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Module 1: Entrepreneur
Meaning of entrepreneur, evolution of concept, functions of an
Entrepreneur, types of Entrepreneur, Intrapreneur-an emerging class,
concept of Entrepreneurship, development of Entrepreneurship, the
Entrepreneurial culture, stages of Entrepreneurial process.
Module – 1
ENTREPRENEUR
Meaning of Entrepreneur- The word entrepreneur is original from French word “Entrependre” means one who undertake risk to start up the business. An entrepreneur is a person who starts an enterprise. He searches for change and responds to it.one who recognizes and manages enterprise especially involving high risk. If taken literally, this definition seems fine, but it is quite incomplete. Researches have shown that entrepreneurs are not necessarily high risk takers. However, a clever entrepreneur performs to reduce risk and increase the likehood of success. The definition nowhere mentions anything about opportunities or resources allocated to achieve the success. the only point mentioned in the definition is regarding high risk, which might not even necessary to be successful. One can choose your career from two broad categories of options.-wage employment or entrepreneurship. The term “career “signifies a continuous ever evolving,ever expanding opportunity for personal as well as business growth and development. Entrepreneurship can be defined as a career in your own business (YOB) rather than wage employment(JOB).if you opt foa a job then you will work for others.in case you opt for entrepreneurship you will be your own boss.in case of wage employment one is engaged in routine work carried on for others for which he receives salary or wages. He has to follow instructions and execute plans laid down by his superior.one can choose to be employed in government service or the public sector or the private sector. 1725: Richard Cantillon : An entrepreneur is a person who pays a certain price for a product to resell it at an uncertain price, thereby making decisions about obtaining and using the resources while consequently admitting the risk of enterprise. 1803 : J.B. Say: An entrepreneur is an economic agent who unites all means of production- land of one, the labour of another and the capital of yet another and thus produces a product. By selling the product in the market he pays rent of land, wages to labour, interest on capital and what remains is his profit. He shifts economic resources out of an area of lower and into an area of higher productivity and greater yield.
1934: Schumpeter : According to him entrepreneurs are innovators who use a process of shattering the status quo of the existing products and services, to set up new products, new services. 1961: David McClleland : An entrepreneur is a person with a high need for achievement. He is energetic and a moderate risk taker. 1964: Peter Drucker : An entrepreneur searches for change, responds to it and exploits opportunities. Innovation is a specific tool of an entrepreneur hence an effective entrepreneur converts a source into a resource. 1971: Kilby : Emphasizes the role of an imitator entrepreneur who does not innovate but imitates technologies innovated by others are very important in developing economies. 1975: Albert Shapero : Entrepreneurs take initiative, accept risk of failure and have an internal locus of control. Examples: Bill Gates – The founder of Microsoft Ratan Tata – The founder of Tata Groups Steve Jobs – The founder of Apple Diru Bhai Ambani – The founder of Reliance groups Mark Zuckerberg – The founder of Face book V G Siddarath – The founder of CCD (Cafe Coffee Day) Management experts defines entrepreneur as a person who has a vision and generates action plan to achieve it.to put in simple words, an entrepreneur is someone who perceives opportunity, organizes resources needed for exploring the opportunity and exploring it.
Evolution of the concept
The word entrepreneur has a variety of meanings. Originally, the word entrepreneurship has been derived from the French word “ entreprendre” which means ‘to under take’. The word has undergone many changes over a period of five centuries. In the early 16th century , a leader of the military expedition was called an entrepreneur. In the 17th century construction and fortification contractors were called entrepreneur. The Oxford dictionary (1897) defines the word entrepreneur as “the director or manager of a public musical institution, one who gets up entertainment especially musical performance”. Later in the 18th century the word was used to refer to as ‘those engaged in economic activity’’. In 19 th^ century , entrepreneurs were views from an economic perspective. A close look at these meaning which has evolved with time seems to suggest that in the earliest period, a person who was strong, took orders & went in search of new lands as part of military expedition was an entrepreneur which later shifted to mean a person with extraordinary idea to build forts that could stand all attacks (an engineering or technical man) was an entrepreneur. Whatever is the road that these terms as
Leadership -an entrepreneur exhibits the qualities of a leader. they are good planners, organizers have good communication skills are empathetic towards their employees are good decision makers, take initiatives to implement plans and are result oriented. Risk taking ability -Frank Knight has identified risk taking ability as the most integral element in defining entrepreneurial characteristics.
