UNIT 14 ENTREPRENEURSHIP

Structure
14.0 14.1 14.2 Objectives Introduction Overview of Entrepreneurship
14.2.1 14.2.2 14.2.3 14.2.4 Enterprise, Entrepreneur and Entrepreneurship Types of Entrepreneurship Forms of Entrepreneurial Organization Reason for Starting an Enterprise

Entrepreneurship

14.3

Entrepreneurship Development
14.3.1 14.3.2 14.3.3 14.3.4 14.3.5 Entrepreneurship A Dynamic System Entrepreneurs Job Entrepreneurship Skills Measuring Entrepreneurship Challenges of Entrepreneurship

14.4

Entrepreneurship Opportunities
14.4.1 14.4.2 Entrepreneurial Training Government Support Towards Entrepreneurship

14.5 14.6 14.7 14.8 14.9

Let Us Sum Up Glossary Suggested Further Reading References Answers to Check Your Progress

14.0 OBJECTIVES
After reading this unit, you will be able to: define entrepreneurship; explain types of entrepreneurship and their skills; identify different forms of entrepreneurial organization; and describe how to measure entrepreneurship.

14.1 INTRODUCTION
In the earlier unit, you learnt in detail about the concept and process of empowerment and approaches to empower the capacity of individual or community as a whole. In this unit, you will learn the real way of empowerment by starting a business/enterprise. Before going to the topic in detail, first it is essential to have some basic knowledge about the terms entrepreneur, enterprise and entrepreneurship.

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Human Resource Development for Marketing

Entrepreneurship is the practice of starting a new business or developing new products or services with the motive to generate profit. Entrepreneurship is a difficult task which concerns not only production, but plays a multi role to attract consumer towards the product. Another important aspect is to maintain the consumers through trust building and reputation. Starting a business is not only important in view of profit generation but also in terms of self-respect and dignity in the society. This makes you a person with selfreliance and independent. Entrepreneurship at individual level is the basis for the national growth and economic development. Hence, now-a-days there is a great appreciation for entrepreneurship development in national and international level. Though the words entrepreneur, enterprise and entrepreneurship look similar, they have different meaning.

14.2

OVERVIEW OF ENTREPRENEURSHIP

Entrepreneurship development needs many factors. Let us now learn some of these.

14.2.1

Enterprise, Entrepreneur and Entrepreneurship

Enterprise Enterprise is the entity or a business initiated by an entrepreneur. It may be categorized into public or private enterprise and small scale or large scale enterprises. Enterprise is a purely economic term, most of the time it is commonly mentioned as business. You may be familiar with the business in your place and their activities. Entrepreneur Entrepreneur is derived from French word entreprendre which means to undertake. This means entering new areas to explore something new for the benefit of the society. According to Websters dictionary, entrepreneur is defined as one who undertakes business/enterprise, by assuming responsibility, control and risk. Based on the role of an entrepreneur, he assumes different forms. According to Schumpeter, four forms of entrepreneur are: The Achiever The Sales person The Manager The Inventor

This categorization is based on the role of entrepreneur and their contribution towards development of enterprise. Now-a-days, a new concept of entrepreneur i.e., social entrepreneur is gaining importance. Entrepreneur who recognizes a social problem and solves it in an innovative manner is called as social entrepreneur. He is the change agent of the society. The main focus of social entrepreneurs is towards solving major social issues which affect the society as a whole. In the society, there are emergence of social entrepreneurs due to increasing demand for the service and lack of information.

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Entrepreneurship Entrepreneurship is the quality of an entrepreneur which is needed for effective functioning of business by utilizing the available opportunities. It is an art of running the business with some logic and analytic thinking. Entrepreneurship is an activity towards empowerment by starting a business of their own and manages resources and people in an efficient way. Entrepreneurship is one of the economic factors implied in factors of production other being land, labour and capital. Most of the time, entrepreneurship is interchangeably used for profit, as they are mainly involved in wealth generation through profit making over a period of time. Enterprise cannot exist without entrepreneur who in turn cannot perform well without entrepreneurship qualities. A proper enterprise can function well by a good vibrant entrepreneur with necessary entrepreneurship skills. Activity 1 List out the enterprises in your area and make note of their activities? ....................................................................................................................................................... ....................................................................................................................................................... .......................................................................................................................................................

