Introduction to entrepreneurship Who is an entrepreneur? The word entrepreneur is derived from the French verb enterprendre. It means to undertake.

An entrepreneur is a person who has possession of a new enterprise, venture or idea and is accountable for the inherent risks and the outcome of a product. The term entrepreneur has been defined as one who detects and evaluates a new situation in his environment and directs the making of such adjustments in the economic system as he feels necessary. Definition of entrepreneurship Entrepreneurship is the process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic and social risk and receiving the resulting rewards of monetary and personal satisfaction and independence.

Importance of an entrepreneur In the economic development of a country or of any region within the country, entrepreneur is one of the most important inputs. In India, the state and private entrepreneurship co-exists and hence entrepreneurial competence makes all the difference in the rate of economic growth. Therefore important role has been assigned to the identification and promotion of entrepreneurs. In India, the need for a broad based entrepreneurial call arises from the need to speed up the process of activating the factors of production leading to a higher rate of economic growth, dispersal of economic activities, development of backward areas, creation of employment opportunities and improvement in the standard of living of the weaker section of society. There are several factors which go into the making of entrepreneurs. Individuals who initiate, establish maintain and expand new enterprises make the entrepreneurial class. The following factors have a bearing on the growth of entrepreneurship: The availability of industrial know-how and technology. Socio-political and economic conditions. State of art and culture of trading and business. Existence of market for products and services and Incentives and facilities available for starting an industry or business. A conducive environment can be created through the policies and interest of the government in economic and industrial development. The role of entrepreneurship and an entrepreneurial culture in economic and social development has often been underestimated. Over the years, however, it has become increasingly apparent that entrepreneurship does indeed contribute to economic development. Transforming ideas into economic opportunities is the crux of entrepreneurship. History shows that economic progress has been significantly advanced by pragmatic people who are entrepreneurial and innovative, able to exploit opportunities and willing to take risks.

Entrepreneurs produce solutions that fly in the face of established knowledge, and they always challenge the status quo. They are risk-takers who pursue opportunities that others may fail to recognize or may even view as problems or threats. Whatever the definition of entrepreneurship, it is closely associated with change, creativity, knowledge, innovation and flexibility-factors that are increasingly important sources of competitiveness in an increasingly globalized world economy. Thus, fostering entrepreneurship means promoting the competitiveness of businesses.

Characteristics or skills required for entrepreneur

Mental ability: - The entrepreneur should be intelligent and should be able to analyze and deal with

situations and solve all the problems.

Business secrecy: - An entrepreneur should be able to select right and trustworthy people/employees

for a particular project, so that those employees will not leak the information related to that project.
Clear objectives/Goal oriented: - An entrepreneur should have clear objectives for his business and

goal oriented. He has to explain the purpose and the necessity of the specified goals to his team members. Whatever the situation, people need goals that are meaningful to them in order to be highly motivated and involved. The goals must be as specific as possible so that all employees can feel a sense of achievement when goal is attained.
Human relation: - An entrepreneur should maintain good relationship with everyone like

shareholders, customers, retailers etc.

Long term involvement: - since an entrepreneur has started the organization he has to retain that

organization for long term. He should take steps for the growth of business.
High energy level: - An entrepreneur should have the ability to work for longer duration for this he

requires mental and physical fitness to work for a longer duration.

Technical skills: 1. Writing and oral communication: - When sending letter to bank or making project report an

entrepreneur should be good in writing and should have technical knowledge. Technical knowledge is also required for oral communication.
2. Technical business management: - An entrepreneur should be able to manage the business in

technical aspect like which machinery to buy, how it should be used etc.
3. Interpersonal: - An entrepreneur should be able to maintain good relationship with others like

shareholders, customers, retailers etc.

4. Listening: - An entrepreneur should listen to the ideas of employees or others. 5. Management style: - An entrepreneur should follow a management style of power in hands of one

person and downward communication.

6. Coaching: - An entrepreneur should be able to guide employees whenever there is a problem.

Coaching needs experience and vision of things. Business management skill: 1. Planning and goal setting: - An entrepreneur should be able to make his plan in respect to short

term, long term or medium term.

