Entrepreneurship comes from a french word `Entrependre’ and the German word `Uternehmen’ both meaning individuals who are `undertakers’ i.e. those who took the risk of a new enterprise. Entrepreneurship is a dynamic activity which helps the entrepreneur to bring changes in the process of production, innovation in production, new usage of materials, creator of market etc. It is a metal attitude to foresee risk and uncertainty and do something new in an effective manner to achieve certain goals.
An entrepreneur is an economic change
agent with knowledge, skills, initiative, drive and spirit of innovation to
achieve goals. He identifies and seizes opportunity for economic
benefits. He is a risk bearer, an organizer and an innovator.
According to Economists →
An entrepreneur is the one who brings resources, labour, material and other
assets into combination to produce a socially viable product, and also one who
introduces changes, innovation and new order.
According to Management →
A person with a vision and action plan to achieve it is an entrepreneur.
Functions of an entrepreneur →
- Identification
of opportunities
- Introduction
of a new product
- Gathering
resources or Introducing new methods of production
- Developing
new markets
Characteristics of an Entrepreneur →
Vision – He
is able to visualize market demand, socio-economic environment and the future
of business venture.
Knowledge – He
has sound conceptual knowledge about all the technicalities of his business.
Desire to succeed – He
has multiple goals and a seeks opportunities to be productive.
Independence – He
is independent in work and decision making
Optimism – He
knows how to exploit opportunities.
Value addition – He
does not follow the conventional rule of thumb, they have a desire to create,
innovate and add value.
Initiative – He
takes the initiative to make an action plan from limited resources.
Goal setting – He
sets realistic goals.
Problem solver – He
is creative in problem solving.
Good human relations – He
is a good leader, motivator and team builder.
Communication skills – He
has the ability to persuade others.
Types of Entrepreneur →
(i) According to Clarence Banhof →
♦ Aggressive/Innovative
entrepreneur – The one who uses various combinations of information
and factors of production to assemble and engineer new and innovative products.
♦ Immitative/Adoptive
entrepreneur – The one who simply adopts a successful innovation
introduced by other entrepreneurs.
♦ Fabian entrepreneur – The
one who is timid and cautious in making bold decisions. Such an entrepreneur
adopts innovations in his business only when he fears that not innovating may
damage his business.
♦ Drone entrepreneur – A
drone entrepreneur is one who refuses to adopt new innovations even at the cost
of reduced returns.
(ii) According to Authur H. Cole →
♦ Empirical entrepreneur – An
entrepreneur who does not innovate and follows the rule of thumb.
♦ Rational entrepreneur – An
rational entrepreneur is one who keeps himself updated with his business, the
market and economic conditions, and introduces revolutionary ideas.
♦ Cognitive entrepreneur – An
entrepreneur that seeks advice and services of experts to make changes which
are revolutionary and reflect a complete shift from its existing structure.
(iii) According to Ownership →
♦ Public entrepreneurship – These
are individuals who partner with the government to create enterprises which
serve the public in innovative ways.
♦ Private entrepreneurship – These
entrepreneurs are profit oriented and do not enter market which have low
monetary rewards associated with it.
(iv) According to Scale of
enterprise →
♦ Large scale entrepreneur – Large
scale entrepreneurs are usually found in developed countries. These entrepreneurs
introduce revolutionary ideas and are able to sustain high profits and develop
new technologies as they possess the financial capacity and necessary resources
to do so.
♦ Small scale entrepreneur – Small
scale entrepreneurs do not have the necessary funds and technology to initiate
large scale production and introduce revolutionary ideas.
Nature of Entrepreneurship →
♦ Creation of an enterprise – It
involves creation and operation of an enterprise.
♦ Organizing function – It
brings together various factors of production for economic use.
♦ Innovation – It
is an automatic, spontaneous and creative response to changes in the
environment.
♦ Risk bearing capacity – It
assumes uncertainty of future.
♦ Managerial and leadership function – It
is responsible for controlling and coordinating the human resource and giving
direction to an enterprise.
♦ Gap filling – It
fills the gap between human needs and available products and services.
Process of Entrepreneurship →
(A) Identify an opportunity – An Entrepreneur senses opportunities and visualizes a market since they are creative and open to new ideas and seek challenges. They look for needs, wants, problems and challenges that are not met or dealt effectively. Since their ideas are innovative they gain first movers advantage which provides product identification and higher credibility in the market.
(B) Establishing a vision – It
involves generation of ideas using past experience and creativity to develop
new and innovative ways to solve a problem, or satisfy a need. Out of many
ideas the most feasible and profitable are chosen and narrowed to one best
idea. He evaluates different opportunities and the business environment to
assess the (i) Real and Perceived value of the product/service (ii) Risks and
rewards associated with the project (iii) and differential advantage in its
competitive environment.
(C) Persuade others – He
forms a foundation team which consists of a group of individuals who work
together to turn his vision into reality. They may be partners, financiers,
family members etc.
(D) Gathering Resources – It
involves using a business plan to attract investors, venture capitalists,
partners, financial institutions, promoters etc. The main task is to
research and identify resources that are needed to turn the idea into a viable
venture.
Resources can be categorized into –
- Financial Resources – Personal savings, retained capital, banks, government institutions, family, friends, partnerships, venture capital, public issue.