Entrepreneurship

14.2.2

Types of Entrepreneurship

Entrepreneurship can be classified into four types based on the opportunity available and the purpose of their activity (Fig. 14.1). i) Opportunity based entrepreneurship Person who chooses his/her career based on the opportunity available and knowledge acquired from the society is called as opportunity based entrepreneur. This is the real entrepreneurship as the idea and interest has initiated from himself. This is not generated by external forces through compulsion. It is established based on ones own interest and enthusiasm. Hence, in this type, entrepreneur will be innovative, enthusiastic and able to do things differently with their own creative thinking. ii) Necessity based entrepreneurship Person who chooses his/her career as a last chance, due to their family circumstances or due to disappointment from their earlier job. They may choose these as an option only for the sake of getting a job. It is not of choice and interest but of pressure and compulsion. This kind of entrepreneur is not having any creative, innovative thinking. Hence, they are not able to with stand in the field due to lack of interest. Finally, they get frustrated and result in loss of business. Ultimately, they close the business in very early stages. In India, majority of entrepreneurship are necessity based rather than opportunity based. iii) Technological entrepreneurship An entrepreneur, who introduces new technology to the market. The contribution of this entrepreneur is in two ways. One is by introducing new products and the other by introducing new process in the existing product. In this kind, the person should give more emphasis on the new technology and update knowledge in this aspect. The success and loss of an enterprise depends on the degree of exposure to new technologies.

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Human Resource Development for Marketing

Example: An entrepreneur producing dried fish products by using solar drier is an example of technological entrepreneur. Producing dried fish products is an existing technology, but the process of drying using solar drier is the new process.

Entrepreneurship

Opportunity
Need based Entrepreneurship Opportunity based Entrepreneurship

Purpose of activity
Technological Entrepreneurship Geographical Entrepreneurship

Fig. 14.1: Types of entrepreneurship

iv) Geographical entrepreneurship An entrepreneur who distributes technology or product from one place to another place is known as geographical entrepreneur. The geographical place may be at national level or international level. This entrepreneur should have knowledge to assess the correct time to sell their products. The major challenge of this entrepreneur is analyzing the consumer demand. As you already studied in Block II & III of this marketing course, it is well evident that demand forecasting and consumer behaviour studies are very difficult due to changing consumer preferences over time. Hence, more attention should be given to consumer survey and demand analysis. Example: A person producing canned fish products in Kerala and selling it in Uttar Pradesh is a kind of geographical entrepreneurship. From this, you come to know that other than production, an entrepreneur should concentrate on wide range of activities i.e., identifying new technology, context and consumer demand to gain good returns.

14.2.3

Forms of Entrepreneurial Organization

An enterprise can be owned by single person or by a few groups of persons. There is no hard and fast rule to be of particular form of entrepreneurial organization. It depends on the knowledge, finance, resources and capacity of the entrepreneur. Based on the ownership pattern i.e., who owns the enterprise?, enterprise can be classified into, Sole proprietor, Partnership, Co-operative form, Joint stock company and State enterprise. Among these types, sole proprietor, partnership and co-operatives are most relevant to self employed and small entrepreneurs. Other two forms are very much relevant to large scale industrial units. Each form has its own positive and negative aspects. Here, I am going to explain you the first three forms in detail. 26

i)

Sole proprietor

Entrepreneurship

The entrepreneur is the single person who has the ownership right over the enterprise. He is the sole person responsible for the profit and loss. Most of the time, all the activities are done by a single person. For example, selling dried fish in which all the activities are not so complicated, which can be managed by the single person. This type or form of organization is better known as individual entrepreneurship. ii) Partnership

This form is established by two or more persons who have joined together to establish an enterprise. The profit and loss can be shared between the members i.e., partners. In this form, co-ordination and trust between partners are essential for the success. For example, value added fish products such as fish pickle and fish cutlet producing units can be established by partnership by utilizing large resources and finance from the partners. iii) Co-operative enterprise