2. Decision making: - An entrepreneur should take various decisions related with the establishment

of an enterprise which includes decisions regarding the product to be manufactured, ownership of the production facility, sources of finance, location of the enterprise, choice of technology, aids and subsidies provided by the government, production cost etc. In order to apply business decisions he has to take important managerial decisions.
3. Negotiation: - An entrepreneur should be able to negotiate the price with suppliers, dealers and

shareholders. Negotiation skill is always required for every entrepreneur. Trying to convince others like financial institutions, suppliers etc.
4. Management: - An entrepreneur should manage men tactfully.

Personal entrepreneur skill: 1. Moderate risk taker: - An entrepreneur only takes calculative risk which means that taking risk as

per capacity and not more than capacity.

2. Innovative: - Every successful entrepreneur is innovative and can come up with new ideas. 3. Dynamic: - An entrepreneur should be able to change according to the situations. 4. Persistent: - An entrepreneur should be able to try and try till he succeeds. 5. Inner control/discipline: - An entrepreneur should be able to control and maintain discipline by

himself and den in his employees. Classification and Types of entrepreneurs Entrepreneurs according to type of business
1. Business entrepreneurs: - These entrepreneurs are involved both in production and marketing.

They handle all things at one point of time.

2. Trading entrepreneurs: - Trading entrepreneurs are those who are only into buying and selling and

not involved in marketing. Example: - Trading of chemicals, raw materials etc.

3. Industrial entrepreneurs: - These entrepreneurs are involved only in production and not in

marketing. They are concerned with technical solutions. They are giving in the market that sell product in market. Example: - Textile industry.
4. Corporate entrepreneurs: - Those who have formed as an legal entity and registered under a

particular act. Example: - Reliance, Tata etc.

5. Agricultural entrepreneurs: - These entrepreneurs are only involved in the agriculture. Example: -

Fertilizers, seeds. (Related to agricultural products or services). According to use of technology: 1. Technical entrepreneurs: - These entrepreneurs are in large scale industries and are involved in

production and who have high knowledge about technology. Example: - craftsmanship, engineers.
2. Non technical entrepreneurs: - Entrepreneurs come up with new marketing and distribution

technology. They use less technology.

3. Professional entrepreneurs: - These entrepreneurs are interested in starting the business and not in

managing business. They sell off and start making new industry or business. According to motivation: -

1. Pure entrepreneur: - These entrepreneurs are willing to become entrepreneur and taking up

business on their own interest to achieve something.

2. Induced entrepreneur: - These entrepreneurs are involved in taking up or starting up industry not

with their own interest because they are forced to enter into business due to some compelled factors. Financial problem or family problem or government incentives- these are the 3 forces to become an entrepreneur.
3. Spontaneous entrepreneur: - These entrepreneurs are born with creative ideas and skills. They have

inborn ability.
4. Motivated entrepreneur: - These entrepreneurs have basic urge to become an entrepreneur.

According to growth: 1. Growth entrepreneurs: - Growth entrepreneurs are those who take up high growth industries with

prospect for substantial growth. These entrepreneurs are positive thinkers. They dont give up easily.
2. Super-growth entrepreneurs: - These entrepreneurs show enormous growth performance in there

venture. According to stage of development: 1. First generation entrepreneur: - people who have firstly started the business, who have initially

taken steps to start business. Example: - JRD TATA

2. Modern entrepreneur: - these entrepreneurs run a Family business and will not adopt new ideas and

changes and will work in fixed manner.

3. Classical entrepreneur: - These entrepreneurs will adopt change. These entrepreneurs are

stereotype entrepreneurs. Other entrepreneurs: 1. According to area: Rural entrepreneur Urban entrepreneur

2. According to gender and age: Men entrepreneur Women entrepreneur

3. According to scale of operation: Small scale entrepreneur Large scale entrepreneur

4. Others or unclassified: Imitating entrepreneur ( copying ) Innovative entrepreneur ( Example: - apple iPod ) National entrepreneur

Intrapreneur entrepreneur.

