucker, successful entrepreneurship involves thefollowing things-Value and satisfaction obtained from resource by the consumer are increasedNew values are createdMaterial is converted into a resource or exiting resources are combined in anew or more productive configuration

Entrepreneurship is the practice which has a knowledge base.Entrepreneurship is not confined to big businesses and economic institutions,it is equally important to small business and non-economic institutionsEntrepreneurship behavior rather than personality trait is more important toenhance entrepreneurshipThe foundation of entrepreneurship lies in concept and theory rather than in

intuition.


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Thus, Drucker has given his viewsthat an entrepreneur need not be a

capitalist or an owner. A banker who

mobilizes others money and

allocates it in areas of higher yield isvery much an entrepreneur though

he is not the owner of the money.


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1. Idea Generation: every new venture begins with

an idea. In our context, we take an idea to be adescription of a need or problem of some constituencycoupled with a concept of a possible solution.

2. Opportunity Evaluation: this is the step where you

ask the question of whether there is an opportunityworth investing in. Investment is principally capital,whether from individuals in the company or fromoutside investors, and the time and energy of a set of

people. But you should also consider other assets suchas intellectual property, personal relationships,physical property, etc.

3. Planning: Once you have decided that an opportunity, you


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3. Planning: Once you have decided that an opportunity, youneed a plan for how to capitalize on that opportunity. A planbegins as a fairly simple set of ideas, and then becomes morecomplex as the business takes shape. In the planning phaseyou will need to create two things: strategyand operatingplan.

4. Company formation/launch: Once there is a sufficiently

compelling opportunity and a plan, the entrepreneurial teamwill go through the process of choosing the right form ofcorporate entity and actually creating the venture as a legalentity.

5. Growth: After launch, the company works toward creating


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5. Growth: After launch, the company works toward creatingits product or service, generating revenue and moving towardsustainable performance. The emphasis shifts from planningto execution. At this point, you continue to ask questions butspend more of your time carrying out your plans.


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Opportunity evaluation

(investment prospectus)

Company's plan Execution

Need / problem

Solution

Competitive position

Team

Risk / reward profile

Strategy

Target customer

Business model

Position

Company objectives

Operating planCompany timeline

Staffing planBudget

Financing plan

Market research

Marketing

Business development

Forecasting

Sales planningR&D management

Operations

management

People management

Process and

infrastructure

Budgeting

Financing

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