Unit -1:

THE CONCEPT OF ENTREPRENEURSHIP

Entrepreneur Entrepreneurship Enterprise

Person Process of action Object

1.1 Introduction:

Basically an entrepreneur is a person responsible for setting up a business or an enterprise. He

has the initiative, skill for innovation and who looks for high achievements. He is a catalytic
agent of change and works for the good of people. He puts up new green field projects that create
wealth, open up many employment opportunities and leads to growth of other sectors.

Entrepreneur:

The word "entrepreneur" is derived from a French root ‘Entreprendre’, meaning, "to
undertake". It was Schumpeter however, who really launched the field of entrepreneurship by
associating it clearly with innovation.

An entrepreneur is a person who starts an enterprise. He searches for change and responds to it.
Entrepreneur is someone who perceives opportunity, organizes resources needed for exploiting
that opportunity and exploits it.

Definition of entrepreneur:

Stems: from the french word ‘entrependre’ meaning one who undertakes or one who is a ‘go-
between’

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.
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.

David mcclleland: an entrepreneur is a person with a high need for achievement.

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.

Albert shapero: entrepreneurs take initiative, accept risk of failure and have an internal locus of
control.

Concept of Entrepreneurship:

An enterprise is created by an entrepreneur. The process of creation is called “entrepreneurship”.

Entrepreneurship is a process of actions of an entrepreneur who is a person always in search of
something new and exploits such ideas into gainful opportunities by accepting the risk and
uncertainty with the enterprise. It includes:

 Creativity & Innovation

 Idea generation
 Evaluation
 Implementation

Concept of Enterprise

Entrepreneur is a person who starts an enterprise. The process of creation is called

entrepreneurship. 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. There are various forms of enterprises like large scale, small scale, Multinational,
innovative etc.

1.2 Nature of Entrepreneur:

An entrepreneur has the following characteristics:
1. Personal characteristics:
 Drive & passion
  Flexibility
 Decision maker
 Networking
 Innovator
 Leader
 self-motivation
 team building
 knowledge
2. Operational characteristics
 Initiative
 Pro active
 Organizes economic resources
 Financial analyst
 Assumes risk and un certainty
 Customer service representative
 Understand What You Offer
Types of Entrepreneur
1. On the Basis of Economic Development:Clarence Danhof classified
entrepreneurs into four groups on the basis of economic development.

A. Innovating Entrepreneurs: This type of entrepreneurship is characterized by

aggressive assemblage of information and the analysis of results deriving from
novel combination of factors of production. Entrepreneurs falling in this class are
generally aggressive in experimentation and exhibited shrewdness in putting
attractive possibilities into practice.

B. Adoptive or Imitative Entrepreneur: There is a second group of

entrepreneurs generally referred as imitative entrepreneurs. The imitative
entrepreneurs copy or adopt suitable innovations made by the innovative
entrepreneurs. They does not innovate the changes himself. They only imitates
technology innovated by others.

C. Fabian Entrepreneur: The third type is Fabian entrepreneur. By nature these

entrepreneurs are shy and lazy. This type of entrepreneurs have neither will to
introduce new changes nor desire to adopt new methods of production innovated
by the most entrepreneurs. They follow the set procedures, customs, traditions and
religions. They are not much interested in taking risk and they try to follow the
footsteps of their predecessors. Usually they are second-generation entrepreneur in
a business family enterprise.

D. Drone Entrepreneur: The fourth type is a Drone entrepreneur who refuse to

copy or use opportunities that come on their way. They are conventional in their
approach and stick to their set practices products, production methods and ideas.
They struggle to survive not to grow. They may be termed as Laggards. In such
cases the organization looses market, their operations become uneconomical and
they may be pushed out of the market.

2. On the Basis of Type of Business: Under this category we can

classify entrepreneurs as described below:
A. Business Entrepreneurs: They are the entrepreneurs who conceive an idea for
a new product or service and then create a business to materialize their idea into
reality. They tap the entire factor of production to develop a new business
opportunity. They may set up a big enterprise or a small-scale business. When they
establish small business units they are called small business entrepreneurs. In a
majority of cases, entrepreneurs are found in small trading and manufacturing
business.