Entrepreneurial decision process Introduction: - Though many individuals have creative new ideas, into market and create a new venture. Yet entrepreneurship and entrepreneurial decisions have resulted in several million new businesses being started throughout the world. Entrepreneurial decision means deciding to become an entrepreneur by leaving present activity.

Decisions for a potential entrepreneur

A. Change from present lifestyle 1. Work environment 2. Disruption

A. Form new enterprise 1. Cultural

2. Sub-cultural

3. Family 4. Peers B. Possible 1. Government 2. Background 3. Marketing 4. Financing 5. Role models

A. Change from present lifestyle: - The decision to leave a career or lifestyle is not an easy one. It

requires lot of energy and courage to change and do something new and different. Although individual tend to start new enterprises that are familiar, two work environments have been particularly good for producing new enterprises: Research and Development and marketing. While working in technology (research and development), individuals develop new product ideas or processes and often leave to form their own companies when these new ideas are not accepted by their present employers. Similarly, individuals in marketing have become familiar with the market and customers unfilled wants and needs, and they frequently leave to start new enterprises to fill these needs. Perhaps an even stronger incentive to overcome the inertia and leave a present lifestyle to create something new comes from a negative force- Disruption. A significant number of companies are formed by people who have been retired, who are relocated due to a move by the other member in a dual-career family, or who have been fired.
B. Desirability of new venture formation: - The perception that starting a new company is desirable

results from an individuals culture, sub-culture, family, teachers and peers.

1. Culture: - A culture that values an individual who successfully creates a new business will spawn

more venture formations than one that does not. No culture is totally for or against entrepreneurship.
2. Sub-cultures: - These sub-cultures support and even promote entrepreneurship- the forming of a

new company as one of the best occupation. No wonder more individuals actively plan new enterprise in these supportive environments. There are also variations in sub-cultures caused by family traits.
3. Family: - To start a new enterprise an individual requires support from his or her family. 4. Teacher: - Encouragement to start a new company is further stimulated by teachers, who can

significantly influence individuals to regard entrepreneurship as a desirable and viable career path.
5. Peers: - finally peers are very important in the decision to form a new company. An area with an

entrepreneurial pool and a meeting place where entrepreneurs can discuss ideas, problem and solutions spawns more new companies than an area where these are not available.
C. Possibility of new venture formation: - Although the desire derived from the individuals culture,

sub-culture, family, teachers and peers need to be present before starting a new venture is considered, the feature necessary is what makes it possible to form a new company? Several factorsgovernment, background, marketing, role models and finances contribute to the creation of new venture.
1. Government: - Government contributes by providing infrastructure to help and support a new

venture.
2. Background: - An entrepreneur should also have necessary background like formal education and

previous business experience give a potential entrepreneur the skills needed to form and manage new enterprise.
3. Marketing: - An understanding of marketing also plays a crucial role in forming a new company.

In addition to the presence of market of a sufficient size, there must also be a level of marketing

know-how to put together the best total package of product, price, distribution and promotion needed for successful product launching.
4. Role model: - A role model can be one of the most powerful influences in making company

formation seem possible. To see someone else succeed makes it easier to picture yourself engaged in a similar activity- of course more successfully. A frequent comment of entrepreneurs when asked about their motivation for starting new venture is If that person could do it, so can I?
5. Finance: - Financial resources must be readily available. Although most of the start-up money for

any new company comes from personal savings, credit, friends and relatives. There is often a need for additional risk capital. Risk capital availability plays an essential role in the development and growth of entrepreneurial activity. Role of entrepreneurs in the economy of a country The following are the reasons why entrepreneurs are important in the society: 1.

Provides employment to huge mass of people: - People often hold a view that all those who do not get employed anywhere jump into entrepreneurship, a real contrast to this is that 76% of establishments of new business in the year 2003 were due to an aspiration to chase openings. This emphasizes the fact that entrepreneurship is not at all an encumbrance to an economy. What more is that approximately 34 million of fresh employment opportunities were created by entrepreneurs from the period of 1980. This data makes it clear that entrepreneurship heads nation towards better opportunities, which is a significant input to an economy.