Enterprise establishes by a large number of persons collectively, through utilizing resources and finance collectively in a co-operative manner. The availability of resources and finance is more when compared to other forms. The decision making with the consensus of all the members is difficult. For example, establishment of small scale fish processing units exclusively for value added and by-products production such as fish pickle, fish cutlet, chitosan etc. The ownership pattern, their advantages and disadvantages are very unique to particular form. These are presented below in Table 14.1.
Table 14.1: Advantages and Disadvantages of Various Forms of Entrepreneurial Organization Forms of Organization Sole proprietorship Ownership Pattern Single ownership Advantages Efficient management Easy to start and wind up Resource and finance from partners Decision making is easy Sufficient resource and finance Division of work between members Disadvantages Limited resource and finance availability Non-transparency between partners Dominating character of partners Convenience of the members Group co-operation is difficult

Partnership

Shared ownership

Co-operative enterprise

Collective ownership

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Human Resource Development for Marketing

Activity 2 Collect information about co-operative enterprise and their scope. .................................................................................................................. .................................................................................................................. .................................................................................................................. ..................................................................................................................

14.2.4

Reasons for Starting an Enterprise

The reason for starting an enterprise varies from person to person. Somebody may be frustrated with their existing job and somebody may want to stand on their own or may want to achieve their goals by producing new products and services. It all depends on the choice and situation of an individual. But, there should be some basic reasons behind starting an enterprise. i) Independent Starting an enterprise can solve your financial worries and make you selfdependent to fulfill your needs. You can work independently in an environment which is preferable by you in a hassle free domination of supervisors and bosses. ii) Employment It is the best to do self-employment on your own and also provide employment opportunities to others in the society. Mostly, it is an opportunity for those who are disappointed in the current competitiveness in job. iii) Self-earning It is a chance to earn money on own through earning profit in an enterprise. The freedom to spend and save depends on your own earning. This gives you the confidence to stand on your own. iv) Personal satisfaction The amount of satisfaction which a person attains through own enterprise is a good motivating factor. The ultimate satisfaction also added through providing goods and services for the benefit of the society.

Check Your Progress 1

Note: a) Write your answers within the space provided. b) Check your answers with those given at the end of the unit. 1) What is meant by entrepreneur? ............................................................................................................. .............................................................................................................

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2)

Name the two categories of entrepreneur? ............................................................................................................. .............................................................................................................

Entrepreneurship

3)

What is the classification of entrepreneurship? ............................................................................................................. .............................................................................................................

4)

What are the two classification of enterprise? ............................................................................................................. .............................................................................................................

5)

What are the advantages of sole proprietorship? ............................................................................................................. .............................................................................................................

6)

What is the ownership pattern of co-operative enterprise? ............................................................................................................. .............................................................................................................

14.3 ENTREPRENEURSHIP DEVELOPMENT

Entrepreneurship development is not that easy. Let us now examine some of the aspects.

14.3.1

Entrepreneurship A Dynamic System

Entrepreneurship is not static over the period of time. It changes over time period due to influence by various factors such as socio-economic factors, environment, support system and individual himself. The skills can be developed through providing good environment and technological services. It is illustrated as follows (Fig.14.2).

Individual

Socio-economic factors

Entrepreneurship

Environment

Support system

Fig. 14.2: Entrepreneurship as a system

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For the successful functioning of enterprise, the inter relationship and inter dependency of individual, socio-economic factors, environment and support system are necessary.

14.3.2

Entrepreneurs Job

Entrepreneurs are those who actually engage in converting the possible opportunity in the society into rewards (value). They utilize new technologies and available resources in a constructive way to produce goods. The main role is to produce new products for the society. Because of this contribution, entrepreneurs are aptly called as an inventor or a founder. The utilization and utility of technology has contributed equally well to the success of enterprise. No one can deny the introduction of mechanization and its contribution to the industrial production. In todays technology driven world, production without technology is meaningless. Hence, learning new technologies is the prime concern of entrepreneur to compete with the market competition. In the modern era, the role of entrepreneur is becoming important because of their innovative creation towards changing customer satisfaction. Innovative thinking is the key to the success of entrepreneur, which add value to their products. The role of entrepreneur (Fig.14.3) does not end with producing products. It extends to initiation, innovation, selection, decision making and problem solving and above all satisfying the customer. For proper functioning of an enterprise, these are certain skills needed to make it as a viable unit.

