Dynamics of Entrepreneurship

Managerial Process Skills

Semester II
1
TOPICS
1. Definition : Entrepreneurship / Entrepreneur
2. Role of Entrepreneurship in Economic Development
3. Characteristics of Entrepreneurs
4. Types Of Entrepreneurs
5. Factors Influencing Entrepreneurship
6. The Entrepreneurial Process
7. Motivation Theories
8. Factors Motivating Entrepreneurs
9. Intrapreneurs
10. Ownership Structures / Forms Of Business
11. Role Of Government in Supporting
Entrepreneurship


2
Entrepreneurship Meaning and Concept
Entrepreneurship is the act of being an
entrepreneur.
French word Entrependre and German word
uternehmen both referring to individuals who
undertakes an endeavor.
Hence, anyone who exhibits the characteristics of
self-development, creativity, self-decision making and
risk taking.
According to oxford dictionary Entrepreneur is one
who organizes and manages enterprise involving high
risk. But researches indicates that entrepreneurs
need not necessarily be high risk takers, however,
they reduce risk and increase likelihood of success.
Entrepreneurship : Definition 1
Entrepreneurship is the attempt to create value
through recognition of business opportunity. It is the
management of risk - taking appropriate to
opportunity and mobilizing the necessary human,
financial, managerial and material resources through
communicative and management skill to bring a
project to fruition.



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Entrepreneurship : Definition 2
Entrepreneurship means the function of seeing
investment and production processes, raising capital,
hiring labour, arranging the supply of raw materials,
finding site, introducing a new technique and
commodities, discovering new sources of raw
materials and selecting top managers for day to day
operations of the enterprise.

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Entrepreneurship : Definition 3
A.H. Cole defined Entrepreneurship as the
purposeful activity of an individual or a group
associated individuals undertaken to initiate,
maintain or aggrandize a profit oriented business
unit for the production or distribution of economic
goals and services. According to Frederick Harbinson,
entrepreneurship is the skill to build an organisation.

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Entrepreneurship : Definition 4
Robert Ronstadt defined Entrepreneurship as:
Entrepreneurship is the dynamic process of creating
incremental wealth. This wealth is created by
individuals who assume major risks in terms of
equity, time and / or career commitment of
providing value for some product or service. The
product or service itself may not be new or unique
but the value must be.

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Entrepreneurship : Definition 5
Entrepreneurship is the ability to perceive an
opportunity, the foresight to see scope for its
exploitation, courage to undertake a task, an
initiative and dare to take risks in the process of
transformation.

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Entrepreneur : Definition & Meaning
Peter Drucker has defined Entrepreneur as a person
who always searches for change, responds to it and
exploits it as an opportunity. Entrepreneurs innovate.


The word Entrepreneur is derived from the French
word Entreprendre meaning undertaker

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Role of Entrepreneurship in Economic Development
1/2

1. Increase National Production
2. Balanced Regional Development
3. Dispersal Of Economic Power
4. Reinvestments of Profits
5. Employment Generation
6. Harnessing youth vigour
7. Capital Formation
8. Redistribution of Wealth and Political Power

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Role of Entrepreneurship in Economic Development
2/2
9. Mobilisation of Capital and Skill
10. Backward and Forward Linkages
11. Promotes Export Trade
12. Social Welfare
13. Higher Productivity through innovation
14. Creates Competitiveness and Consumer oriented
market
15. Transfer of Technology to Rural Areas
16. Entrepreneurship is a catalyst for economic
development



11
Characteristics of Entrepreneurs 1/4

1. Hard Work
2. Commitment to Task
3. Choosing Moderate Risk
4. Seizing Opportunities
5. Sense of Efficacy
6. Objectivity
7. Open to Feedback
8. Independence
9. Hope of Success
10. Optimism in Novel Situations / Positive Response to
Change
11. Attitude towards Money


12
Characteristics of Entrepreneurs 2/4

12. Proactive Management
13. Competition and Collaboration
14. Reinforcing Achievement Motivation / Desire for
High Achievement
15. Flexible Authority Relationship
16. Sound Decision Making Ability
17. Good at Team Work and Team building
18. Perseverance
19. Vision
20. Leadership Skills
21. Self Confidence / Gut Feeling
22. Dedication and Determination