B. Trading Entrepreneur: There entrepreneurs undertake trading activities and

are not concerned with the manufacturing work. They identifies potentiality of
their product in markets, stimulates demand for their product line among buyers.
They may go for both domestic and overseas trade. These entrepreneurs
demonstrated their ability in pushing many ideas ahead which promoted their
business.

C. Industrial Entrepreneur: Industrial entrepreneur is essentially a manufacturer

who identifies the needs of customers and creates products or services to serve
them. He is product-oriented who starts through an industrial unit to create a
product like electronic industry, textile unit, and machine tools.

D. Corporate Entrepreneur: These entrepreneurs used his innovative skill in

organizing and managing a corporate undertaking. A corporate undertaking is a
form of business organization, which is registered under some statute or Act like a
trust registered under the Trust Act, or a company registered under the Companies
Act. These corporate work as separate legal entity. He is thus an individual who
plans, develops and manages a corporate body.

E. Agricultural Entrepreneur: Agricultural entrepreneurs are those who

undertake agricultural activities as through mechanization, irrigation and
application of technologies to produce the crop. They cover a broad spectrum of
the agricultural sector and include agriculture and allied occupations.

3. According to the Use of Technology:The application of new technology in

various sectors of the national economy is essential for the future growth of
business. We may broadly classify these entrepreneurs on the basis of the use of
technology as follows:

A. Technical Entrepreneurs: With the decline of joint family business and the
rise of scientific and technical institutions, technically qualified persons have
entered the field of business. These entrepreneurs may enter business to
commercially exploit their inventions and discoveries. Their main asset is technical
expertise. They raise the necessary capital and employ experts in financial, legal-
marketing and other areas of business. Their success depends upon how they start
production and on the acceptance of their products in the market.

B. Non-technical Entrepreneur: Non-technical entrepreneurs are those who are

not concerned with the technical aspects of the product or service in which they
deal. They are concerned only with developing alternative marketing and
promotional strategies for their product or service.

C. Professional Entrepreneur: Professional entrepreneur is an entrepreneur who

is interested in establishing a business but does not have interest in managing it
after establishment. A professional entrepreneur sells out the existing business on
good returns and starts another business with a new idea. Such an entrepreneur is
dynamic and conceives new ideas to develop alternative projects.

4. According to Motivation:Motivation is the main force that promotes the efforts

of the entrepreneur to achieve his goals. An entrepreneur is motivated to achieve or
prove his excellence in their performance. According to motivation we can classify
entrepreneur as:.

A. Pure Entrepreneur: A pure entrepreneur is the one who is motivated by

psychological economical, ethical considerations. He undertakes an entrepreneurial
activity for his personal satisfaction in work, ego or status.

B. Induced Entrepreneur: This type of entrepreneur is one who induced to take

up an entrepreneurial task due to the policy reforms of the government that
provides assistance, incentives, concessions and other facilities to start a venture.
Most of the small-scale entrepreneurs belong to this category and enter business
due to financial, technical and several other facilities provided to them by the
various agency of Govt. to promote entrepreneurship. Today, import restrictions
and allocation of production quotas to small units have induced many people to
start a small-scale unit.

C. Motivated Entrepreneur: New entrepreneurs are motivated by the desire for

self-fulfillment. They come into being because of the possibility of making and
marketing some new products for the use of consumers. They are motivated
through reward like profit.

5. According to Growth: The industrial units are identified as high growth,

medium growth and low growth industries and as such we have ‘Growth
Entrepreneur’ and ‘Super Growth Entrepreneur.’

A. Growth Entrepreneur: He necessarily takes up a high growth industry and

chooses an industry, which has sustained growth prospects. Growth entrepreneurs
have both the desire and ability to grow as fast as large as possible.