Resources labour,capital

Opportunity

Rewards

Technology

Fig. 14.3: Role of an Entrepreneur

14.3.3

Entrepreneurship Skills

The qualities which are necessary to start an enterprise are called as entrepreneurial skills (Fig.14.4). An entrepreneur should have basic skills i.e. 30 Starting a business. Develop the business towards the path of success. Arrange finance for running the business. Production of products in an efficient way. Market the product in time.

Entrepreneurship

Fig. 14.4: Skills

But, in this competitive world, this basic skill alone is not enough to sustain the enterprise. There are special skills (Fig. 14.5) which an entrepreneur should possess. These are: i) Sales and marketing skills The success and failure of a business mainly depends on customers. They are the real judges to decide the quality of the product and bring the product into a great success. Sales and marketing skill is needed to attract consumers, producing customer oriented products i.e., highly demanded products and make awareness among the customer about the product through wide publicity through advertisements etc. Production alone cannot make a product really worth; the real success depends on the marketing skill. ii) Financial management skills Profitability of the enterprise depends on availability of money, efficient utilization and handling of money. Streamlining money while in surplus and stabilize the enterprise during deficit period is the ideal skill of an entrepreneur. The balancing nature of finance is essential. Pricing of the product to get more returns in the competitive market is the concept in the financial management. iii) Self motivating skills Entrepreneur is the initiator and decision maker to initiate new things and to decide how to get funding, how to develop products and above all how to attract the customers. The self motivation among the entrepreneurs really leads the person to the great position and makes the business a sustained unit.

Financial Management Skills Sales and Marketing Skills Self Motivating Skills

ENTREPRENEURIAL SKILLS

Administrative Skills Time Management Skills

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Fig. 14.5: Entrepreneurial skills

Human Resource Development for Marketing

iv) Time management skills Time is a limiting factor in both the cases of product delivery and finance payment. Other than production, the timely delivery of product is also important for a business. In fisheries products, the perishable nature of fish produce needs special care and quick disposal. It is very crucial in home based single person running business. v) Administrative skills

Business activity includes proper documentation and filing of all the records from time-to-time. The filing of purchase and delivery details, tax and licensing should be carried out in a proper way to avoid confusions in future. Entrepreneur should be familiar of the basic job of an administrator such as planning, organizing, staffing, directing, co-ordinating, reporting and budgeting to make effective business administration. Starting a business is very easy which everyone can do. But, running the business in a successful manner is difficult without these entrepreneurial skills. Apart from these skills there are some other qualities, an entrepreneur should have to take decisions easily even during the risk and critical situation. The qualities such as leadership, management skills, team building, acceptability, and adjustability, creativity, growth-oriented, dynamic and vibrant can help in running the business without any obstacles. In general, there are no rigid and specific qualities exclusively for an entrepreneur. Importance of three Is in entrepreneurial skills Some persons are very extra-ordinary and they can manage the problems very easily. Their self-interest and involvement in decision-making are the opportunities to develop skills in right way. But there are three Is which are treated as mandatory skill for the entrepreneur. They are initiative, independent and ideas which contribute equally for developing the entrepreneurial skills. i) Initiative

An entrepreneur should have the ability to initiate things in correct time and also in efficient manner. It is the primary skill for an entrepreneur. ii) Independent

An entrepreneur should have the tendency to face all problems and solve it in a strategic way. Even though obtains opinion from others, the entrepreneur should take decision independently. iii) Ideas An efficient enterprise and its success mainly depend on the new ideas of an entrepreneur. To include change and upgradation based on the consumer demand and feedback. New idea should be backed by creative thinking to make your product unique and popular.