- Operating Resources – They can be Tangible or Intangible.
Tangible – (a) machines (b) raw
materials (c) land and building (d) office equipments (An entrepreneur has to
make a decision to buy, rent or hire them).
Intangible resources – (a) company’s image (b) operating procedures (c) transportation (d) management
- Human – Temporary/permanent employees, Amount of man power needed, Recruitment, Selection and Training of staff, Compensation, Organization culture.
- Information – An efficient management information system is needed in order to have timely info about customers, markets, competitors and external environment. All the data is networked on real time basis to speed up actions based on information.
(E) Create new Venture – When
all the resources have been arranged, the next step is Creation and
establishment of a new venture and running the business venture successfully.
It requires a lot of enthusiasm and persuasion to gather optimum resources and
it requires a lot of perseverance and passion to believe in self.
(F) Change/Adapt with time – It
is necessary to monitor and upgrade the organization with changing market
conditions. It requires availability of funds to make changes and the
adaptability of human resource towards changed environment.
Functions of Entrepreneurship →
(A) Primary Functions –
- Planning
- Organizing
- Decision
Making
- Managing
- Innovating
- Risk
bearing
(B) Secondary Functions –
- Diversification
of production
- Expansion
of the enterprise
- Maintaining
cordial employer and employee relations
- Tackling
Labour problem
- Co-ordinating
and communicating with third parties
(C) Other Functions –
- Managing
of scarce resources
- Dealing
with public bureaucracy
- Identifying
parallel opportunities
- Building
Strong customer relations
Barriers to Entrepreneurship →
(i) Environmental Barriers →
(a) Raw Material – Non-availability of
raw materials required for production during peak seasons. It leads to
increase in price of raw materials due to competition.
(b) Labour –
- Lack
of skilled labour
- Lack
of committed and loyal employee
- Quality
and Quantity of labour
(c) Machinery – Machines are necessary
but they are also costly and due to rapid change in technology they become
obsolete and require replacement which requires cash in hand. It becomes
very difficult for small business organization to keep updating its production
process.
(d) Land and Building – Acquisition of
land and construction of building at a prime location require heavy
expenditure. If the land is taken on rent, it becomes a fixed cost and a
constant concern for the entrepreneur.
(e) Infrastructure support – Adequacy of
power, proper roads, water and drainage facilities etc. There is less
support from development authorities due to red-tapism and corruption.
(ii) Financial barrier →
Availability of funds is a major concern. A delay in source of finance results
in delay of starting or running business.
(iii) Personal Barrier →
They are caused by emotional blocks of an individual. They cause a mental
obstruction. They are: -
(a) Lack of confidence – They think they
will never find a successful business idea and would be unable to attract
necessary resources. Therefore, they dismiss the thought of being
self-employed.
(b) Lack of Dependability on others –
They aim to gain their additional expertise through trail and error and
experience, rather than seeking further development or personal assistance from
others.
(c) Lack of Motivation – Lose interest
and motivation when ideas don’t work.
(d) Lack of Patience – When desire to
achieve success in first attempt or to become rich instantly are confronted
with business challenges/problems they lose interest. They give up at during
initial losses.
(e) Inability to Dream – Sometimes they
are short of vision or satisfied with what they have achieved and lose interest
in further expansion of business.
(f) Sense of Pride/Embarrassment – they
are too proud or too embarrassed to take help.
(iv) Societal Barrier →
- Socio-cultural
norms and values
- Degree
of approval or disapproval of entrepreneurial behaviour
- Financial
stability and family background
- Caste
and religious affiliation
(v) Political Barrier →
- Government
incentives and concessions
- Facilitating
socio-economic setting
- interest
in economic development of society
Scope of Entrepreneurship in India →
Individuals are opting for
entrepreneurship as a career due to reasons such as –
- Desire
of control over one’s future
- More
profits
- Lack
of employment opportunity
- Government
measures to promote entrepreneurship
Entrepreneurship provides employment and
source of earning to people. It helps in reducing the monopoly of rich
businessman and achieving a balanced regional development and growth in
economy. Government of India is conducting development programmes to
identify entrepreneurial potential and assistance from financial and
non-financial institutions are being provided to entrepreneur. Entrepreneurship
training institutes have been established and financial and operational support
is being provided to young entrepreneurs in India.
Need of entrepreneurship in an economy
can be highlighted from the following points:
(1) Lifeline of a nation:
Level of development of a country can be
measured from the quality of the entrepreneurship. No country can develop
without the development of entrepreneurship, as it increases the quality and
quantity of trade.
(2) Provides innovation:
An Entrepreneur is the person who brings
new ideas, innovate products and new vision to the enterprise. As a result of
which consumers in the market gets a wider variety of goods and services which
again help in increasing the size of the market but domestically as well as
internationally.
(3) Increase in profits:
Profit is the excess of revenue over
cost. It can be increased either by increasing revenue or reducing cost.
increase in revenue is beyond the control of the enterprise and profit can be
increased by reducing cost of production which is possible only with the
endeavour of an entrepreneur. Increase in profit increases the opportunities
for future growth and development.
(4) Social benefits
An entrepreneur provides various goods
and services at lowest possible prices which indeed raises the standard of
living and thereby, increases social benefit along with private benefits.
(5) Employment opportunities
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