2. Contributed towards research and development system; - Almost 2/3% of all innovations are due

3.

4.

5.

6.

to the entrepreneurs. Without the boom of inventions the world would have been a much dry place to live in. Inventions provide an easier way of getting things done through better and standardize technology. Creates wealth for nation and for individuals as well; - All individuals who search business opportunities usually create wealth by entering into entrepreneurship. The wealth created by the same play a considerable role in the development of nation. The business as well as the entrepreneur contributes in some or other way to the economy, may be in the form of products or services or boosting the GDP rates or tax contributions. Their ideas, thoughts, and inventions are also a great help to the nation. Sky-scraping heights of apparent prospects; - The individual gets maximum scope for growth and opportunity if he enters into entrepreneurship. He not only earns, the right term would be he learns while he earns. This is a real motivating factor for any entrepreneur as the knowledge and skills he develops while owning his enterprise are his assets for life time which usually, lacks when a person is under employment. The individual goes through a grooming process when he becomes an entrepreneur. In this way it not only benefits him but also the economy as a whole. It is a challenging opportunity for the people: - Although entrepreneurship is a challenging task but in most of the cases the rewards it gives are much more than what one anticipates. It does not only reward an entrepreneur at financial levels but also on individual level. It provides self satisfaction to the entrepreneur. Entrepreneurship provides self sufficiency; - The entrepreneur not only become self sufficient but also provide great standards of living to its employees. It provides opportunity to a number of people working in the organization. The basic factors which become a cause of happiness may be

liberty, monetary rewards, and the feeling of contentment that one gets after doing the job. Therefore the contribution of entrepreneurs makes the economy an improved place to live in.

ENTREPRENEURSHIP AND ENTERPRISE DEVELOPMENT Private sector development and entrepreneurship development are essential ingredients for achieving the Millennium Development Goal of reducing poverty. While sound macroeconomic policies and providing market access are crucial, emerging markets need to nurture and develop entrepreneurs able to take advantage of opportunities created by globalization. For many developing countries, private sector development has been a powerful engine of economic growth and wealth creation, and crucial for improving the quality, number and variety of employment opportunities for the poor.

Economically, entrepreneurship invigorates markets. The formation of new business leads to job creation and has a multiplying effect on the economy. Socially, entrepreneurship empowers citizens, generates innovation and changes mindsets. These changes have the potential to integrate developing countries into the global economy. Functions of entrepreneurs

The functions of an entrepreneur can be summarized as follows. A. Conception of an idea: An entrepreneur is the person with a creative mind who can identify business opportunities and take steps for the conversion of ideas into successful business ventures, and give them a concrete shape. B. Promotion: It is felt that generally an entrepreneur undertakes the risk of setting up a small enterprise as a sole proprietor. But, now-a-days many entrepreneurs have assumed the role of promoters of large companies. In fact, promotion may be undertaken for setting up a new business, small or large expansion of an existing business or for combining two or more business firms. As a promoter, the entrepreneur has to conduct feasibility studies, decide to the form of organization, assemble the required funds and people, and give a concrete shape to the business proposition. C. Innovation: An entrepreneur is also seen as an innovator who tries to develop new technology, products and markets. The entrepreneur uses his creative abilities to do new things and exploit opportunities in the market. D. Bearer of risks and uncertainty: You know that starting of a new business venture involves good amount of risk and uncertainty. To start with, it is the entrepreneur who assumes risks and is prepared for the losses that may arise because of unforeseen situations in future. In fact, it is his willingness to take risks that helps him to take initiatives in doing new things or trying new methods of production. E. Arranging necessary capital: Arranging funds is one of the biggest hurdles in setting up a new entrepreneur. It is he who has to provide the initial capital (otherwise known as risk capital or seed capital) for starting the ventures and then make the necessary arrangements for raising additional funds required to carry on and expand the business. F. Staffing: An entrepreneur has to design the organizational structure and recruit suitable persons for various positions. He also makes an estimate for skilled and unskilled workers required and makes arrangements for their recruitment. Issues and problems faced by entrepreneurs A business enterprise comes into existence due to the pioneering efforts of entrepreneurs. However, there are several issues and problems faced by entrepreneurs while giving shape to their idea. These are as follows: A. Selection of business: - The entrepreneur might be having a very good business idea. However, successful implementation of the idea into business activity involves a painstaking exercise. First

B.