14.3.4 Measuring Entrepreneurship

Entrepreneurship is a key driving force for an individual, national and global development. It links innovation and economic growth. Hence, it is essential to 32

measure entrepreneurship to analyse the level of entrepreneurship and their contribution to the society. Individual level: Entrepreneurship is a multifaceted and heterogeneous activity; it is difficult to measure by using single criterion. Hence, there are some traits which are useful to measure the entrepreneurship. The traits are degree of innovativeness, positive attitude, risk taking ability, team building ability, problem solving capacity and level of enthusiasm. Activity 3 Lakshmi Mittal and Anil Ambani are two successful entrepreneurs. Can you list out which are the traits helping them towards destiny? .................................................................................................................. .................................................................................................................. .................................................................................................................. .................................................................................................................. But, one thing is clear that the profit generation is the visible criteria to measure the success of any enterprise in the long run. National level: In India, level of entrepreneurial activity is usually assessed through an adult population survey. The index use for the measure is Total Entrepreneurial Activity (TEA) index. Global level: At the global level, Global Entrepreneurship Monitor (GEM) a non-profit consortium is collecting research data on entrepreneurial activity from various countries. Now-a-days, the level of entrepreneur development is a criterion towards judging the national growth. Hence, in India a separate ministry of micro, small and medium enterprises has been created towards promoting and facilitating entrepreneurial activities.

Entrepreneurship

14.3.5

Challenges of Entrepreneurship

Entrepreneur is the inventor who produces new things and a sales manager who channelizes sale and other activities. But, in this competitive world, entrepreneurs are facing many challenges and they are: i) Competition

The increasing number of entrepreneurs over time has resulted in competition. Hence, concentrate on cost effective, environmental friendly, consumer need based products is the need of the hour. In the globalization era, survival of small and medium scale enterprise is difficult when the large scale industries are competing. ii) Technology

Technology is the prime force for the success of the enterprise. In the patent era, the affordability and availability of cost effective technology is a difficult task. 33

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iii) Finance Finance availability at right proportion in right time is a major challenge. Without adequate finance, entrepreneur will be in trouble to proceed with the activities of an enterprise. iv) Publicity In this globalization era, sales promotion in the way of publicity through advertisement is very essential. Most of them are giving least preference to advertisement because of high cost of advertisement. v) Consumer behaviour

One of the greatest challenges of running the business is consumer satisfaction about the product. Production and marketing of need based product according to consumer taste and preference is the only way to lead the enterprise in the success path. The demand for fishery value added and by-products are gaining acceptance and good market, mostly in urban areas. Most of the time, the failure of the enterprise is mainly due to inadequate planning. Hence, care should be taken before starting the enterprise by giving sufficient time for planning before you proceed.

14.4 ENTREPRENEURSHIP OPPORTUNITIES

Entrepreneurship development is now gaining popularity among the entrepreneurs due to growing competition. For the benefit of the entrepreneurs and persons associated with enterprises, government started many national institutions.

14.4.1

Entrepreneurial Training

To give proper training to the entrepreneurs and associated personnel, the national level institutions are performing a very significant role to increase the countrys entrepreneurship index in the international level. The institutions in India are listed below. i) National Entrepreneurship Development Institutes National Institute for Entrepreneurship and Small Business Development (NIESBUD), Noida. National Institute of Micro, Small and Medium Enterprises (NIMSME), Hyderabad. Indian Institute of Entrepreneurship (IIE), Guwahati. National Institute of Small Industry Extension Training (NISIET), Hyderabad. Entrepreneurship development institutes provide financial assistance under EDI Scheme which is facilitated by Ministry of Micro, Small and Medium Enterprises.

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ii)

Entrepreneurship Education

Entrepreneurship

In the present days, the entrepreneurship skill development activities are initiated in school level itself towards encouraging entrepreneurial spirit among students. As Mahatma Gandhi emphasized on vocational skill development, it has been reemerging with a new face.

14.4.2

Government Support Towards Entrepreneurship

In the recent years, Government involvement in encouraging and promoting entrepreneurship is wide ranging and has enormous implications. The financial support in the way of Self Help Groups and microfinance is exclusively for motivating the entrepreneurs. The Special Economic Zones are also established with specific concessions to encourage the entrepreneurs. Even then, there are some grey areas which need to be fulfilled towards successful entrepreneurial development. In India, todays knowledge based economy is good for entrepreneurship development in a great extent. Definitely, India has the limitless potential to create entrepreneurs. Most of the time, the major obstacle is right environment towards entrepreneurship development. To bridge the gap, Government should focus on: Create right environment for success; Ensure that entrepreneurs have access to the right skill; Ensure that entrepreneurs have access to capital; and Enable networking and exchange of information.