B. Super-Growth Entrepreneur: This category of entrepreneurs is those who

have shown enormous growth of performance in their venture. The growth
performance is identified by the high turnover of sales, liquidity of funds, and
profitability.

6. According to Entrepreneurial Activity:Based on entrepreneurial activity,

entrepreneurs are classified as novice, serial, and portfolio entrepreneur.

A. Novice Entrepreneur: A novice is someone who has started his/her first

entrepreneurial venture. A novice entrepreneur is an individual who has no prior
business ownership experience as a business founder, inheritor of a business, or a
purchaser of a business. It is not similar to early starter; a novice can also be a 50
year old with over 25 years of experience in the industry.

B. A Serial Entrepreneur: A Serial Entrepreneur is someone who is devoted to

one venture at a time but ultimately starts many. It is the process of starting that
excites the starter. Once the business is established, the serial entrepreneur may
lose interest and think of selling and moving on.

C. Portfolio Entrepreneur: A portfolio entrepreneur is an individual who retains

an original business and builds a portfolio of additional businesses through
inheriting, establishing, or purchasing them. A portfolio entrepreneur starts and
runs a number of businesses. It may be a strategy of spreading risk or it may be
that the entrepreneur is simultaneously excited by a variety of opportunities. Also,
the entrepreneur may see some synergies between the ventures.

7. Other Entrepreneurs:

A. First-Generation Entrepreneurs: This category consists of those

entrepreneurs whose parents or family had not been into business and was into
salaried service. The booming economy of India has led to a multitude of business
opportunities, and with deregulation, it has become easier to set up businesses.
Also, with a change in the mindset of the middle class, it is now more acceptable to
become an entrepreneur. A first-generation entrepreneur is one who starts an
industrial unit by means of an innovative skill. He is essentially an innovator,
combining different technologies to produce a marketable product or service.

B. Modern Entrepreneur: A modern entrepreneur is one who undertakes those

businesses which go well along with the changing scenario in the market and suits
the current marketing needs.

C. Women Entrepreneurs: Women as entrepreneurs have been a recent

phenomenon in India. The social norms in India had made it difficult for women to
have a professional life. Now this has changed. Progressive laws and other
incentives have also boosted the presence of women in entrepreneurial activity in
diverse fields. In 1988, for the first time, the definition of Women Entrepreneurs’
enterprise was evolved that termed an SSI unit/industry-related service or business
enterprise, managed by one or more women entrepreneurs in proprietary concerns,
or in which she/they individually or jointly have a share capital of not less than 51
per cent as partners / shareholders / directors of a private limited company /
members of a cooperative society, as a Woman Enterprise.

D. Nascent Entrepreneur: A nascent entrepreneur is an individual who is in the

process of starting a new business.

E. Habitual Entrepreneur: Ahabitual entrepreneur is an individual who has prior

business ownership experience. The nascent entrepreneur can either be a novice or
a habitual entrepreneur.

F. Lifestyle Entrepreneurs: Lifestyle entrepreneurs have developed an enterprise

that fits their individual circumstances and style of life. Their basic intention is to
ear an income for themselves and their families.

G. Copreneurs: It is related to the married couples working together in a business.

When a married couple share ownership, commitment and responsibility for a’
business, they are called “copreneurs”. As copreneurs, couples struggle in ventures
to establish equality in. their relationships. Such couples represent the dynamic
interaction of the systems of love and work.

H. IT Entrepreneurs: IT entrepreneurs are creating a new business platform that

takes them straight to the top. They are confident, ambitious innovative and
acquired creativity in the competitive global environment and created a niche of
their self. They are the brave new bunch of entrepreneurs who are raring to take on
the world of information technology.

I. Social Entrepreneur: Social entrepreneur is one who recognizes the part of

society, which is stuck and provides new ways to get it unstuck. Be it dedicated
efforts for child upliftment, fighting for the conservation of Assam’s rainforests,
working for the betterment of the blind or initiatives to empower women, the
entrepreneur’s passion is very strong. Freedom, wealth, exposure, social mobility
and greater individual confidence are driving this huge wave of social innovation
and entrepreneurship. After all are tired with the Inefficiency of governments and
the indifference of corporate, and want to make a change and this is the case
everywhere.