13
Characteristics of Entrepreneurs 3/4
23. Positive Attitude / Positive Response to Challenges
24. Honing of Business Skills
25. Open mindedness Towards New things - Acquiring
New Technologies and Processes
26. Building up Strategic Relationships
27. Reward Sharing
28. Infinite Learning
29. Passionate about their Ventures
30. Creativity
31. Great deal of Energy for Survival
32. Foresight
33. Organising Skills



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Characteristics of Entrepreneurs 4/4
34. Innovative
35. Entrepreneurs like to think they control their own
lives
36. Flexibility and Ability to Adapt
37. Knowledge of Markets / Versatile Knowledge
38. Responsive to Suggestions
39. Take Initiative
40. Resourceful
41. Responsive to Criticism
42. Ability to tolerate Ambiguity
43. Value Addition


15

Types of Entrepreneurs 1/6

A. Clarence Danhofs Classification of Entrepreneurs
1. Innovating Entrepreneurs
Introduce new goods, new method of production, discovers
new market and reorganises the enterprise (developed
economy)
2. Imitative Entrepreneurs
Do not innovate change themselves but only imitate techniques
and technology and successful innovations (under developed
economy)
3. Fabian Entrepreneurs
Great caution and skepticism in experimenting with change,
innovate only when loss may be caused
4. Drone Entrepreneurs
Ready to suffer losses but not make changes in their existing
production methods.

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Types of Entrepreneurs 2/6
B. Behavioural Scientists Classification of Entrepreneurs

1. Solo Operators
Essentially work alone, employ only if necessary
2. Active Partners
They start or carry on an enterprise as a joint venture. Entrepreneurs
who only contribute funds are simply called Partners
3. Inventors
Invent new products, basically interested in research and innovative
activities
4. Challengers
Seek Challenges, attracted to industry because of the challenges it
presents
5. Buyers
Dont like bearing too much risk therefore buy the on going enterprise
6. Lifetimers
Business as an integral part of life. Family enterprises and businesses
that depend on exercising personal skill fall in this category



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Types of Entrepreneurs 3/6
C. Classification On the Basis of Ownership
1. Founders or Pure Entrepreneurs
2. Second Generation Operators of Family Owned
Business
3. Franchisees
4. Owner Managers

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Types of Entrepreneurs 4/6
D. Classification On the Basis of Personality
Traits and their style of Running the Business
1. The Achiever
2. The Induced Entrepreneur
3. The Idea Generator
4. The Real Manager
5. The Real Achievers

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Types of Entrepreneurs 5/6
E. Classification Based on Type of Business
1. Industrial Entrepreneurs
2. Trading Entrepreneurs
3. Corporate Entrepreneurs
4. Agricultural Entrepreneur

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Types of Entrepreneurs Others 6/6
1. Women Entrepreneurs - An SSI unit / industry
related service or business enterprise managed by
one or more women entrepreneurs in propriety
concerns or in which she / they individually or
jointly have a share capital of not less than 51% as a
company / members of co-operative society is a
Women Entrepreneurs Enterprise.
2. Copreneurs
Both husband and wife start and run a business
venture

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Factors Influencing Entrepreneurship

I) Economic Factors

1. Capital
2. Raw Material
3. Labour
4. Market
5. Supportive Government Policies
6. Availability of Financial Assistance from various
funding bodies
7. Ancillary Support
8. Availability of Technical Factors like premises,
electricity etc.

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Non - Economic Factors 1/3

A) Background Factors
1. Education, Training and Experience
2. Family, Role models and association with similar
type of individuals
3. Financial Conditions

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Non - Economic Factors 2/3
B) Motivational Factors
Need for Achievement
Personal Motives / Expectations
Business Environment
Recognition & Social Status
(Status withdrawal can motivate entrepreneurial
behaviour example Japan)

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Non - Economic Factors 3/3
C) Social Conditions
Legitimacy Of Entrepreneurship
Marginality or Social Pressure
Security

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The Entrepreneurial Process


1. Identification And Opportunity Evaluation
2. Drawing Up Of A Business Plan
3. Persuade Others
4. Determination of the Required Resources
5. Creating the Venture
6. Managing the Enterprise
7. Adapt / Change with Time

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Motivation Theories


Prominent among Motivation Theories relevant to Entrepreneurship are
1) Maslows Need Hierarchy Theory
2) McClellands Acquired Needs Theory

