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Chapter 1

Nature and development of Entrepreneurship/History of


Entrepreneurship

A French word Entrepreneur means Go between on Between Takes.

i. Earliest Period:
Marcopolo (Venice Italia) contract Money man
Merchant Adventurer Venture Capitalist

Having Ability of taking risk but no money Business man having money but
no ability
Profit distributed 25% 75%

ii. Middle ages.
Entrepreneur-An actor who manages large govt. projects (buildings, castles etc)
Project was provided by Govt.
Resources provided by Govt.
No risks were involved.

iii. In the 17
th
century.
Risk was involved as contract price was fixed.
Royal bank was allowed to operate.
Richard Cantillon (father of Term Entrepreneurship) defines:
Entrepreneur is a person who buys at a certain prices and sells at an
uncertain price, thus operating at a risk

iv. In the 18
th
Century:
Capital user contract Capital Provider
(Having Ability but no capital) (Having capital but no ability)
Edison Invention through R&D (Commercialized) Profit
Capital required for (Lab, Buy equipment)
Era of industrialization.

v. In the 19
th
and 20
th
century ( 21
st
century)
Entrepreneurship was viewed from economic prospective.
Entrepreneur contributes his role in the economic development of the country (Job
opportunities, facilities, profit)
-The Entrepreneur adopt and develop new technology in creation of projects.
-Innovation-Improvements
(Innovation in methodology, products, Innovation in business, in develop with the
customers) Innovation defined as Ability to create and conceptualize and understand
all forces at work Newness can be anything e.g. new product or new distribution
system.
Definition of Entrepreneurship

Economic definition:
Entrepreneurship is a dynamic process of creating incremental wealth.

General Definition:
Entrepreneurship is a process of creating something new assuming risks and
rewards.

Business definition:
Entrepreneurship is a process of creating something new with value by devoting
necessary time and effort assuming the company financial psychic and social risk and
receiving the resulting rewards and personal satisfaction and independence

Components of definition
Basic Aspects.

i. Value creation (Benefit/utility to stake holders)
ii. Devotion of time and effort. (Active Participation)
iii. Risks (Financial, social and psychic)
iv. Rewards (Monetary, personal satisfaction and social acceptance)
(Society recognize and appreciate businessman)

Entrepreneur Vs Inventions:

Characteristics of Invention:

Highly driven (motivated)
Motivated by work
Highly Creative
Well educated
Free thinker
Problem solver
High self confidence
Risk taker
Able to tolerate ambiguity
Dont give much importance to money.

Differences:

Difference in education:
Inventor is supposed to be highly educated, entrepreneur may not be highly educated.
Money Orientation: Inventor does not give much importance to money whereas
Entrepreneur is concerned with money (profit).
Entrepreneurs love their organization whereas inventor loves his creation (invention)
ENTREPRENEURIAL PROCESS:

Entrepreneur process consists of four phases.

1. Identify and evaluate the opportunity.

a) Opportunity Identification:
It may result due to Entrepreneurs alertness to possibilities or by developing a
mechanisms of opportunities identification.

He is a Keen Observer, having meeting plans up and generates new ideas

Sources of Opportunity include.
i. Consumers
ii. Business Associates
iii. Distribution Channel
iv. Technical People
v. Research and Development

b) Opportunities Analysis.

Careful screening and evaluation of each opportunity in terms of returns, values, risks,
fit with personal skills, deferential advantages and window of opportunities.
Risks involved are competition, technology, market and amount of capital.
Prepare an Opportunity Analysis plan that includes product, assess opportunity, and
assess Entrepreneur and team, specification of activities and sources of capital

2. Develop a Business Plan:

Business plan is a written document describing all relevant internal and external
documents and strategies of starting a venture.

It is a time consuming and most difficult phase of the process. (For making a business
plan a safe estimate of time required is 200 hrs). It includes understanding basic issues
to develop the opportunity, determine the sources required obtain the resources and
manage the venture. Important areas include functional plans e.g. marketing plan,
financial plan, production plan, Organizational Plan, Operational Plan as well as the
environmental analysis including environments like economy, social, legal,
technological.

3. Determine the resources required

Appraise the current resources. Resources include Capital, Human Resources, Physical
Resources and Knowledge.
The resources that are falling short needs to be acquired in time where the entrepreneur
wants to give little control and ownership.
4. Manage the Enterprise

Use resources to implement the business plan.
Implement the management style and determine key variables for success including
control elements and strategies, managerial systems, performance evaluation etc.

Types of Start up

An Entrepreneur can start from any three types of Enterprise.

i. Life style firm: Goes from a similar pattern, privately held, low growth and less
research and development private ownership 30 to 40 employees after several
years start from 4 to 5. Annual revenue $ 2 million.

ii. Foundation company: 40 400 employees after 5 10 years. Annual revenue
$ 10 20 million. Attract private investors. Get investment from investors but
donot offer shares in market, dont go public.

iii. High potential venture: More than 500 employees after 5-10 years. Annual
revenue $ 20-30 million, receives greatest interest and publicity.


ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT

1. Initiating and constituting change in structure of business and society.
2. Equal distribution of wealth
3. Creation of capital

Types of innovations include.
a) Ordinary innovation
b) Technological innovation
c) Break through innovation (Anything that changes the previous thing as a major
change)

1) Government as an innovator:

Government bridges the gap between science and market place by providing resources
and consultancy, Commercialization, Technology transfer and R & D
Problems: include lack of business skills, bureaucratic approach and red tape-ism

2) Corporate Entrepreneurship

Corporate Entrepreneurship is Entrepreneurship within an existing organization usually
by creation by SBUs (Strategic Business unit)
Existing organization has resources but due to bureaucracy structured organizations
and short term orientation they prevent creativity.

3) Independent Entrepreneurship

Creation of new organization and most affected method of bridging the gap between
science and market place.
Problems: Problem includes lack of managerial knowledge, marketing or financial
resources, unrealistic inventions and improper interaction with stakeholder.

ETHICS AND SOCIAL RESPONSIBILITY OF ENTREPRENEUR:

Business Ethics is the study of behavior and morals in a business situation.

Entrepreneur is not only the money maker but also shows an ethical behavior.

Entrepreneur has to create a balance between ethics, economic expediency (profit) and
social responsibility differentiating him from a manager.

Entrepreneurs are sensitive to peer pressures and general social norms in community.


FUTURE OF ENTREPRENEURSHIP.

Common aspects are risks taking, creativity, independence and reward.

Entrepreneurship is expected to have a Bright Future

Universities are offering this subject more, even Entrepreneurial Sciences has been
taught.

Government encouragement and providing facilities roads, communications and tax
incentive.

Increased societal support that is honorable and prestigious pursuit.

Encouraging and constructive role of mass media e.g. article and media interviews.