C.

D.

E.

F.

G.

of all, he/she has to study the market to know whether the idea of products or services could be accepted by the market. For the purpose, the entrepreneur has to determine the market demands of the intended products/services and carry out exercises to find out the projected costs of the product or services. In this way, the entrepreneur shall be able to know as to whether the venture is profitable or not. This systematic exercise is known as a feasibility study and presented in the form of a report known as Feasibility Report or Project Report. Not only that, an entrepreneur may conceive a number of ideas and identify many new business opportunities. In view of limited resources he may like to give shape to most the profitable one. The feasibility studies shall help him/her to identify the same. Choice of form of business enterprise: - There are various options available to the Entrepreneur as far as the choice of form is concerned. She/he may go in for sole proprietorship, a partnership or a joint stock company. The choice is rather difficult Issue. However, there are certain lines of business where one has no choice. For Example, take the case of banking and insurance. These can only be taken up by the Joint stock companies. The size of the business will determine the form of organisation. Apparently, company form of organisation is suitable in case of large-scale operations, while sole proprietorship or partnership is considered more suitable for small scale and medium scale operations. Financing: - The problem of arranging finance always troubles the entrepreneur. As you know, without capital no business activity can be started. Capital is needed for the entrepreneur to buy fixed assets like land and building, machinery and equipment etc. Further, finance is needed to meet day-to-day expenses of the business. Having built up the estimate of the amount of capital required, the entrepreneur may have to arrange finance from various sources. Many financial institutions like IFCI, IDBI etc. are providing seed capital fund or venture capital fund for the financing of good entrepreneurial ventures. So, the entrepreneur shall have to approach these financial Institutions and bankers for the purpose provide some funds on his own and Plan for a public issue of capital at the appropriate time. Location: - The problem of locating the business unit is another issue for consideration that should be carefully handled by entrepreneur. Location of a business unit depends upon many factors like availability of raw material, availability of transport, power, water, nearness to market etc. The government also provides many incentives in the form of tax holidays, rebate in power and water bills etc. to the unit located in a backward area or underdeveloped area. Thus, the entrepreneurs need to look at all these factors before setting up a business unit. Size of the unit: - Size of the business is influenced by several factors like technical, financial and market considerations. When entrepreneurs feel that they can market the intended products or services and can raise sufficient amount of capital, they can start their operations in a big way. Generally, the entrepreneurs may start their operations on small scale and expand gradually. For example, the owner of Nirma Limited, Dr. Karsanbhai Patel used to sell washing powders taking rounds in bicycles in 1980s and with increase in operation it has now become Nirma Limited. There is no doubt that if an entrepreneur starts on a small scale, it is easier for him/her to adapt to changes without much risk as huge investments will not be blocked in permanent assets However, in the changing business scenario, many entrepreneurs start their Ventures on large scale and are prepared to take big risks. Of late, many new entrepreneurs, particularly technocrats (who are professionally trained and employed) have joined in the economic development after leaving their lucrative Jobs and started their new ventures in a big way. Machines and equipments: - The choice of machines, equipments and processes is a delicate problem before starting a new venture. This depends on various factors like availability of funds, size of production, and the nature of production process. The emphasis should be placed on productivity. Availability of facilities of repairs and maintenance, availability of spare parts and after sale services are also an important consideration while selecting a particular equipment and machinery. Suitable manpower: - If the size of business is large, the entrepreneur has to find suitable competent persons for various functional areas. She/he has to identify the right persons for each area and motivate them to join the set up. It is not that easy. It involves a lot of patience and persuasion. Thus, the entrepreneur has to find solution to many problems and Issues while

Launching a new business. The success is ensured by making Proper choices And arrangements.