1) Maslows Need Hierarchy Theory
PLEASE USE DIAGARM FROM Pg. 41 Ref. Book S.S.KHANKA
According to Maslow, all human needs are classified into the five need
clusters as shown in the following figure:
1. Physiological Needs
2. Safety and Security Needs
3. Social Needs
4. Esteem Needs
5. Self Actualisation

The needs are arranged in a lowest to highest hierarchy. The second need
does not dominate unless the first is satisfied and the third need does not
dominate unless the second is satisfied. This process goes on till the last
need. This is because man is never satisfied. For entrepreneurs the social,
esteem and self actualisation needs are major motivating factors.

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Maslows Need Hierarchy Theory
Diagram
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Physiologi
cal Needs
Self
Actualisation
Needs
Safety &
Security
Needs
Social
Needs
Esteem and
Status Needs
1
2
3
4
5
McClellands Acquired Needs Theory
According to David McClelland a person acquires
three types of needs as a result of ones own life
experiences.
1. Need for Affiliation
2. Need for power
3. Need for Achievement
In case of Entrepreneurs the Need for Achievement is
very high and dominating.

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Factors Motivating Entrepreneurs

I) Internal Factors
1. Desire to do something new
2. Educational Background
3. Occupational Background or Experience
II) External Factors
1. Government Assistance and Support
2. Availability of Labour and Raw Material
3. Encouragement from big business houses
4. Promising demand for the product

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Intrapreneurs
Talented people from the corporate world leave their
jobs and start their own manufacturing business units
because management is not receptive to their ideas.
They become successful and pose a threat to previous
companies. These entrepreneurs are called
Intrapreneurs.
A system and an organisation culture within a large
organisation was needed that would allow these
executives to operate like entrepreneurs.
Gifford Pinchot suggested the creation of a system that
would provide select executives a status within the
corporation similar to that of an entrepreneur in a
society. Such people are called intra corporate
entrepreneurs or intrapreneurs.


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Ownership Structures / Forms Of Business
1. Proprietorship / Personal Business
The enterprise is owned and controlled by 1 person.
Advantages
Simple form of Organisation
Owners freedom to take decisions
High secrecy
Tax Advantage
Easy Dissolution
Flexibility and directness of Control
Disadvantages
Limited Resources
Limited Ability
Unlimited Liability
Limited life of Enterprise Form

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Ownership Structures / Forms Of Business

2. Partnership Business
A number of individuals associate together for running the business
Advantages
Easy Formation
More Capital Available
Combined Talent, Judgement and skill
Diffusion of Risk
Flexibility
Tax Advantage
Disadvantages
Unlimited Liability
Divided Authority
Lack of Continuity
Risk of Implied Authority

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Ownership Structures / Forms Of Business

3. Limited or Joint Stock Company
A limited Company or a joint Stock Company is a combination of
individuals who subscribe the capital by taking shares of the Company
Advantages
Limited Liability
Vast Capital Available
Greater scope of expansion
Transferability of shares
Tax Relief
Disadvantages
Difficulty and cost of formation
Reckless speculation encouraged
Clash of interests between members and management
Bureaucratic approach may creep in administration

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Ownership Structures / Forms Of Business

4. Family Enterprise
Advantages
Commitment
Dedication
Loyalty
Spirit of Entrepreneurship
Financial strength
Disadvantages
Nepotism
Favouritism
Rigidity
Conservatism

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Ownership Structures / Forms Of Business
5. Company
A company is an association of many persons, who contribute money or
moneys worth to a common stock and employ it for a common purpose.
The common stock so contributed is denoted in money and is the capital
of the company. The persons who contribute it or to whom it belongs are
members. The proportion of capital to which each member is entitled is
his share.
Advantages
Limited Liability
Perpetual Existence
Professional Management
Expansion Potential
Transferability of shares
Diffusion of Risk
Disadvantages
Lack of Secrecy
Legal Restrictions
Management mischiefs
Lack of personal Interest

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Ownership Structures / Forms Of Business