Types of Entrepreneur:
Based on functional entrepreneur: Innovative Entrepreneurs : Innovating entrepreneurs are dynamic & enthusiastic. They are interested in introducing new projects and they experiment and conduct permutation and combinations of ideas to yield new products and services.; using new raw materials trying new methods of production; discovering new markets; & re-organising the enterprise. Such entrepreneurs are found only in developed economies. Imitative Entrepreneur: These entrepreneurs are ready to adopt successful innovating undertaken by innovative entrepreneurs. They themselves do not innovate new things but imitate the methods, techniques & technologies which are successful in the market. Such entrepreneurs are found in developing economies. Fabians Entrepreneurs: Fabians entrepreneurs are very cautious in bringing any change in their enterprises. They are lazy and slow in adopting the changes. They avoid taking risks. They imitate the changes made by others only when they feel that otherwise they lose the market or relative position in the market. They strongly believe in customs and traditions. They do not change products unless they are out of market. Drone Entrepreneurs: Drone Entrepreneurs are not open to creativity and change they do not like changing the working of organisations with the changing times.. They are conservative in their outlooks. They continue with the old method at the cost of reduced turnover & market share. They are purchased out of the market in long run. Based on personality traits and their style of running the business- Achiever- these types of Entrepreneurs have personal desires to excel. The only drive that pushes them is the desire to achieve something in life, the desire to make a mark in society, the desire to prove their excellence.no matter how many hurdles come in their way, they are totally determined. They do not need any external stimulus but are self-driven. Their characteristics can be termed as achievement personified. They can rightly be called as go- getters. This personality will often cause them to build their business around their own personal brand. These Entrepreneurs have dreams and dare to fulfil their dreams.
The induced Entrepreneur -these types of Entrepreneurs are induced by some external factors to start a business. The external factors could be like supporting government policies, unemploymentand familysupport; facilitating institutional support etc. these types of Entrepreneurs turn out to be more realistic in their approach. For instance-when the government announced subsidies,tax debates and financial support to small scale industries, several Entrepreneurs started their business as SSIs. Idea generator- these kinds ofEntrepreneurs are highly creative people who0 are always in search of innovative ideas for setting up new business ventures. they have the ability to sense the demand much ahead of others. they enjoy the first movers advantage and are able to skim higher profits from the market. they can rightly be given the title of essence of Entrepreneurship. Based on type of business- Trading Entrepreneurs: Trading Entrepreneurs is one who undertakes trading activities (buying and selling of good s and services) and is concerned with the manufacturing of products. He identifies potential market,stimulates demands and generatesinterest among buyers to purchase a product. For example, distributors would buy from the manufacture and sell the same to the whole- sellers or retailers. While retailers buy either from whole seller or distributor and sell the same to the customers. Industrial Entrepreneurs: Industrial entrepreneurs are those who undertake some manufacturing activity. They identify the needs of the customers and conceive an idea of manufacturing a new product. They make use of technology and economic resources to create a profitable venture. They are the owners of small industrial units who run establishments on their own with the help of new workers and assistants. Corporate Entrepreneurs: Corporate Entrepreneurs is a person who demonstrates his innovative skill in organising and managing a corporate undertaking (which is registered under some stature or act that gives it a separate legal entity. Agricultural Entrepreneurs: Individuals who undertake agricultural operations using modern mechanical devices and raise crops other than traditional ones may be called agricultural entrepreneurs. They risk growing crop and experiment with new techniques to raise crops Based on ownership- Pure Entrepreneurs : individuals who are the founders of the business. They are the ones who conceptualize a business plan and then put in efforts to make the plan a success. Ex- Dhirubhai ambani
Public Entrepreneurs : In many countries government itself established enterprises for the benefits of the society at large. As the government is the owner of such units they are called public enterprises. Here government acts as an entrepreneur. Private Entrepreneurs: Entrepreneurs other than the government are called private entrepreneurs. Most of the entrepreneurs in our country are being run by private entrepreneur. The primary objective of private entrepreneurs is maximum profit Forced Entrepreneurs: Entrepreneurs who start enterprises on the external pressure may be called forced entrepreneurs. People who do not get job which suits their qualification may start their own enterprises. Artisan Entrepreneurs: Skilled person in rural areas are considered are artisan entrepreneurs. These people acquire their skill through inheritance and training since childhood. They are blacksmith, carpenter, shoemaker, potter, weavers, and like.