Are you interested in starting a business? Keep in mind these basic tips. Tips to start a business 1) 2) 3) 4) 5) You should know the technical aspects of your business. You should be capable of financial management and record keeping. You should have knowledge of legal and regulatory management of the enterprise. You should be aware of the operational requirements to run your enterprise. Last but not least, you should be thorough in marketing skills of your product.

Check Your Progress 2

Note: a) Write your answers within the space provided. b) Check your answers with those given at the end of the unit. 1) What are the important factors which help in developing the entrepreneurial skills? ............................................................................................................. ............................................................................................................. 35

Human Resource Development for Marketing

2)

Write some challenges of entrepreneurship? ............................................................................................................. .............................................................................................................

3)

List some national Entrepreneurship development institutes? ............................................................................................................. .............................................................................................................

14.5 LET US SUM UP

Entrepreneur is a person who is able to undertake the enterprise with fullest effort and responsibility. Entrepreneurship is the quality of the entrepreneur for the effective functioning of the business. Entrepreneurship can be classified based on opportunity and purpose i.e., Need based entrepreneurship, opportunity based entrepreneurship, Technological entrepreneurship and Geographical based entrepreneurship. The forms of entrepreneurial organization can be classified into Sole proprietor, Partnership, Co-operative form, Joint Stock Company and State enterprises. One can start an enterprise mainly to be independent, to be employed, self earning and attain personal satisfaction. The reason may vary between persons. Successful functioning of an enterprise depends on inter relationship between the socio-economic factors, environment, individual and support system. Entrepreneurs job is to convert the available opportunities into probable rewards by utilizing the resources and technology in an efficient way. For efficient functioning of the job, entrepreneur needs some skills such as sale and marketing skills, financial and management skills, self motivating skills, time management skills and administrative skills. The major challenges put before the entrepreneur are competition, publicity and consumer behaviour. In India, there are some national level institutes which support entrepreneurial training along with government support.

14.6 GLOSSARY
Consensus Enterprise Entrepreneur : : : Decision taken with the acceptance of majority of persons in a group. Enterprise is the entity or a business which is started by an entrepreneur. Entrepreneur is defined as one who undertakes business/enterprise, by assuming responsibility, control and risk. Entrepreneurship is the quality of an entrepreneur which is needed for effective functioning of business by utilizing the available opportunities. Consisting of elements of different kind or nature.

Entrepreneurship

Heterogeneous 36

Sole Proprietor

Single person who has the ownership right over the enterprise and manages on his/her own with limited finance. Process of improving the appearance or efficiency of particular action.

Entrepreneurship

Streamlining

14.7 SUGGESTED FURTHER READING

Bjerke, B., Hultman, C. 2000. Entrepreneurial Marketing: The Growth of Small Firms in the New Economic Era, Edward Elgar.

14.8

REFERENCES

cs, Z.J., Audretsch, D.B., 2003. Handbook of Entrepreneurship Research: An Interdisciplinary Survey and Introduction, Kluwer Academic Publishers. Schllhammer, H., Kuriloff, A.H. 1979. Entrepreneurship and Small Business Management, John Wiley & Sons.

14.9 ANSWERS TO CHECK YOUR PROGRESS

Check Your Progress 1 1) 2) 3) Entrepreneur is defined as one who undertakes business/enterprise, by assuming responsibility, control and risk. It may be categorized into public or private enterprise and small scale or large scale enterprises. Entrepreneurship can be classified based on the opportunity, purpose and scope. Based on this, entrepreneurship can be classified into four types. a) b) c) d) 4) 5) 6) Opportunity based entrepreneurship Necessity based entrepreneurship Technological entrepreneurship Geographical entrepreneurship

Enterprise can be classified into, Sole proprietor, Partnership, Cooperative form, Joint stock company and State enterprise. Efficient management, Easy to start and wind up are the main advantages of sole proprietorship. Collective ownership is the pattern of co-operative enterprise.

Check Your Progress 2 1) 2) The three factors are initiative, independent and ideas - contributing equally for developing the entrepreneurial skills. Competition, publicity, consumer behavior are the main challenges of entrepreneurship. 37

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3)

a) b)

National Institute for Entrepreneurship and Small Business Development (NIESBUD), Noida. National Institute of Micro, Small and Medium Enterprises (NIMSME), Hyderabad.

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