6. Co-operative
A voluntary organisation of those who are economically weak to stand on their
own legs. They come together not to earn profits but to improve their common
economic interests through business propositions. The basic objectives of such
organisations are self help and mutual help.
Advantages
Easy Formation
Limited Liability
Perpetual Existence
Social Service
Open Membership
Tax Advantage
State assistance
Democratic Management
Disadvantages
Lack of Secrecy
Lack of business acumen
Lack of interest
Corruption
Lack of mutual interest

37

Role Of Government


3 Examples given below:

1. C & SSI and DIC
Direction for setting up Small scale units, Idea on
product selection, raw materials, market survey,
preparation of projects etc.
2. SISI Small Industries Service Institute
Identification of products, guidance for project
preparation, Vetting of projects, guidance for selection
of plant and machinery, raw material, market survey,
marketing and special training needs
3. IDBI Industrial Development Bank Of India
Guidelines on large scale and small scale industry

38
The Tomato Seller

A Jobless man applied for the

position of 'office
boy' at Microsoft. The HR manager interviewed
him then watched him cleaning the floor as a
test.
'You are employed' he said. Give me your e-mail
address and I'll send you the application to fill
in, as well as date when you may start.
The man replied 'But I don't have a computer,
neither an email'.

Contd

'I'm sorry', said the HR manager. If you

don't have an email, that means you do
not exist. And who doesn't exist, cannot
have the job.'

The man left with no hope at all. He didn't
know what to do
Contd

He had only $10 in his pocket. He then

decided to go to the supermarket and buy
a 10Kg tomato crate.
He then sold the tomatoes in a door to
door round. In less than two hours,
he succeeded to double his capital. He
repeated the operation three times,
and returned home with $60.

Contd

The man realized that he can survive by this

way, and started to go everyday earlier, and
return late. Thus, his money doubled or tripled
everyday.

Shortly, he bought a cart, then a truck, and then
he had his own fleet of delivery vehicles.



Contd

5 years later, the man is one of the biggest food

retailers in the US ...

He started to plan his family's future, and

decided to have a life insurance.

He called an insurance broker, and chose a

protection plan.

When the conversation was concluded the

broker asked him his email.

Contd

The man replied,

'I don't have an email.'

The broker answered curiously, 'You don't have

an email, and yet have succeeded to build an
empire. Can you imagine what you could have
been if you had an e mail?!!'

The man thought for a while and replied, 'Yes,

I'd be an office boy at Microsoft!'


Morals
Moral 1
Internet is not the solution to your life.


Moral 2

If you don't have Internet, and work hard, you can
be a millionaire.


Moral 3

If you received this message by email,
you are closer to being a office boy/girl,

than a
millionaire..........







In an interesting article on Forbes titled The
Smartest Unknown Indian Entrepreneur ,
Sramana Mitra profiles Sridhar Vembu, the
founder and CEO of an Indian firm called
AdventNet. The firm today, is a 100%,
bootstrapped, $40-million-a-year revenue
business that sends $ 1 million to the bank every
month in profits.
The Smartest Unknown Indian Entrepreneur
Is an Entrepreneur born or made?

An entrepreneur may be born out of lack of
employment opportunity
Or an entrepreneur who lets go of
employment opportunity to pursue a dream
or passion
Or someone who recognizes opportunity in a
service or sector
Is it a good idea? 5 questions to ask
Is the number of potential customers, in other
words the market, large and growing?
Who is your customer and what is his or her
problem, specifically, that you plan to solve?
How are these people currently solving their
problem, that is, what is your competition?
How much better or cheaper are you than your
potential customers' current solution, and can
you maintain that advantage?
And, most importantly: are you and your team
suited to this task - do you have the right
knowledge and network in this industry? Are you
passionate about the problem or industry?

Is it an Idea or
Perhaps it's a flash of inspiration; perhaps you've
sat and brainstormed in a workshop - either way,
ideas spring forth from an inner source. No
analysis has been performed to determine the
quality of the idea. In fact, the basic rule to
getting the creativity flowing in a brainstorming
session is 'there's no such thing as a bad idea'.
And during idea-generation, that's true; but in
fact, few are really good business ideas. So the
goal is to generate as many as possible to provide
the raw material for the next stage: opportunity
evaluation


an Opportunity
Opportunities, on the other
hand, are ideas that have
been through an analytical
wringer. Take an idea, punch
it, pull it, ask the right
questions, and if it holds up
- it's an opportunity: a
chance to build a viable
venture.
END
THANK YOU
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