INTRAPRENEURS:
The term intrapreneur emerged during the 1970s.several senior executives of big corporations left their jobs to start their own small business because the top bosses in these corporations were not receptive to innovative ideas. These executives turned entrepreneur achieved phenomenal success in their new ventures; posing a threat to the corporations they had left. These types of entrepreneurs came to be known as “ Intrapreneurs” An Intrapreneur is an inside entrepreneur within a large firm, who uses entrepreneurial skills without incurring the risks associated with those activities. Intrapreneurs are usually employees within a company who are assigned to work on a special idea or project, and they are instructed to develop the project like an entrepreneur would. Intrapreneurs usually have the resources and capabilities of the firm at their disposal. Intrepreneurs are the people working in big organisations holding key position. They are quite innovative and bring many changes in products and the methods of production. They possess all the qualities of entrepreneurs. They have many new ideas which are converted into product or service or anything that satisfies human wants or needs. They may or may not undertake research and development for the purpose. They appear to be de-factor owners of the organisation in which they are seen working and by their acts, deeds and talents they can be easily mistaken to be so. But the main difference between entrepreneurs and intrepreneurs is the element of risk. The former is prepared to take-up while the later does not. Top managements in big establishments encourage people holding key positions to come out with new ideas so that they can bring in changes in product and services offered by them. More the variety of products more is the goodwill enjoyed by the organisation. The fast changing markets and consumer preferences have increased the role of intrepreneurs in the
success of big organisations. To develop successful innovation, a corporation should establish a conducive organizational climate. The process of establishing Intrapreneurship within an existing organisation requires the commitment of management, particularly top management. The organization must carefully choose leaders, develop general guidelines for ventures and delineate expectations. Training sessions are an important part of the process. A system of incentive and reward should be also in place as a means of encouragement. This climate creates a person who develops into an Intrapreneur with all the skills, talents, ability etc that is required to hold the reins of venture. Such people are now on the raise and are emerging as a class. Characteristics: Intrapreneurs bridge the gap between inventors and mangers. They take new ideas and turn them into profitable realities. They have vision and courage to realize it. They can imagine what business prospects will follow from the way customers respond to their innovations. They have ability to plan necessary steps for actualization of the idea. They have high need for achievement and they take moderate calculated risk. They are dedicated to their work that they shut out other concerns. Including their family life. Difference between Entrepreneur and Intrapreneur Bases of difference Entrepreneur Intraprenenur Meaning Entrepreneur refers to a person who set up his own business with a new idea or concept Intrapreneur refers to an employee of the organization who is in charge of undertaking innovations in product, service, process etc. Resources Uses own resources. Use resources provided by the company. Enterprise Newly established An existing one Dependency An entrepreneur is independent in his operations. But, an intrapreneur is dependent on the entrepreneur, i.e., the owner. Freedom Has freedom and autonomy. Need not report to anyone unless has investors. Has the freedom and autonomy for professional growth, but may have to report to whoever hired them. Raising of Funds An entrepreneur himself raises funds required for the enterprise. Funds are not raised by the intrapreneur. Risk Entrepreneur bears the risk involved in the business. An intrapreneur does not fully bear the risk involved in the enterprise. Operation An entrepreneur operates from out- On the contrary, an intrapreneur
Definition of Entrepreneurship B. HIGGINS: “ The function of seeing investment & production opportunities; organising an enterprise to undertake a new production process; raising capital; hiring labour, arranging for raw material, finding a site & combining these factors of production into a going concern; introducing new techniques, new commodities, discovering new sources of natural resources & selecting top-managers for day-to-day operations.” SCHUMPETER: “Entrepreneurship is based on purposeful & systematic innovation. It includes not only the independent businessman but also company directions & managers who actually carryout innovative functions.” Enterprise Entrepreneur is a person who starts an enterprise. The process of creation is called entrepreneurship. The entrepreneur is the actor and entrepreneurship is the act. The outcome of the actor and the act is called the enterprise. An enterprise is the business organization that is formed and which provides goods and services, creates jobs, contributes to national income, exports and overall economic development. Difference between Entrepreneur and Entrepreneurship Entrepreneur Entrepreneurship He is a person It refers to a process He is an organiser It refers to organization He is an innovator It refers to innovation He is a risk bearer It refers to risk bearing He is a motivator It refers to motivation He is a creator It refers to creation He is a visualisor It refers to vision He is a leader It refers to leadership He is an initiator It refers to initiation He is a planner It refers to planning He is a decision maker It refers to decision He is a communicator It refers to communication Evolution of Entrepreneurship: The industrial health of a society depends on the level of entrepreneurship existing in it. A country might remain backward not because of lack of natural resources or dearth of capital [as it is many times believed] but because of lack of entrepreneurial talents or it inability to tap the latent entrepreneurial talents existing in that society. Entrepreneurs historically have
altered the direction of national economies, industry or markets- Japan, Singapore, Korea, Taiwan to name a few. Development of Entrepreneurship: Towards the end of the sixties, two significant contributions were made in the field of entrepreneurship .One was that there is a positive linkage between entrepreneurship and economic development and the other was regarding the emergence of a strong hypothesis that entrepreneurship can be developed through planned efforts1. Consequently planners realized that absence of a strong entrepreneurial base acts as a serious handicap in the industrial development of a region. The identification and development of first generation entrepreneurs through Entrepreneurial Development Programmes is an important strategy. There is a growing realization that presence of resources and favourable government policies cannot automatically manufacture economic development. It is the entrepreneurial spirit of the people, which can transform the economy of that region. Both the quantity and quality of entrepreneurs are of utmost significance for achieving the goal of economic development. The myth that entrepreneurs are born with some innate traits is fortunately no longer held. You will learn more about this in the lesson on motivation. Many research studies have brought out that entrepreneurship can be taught and learned. Entrepreneurship is a discipline and like all disciplines it has models, processes and case studies, which can help an individual to study this subject. The necessary competencies required of a successful entrepreneur can be acquired through training and development. Numerous courses in entrepreneurship are being taught all over the world in schools and colleges, seminars and conferences are being organized and EDPs are 1 [Sharma K.M. ‘Economic Development in India, New Thrust on Small Scale Industries’, in Sammi Udin et.al. [ed.] Entrepreneurship Development in India. Mittal Publications, New Delhi 1990, p. 23] being conducted. The thinking today is why just create managers why not create people who can absorb managers. One can acquire the traits and learn the skills for becoming an entrepreneur e.g. a person can learn to be achievement oriented, self- confident, perseverant etc. which are all part of the characteristics of a successful entrepreneur. Usually the model used for entrepreneurial education has three phases: Stimulatory Phase - This phase involves planned publicity for opportunities, motivation training and help and guidance in selection of product or service.
- increase in literacy
- increase in employment & in employment opportunities 6.Distribution of wealth 7.Import of technology & modern business concepts. Entrepreneurial Culture The concept of culture is used to distinguish human societies from animal groups. The customs, ideas and attitudes shared by a group, which make up its culture, are transmitted from generation to generation by learning processes rather than biological inheritance. Adherence to these customs and attitudes is regulated by systems of rewards & punishments peculiar to each culture. Language and other symbolic media are the chief vehicles of culture transmission but many behaviour patterns are acquired through experience alone. In almost all successful business firms there have been leaders who revived and changed the culture and course of those firms. In most cases such changes are based on retaining and developing what is good in an existing culture and adding to it new elements that will stimulate growth. A total rejection of all that existing can be devastating. Therefore the skill in reforming the culture of a company is to identify and retain the pride and honour in what is good while recognising what is to be rejected or modified. At the same time the management of the firm should seek, generate and embrace new ideas and practices that can energise the firm and propel it forward with new vigour. A culture is usually divided into sub-culture based upon geography, language, ethnic background, human characteristics and such other qualities that stem out from human characteristics. In recent years this has the effect of the alien culture too. For an entrepreneur the culture is, therefore, a sum total of all these interacting innate factors. Like nations, business firms also have their distinctive cultures & need to inculcate these aspects into managing affairs. Many firms are not aware of their culture or sensitive to its distinct characteristics. They become aware of it when they have to induct managers and other personnel from other firms with different cultures or even more acutely when mergers and acquisitions take place. Perhaps this is the reason why international human resource management has developed itself into a discipline and has become a part and parcel of academic studies in MBA. The areas where entrepreneurial culture is showcased are as follows:
Business Culture/Ethics : Ethics is that branch of philosophy which is concerned with rightness or wrongness, goodness or badness of human conduct. No doubt that these days various legislations are in place to ensure adherence to norms. But the underlying fact is that since ages the social norms, which we call as morals have led people adopt them and progress. Thus even before laws can guide people the customs, tradition and social values have led them. Productivity Culture: Productivity improvement is not just doing things better. It is more importantly doing better in the right manner. All productivity improvement stems from people productivity as people constitute the motive power behind all the resources. Like machine which stands idle, human potential diminishes if not properly utilised. This suboptimal manpower utilisation is the major reason for brain drain in many developing countries. Thus, there is no point in improving skills until the organisation can use them. Organisation must periodically conduct opinion survey or a feedback session for corrective actions for area of concern. Besides the well know tools for improving productivity like motivation, communication, etc. Quality Culture: In many western countries price and quality go hand in hand. If product is comparatively highly priced it connotes better quality than the lower priced one. But this does not appear to be so in India. Use of chemicals harmful to humans in manufacture of food or drinks, no adequate measure for dangerous manufacturing processes, etc reflects the scant respect for quality as a culture. Thus Indian organisations, at this juncture, will realise it increasingly necessary to combine their peculiar ways of doing business with the global practices of business they are involved in. Organisational culture: Culture enables organisation to function as a collective unit. The cultural glue consists of strong norms and values that heavily influence the way people behave, how they work together and how they pursue the goals of the organisations. To strengthen an organisation’s culture, a set of values, behaviour characteristics procedural rituals, role model for the professionals working in an organisation should be identified. Structure reflects the organisation of work roles. The roles may be production, finance, marketing, personnel etc. The structure of the organisation embodies the fundamental division of labour, describes the nature and duties of the jobs to be done and aggregates them into groups or business. Stages in Entrepreneurial Process-
shorter, focus on the opportunity not the venture and provide the basis for decision making whether or not to act on the opportunity.
2. Developing Business Plan : A good business plan must be developed in order to explicit the defined opportunity. It is as good as a preparation of a report. This is perhaps the most time consuming but an important process. An Entrepreneur usually would not have prepared a business plan before and may not have the resources available to do a good job. Even if the Entrepreneur has prepared a plan before, it may not be for the opportunity for one on hand at present. Although the preparation needs lot of information & expertise the information varies from the type of product, service or targeted consumers. The following are the important issues that are considered under the development of a business plan. (a) Develop a Report / Business Plan: (i) Title page (ii) Table of contents (iii) Executive Summary (iv) Major section: (1) Description of business (2) Technology plan (3) Marketing plan (4) Financial plan (5) Production plan (6) Organisation plan (7) Operational plan (8) Summary (v) Appendix (Exhibits). 3. Determine the Resources Required: This process starts with an appraisal of the entrepreneur’s present resources. Any resources that are critical need to be differentiated from those that are just helpful. Care must be taken not to underestimate the amount and variety of resources needed. The downside risk associated with insufficient or inappropriate resources should also be assessed. Here resources would also mean the talent, skills, expertise, and knowledge, name of the sponsor besides usual resources like men, money, machine, materials & management. It is in this phase that besides listing various resources side by side the suppliers are also listed. This ensures scientific approach such that an entrepreneur can
structure a deal that enables the resources to re acquired at the lowest possible cost and least loss of control.
4. Manage the Enterprise: This phase involves implementing a management style and structure, as well as determining the key variables for success. A control system must be established, so that any problem areas can be quickly identified and resolved. Some entrepreneurs have difficulty managing and growing the venture they created.
Assignment Questions: List out the successful Indian Entrepreneurs Internal and external Problems faced by entrepreneurs List out the failure Indian Entrepreneurs Entrepreneur (^) Entrepreneurship Enterprise Person Process of action Object