J. Forced Entrepreneurs: The money-lenders of yesterday, who are thrown out of

their family business because of government legislation, the neorich Indians
returning from abroad and the educated unemployed seeking self-employment
form this class of entrepreneurs.

K. Individual and Institutional Entrepreneurs: In the small scale sector

individual entrepreneurs are dominant. Small enterprises outnumber the large ones
in every country. Such entrepreneurs have the advantage of flexibility, quick
decision making. But a single individual can establish, operate and control an
organization up to a limit. Thereafter, it becomes necessary to institutionalize
entrepreneurship. The business will have to acquire a number of new
entrepreneurial skills through a corporate body. A group of entrepreneurs has to be
developed to handle the increasingly complex network of decision-making. The
central function of the entrepreneur remains the same but the basic decisions like
the line of business, the amount of capital employed, etc. are taken collectively by
the promoters at the helm of affairs. Thus, individual entrepreneur and institutional
entrepreneur coexist and support each other. Corporate sector the symbol of
institutionalized entrepreneurship.

L. Entrepreneurs by Inheritance: At times, people become entrepreneurs when

they inherit the family business. In India, there are a large number of family
controlled business houses. Firms in these houses are passed from one generation
to another.

1.3 Factors which motivate entrepreneur:

The 6Cs that motivate the Entrepreneurs - Change, Challenge, Creativity, Curiosity, Control
& Cash.

1. Change - Entrepeneurs constantly want change and also want to be the bearers of
the change. They are problem solvers and want to disrupt the status quo. They have a 
vision ("I want to aggregate the world's information" or "I want to put  a PC in every
desk") and go about attempting to change - some succeed and others don't.
2. Challenge - Many people who like to startup want it for the challenge and want to
handle big problems. For such people, the typical job in a big corp is not challenging
enough and too boring to be worth.
3. Creativity - Running your own business lets you be more creative. For instance,
you can experiment with a new website design, new marketing strategy, create
innovative products that attacks a known problem in a different way, create new
packaging and new advertising campaigns. You have an infinite room to bring in your
creativity in a small business that you found.
4. Control - Many guys who startup a business don't want to be pushed around and
work in a product/company in which they have no way to shape the destiny. They want
to work at their own time, own pace, location of their choice, employees of their choice
and have an active role in deciding the direction of the company.
 5. Curiosity - Successful Entrepreneurs are always curious and ask - "what if we do X
this way?". They want to understand the customer's minds, markets and competitors.
They are constantly curious to see how their particular theory ("people want to do X
with Y") works. In this aspect, they are no different from a researcher who is searching
for the truth.
6. Cash - The final part is the cash. Many non-entrepreneurs think cash comes first for
entrepreneurs. That is never really true. If that were the case, there is no reason for an
Ellison or Gates to keep pursuing their business aggressively after they have made a
billion dollars (which could get them almost everything a person could want).
However, cash (and multi-million dollar exits) do play a part in motivation to run a
business. Just that if it is the primary motivation, it is quite likely that the business
would either fail or have a premature exit.

1.4 Entrepreneurial Risk:

Entrepreneurs’ life is not just about rewards, successes and achievements, its destructive
source can be found within the energetic drive of successful entrepreneurs.Starting or
buying a new business involves risk. The higher the rewards, the greater the risks. An
entrepreneur journey is full of risk and reward. Risk shows the dark side of
entrepreneurship, not all entrepreneurs are driven solely by monetary gain and the level of
financial risk cannot be completely explained by profit opportunity. Entrepreneurial risk is a
complex issue that requires far more than a simple economic risk versus — return
explanation.
1. Competitive Risk
Competitive risk is the risk of a business facing competition from its rivals. Every business
besides monopolies face competition because there are substitutes easily available in the
market. New businesses have to face this risk to a higher degree because they face stiff
competition from already established businesses. However, reputable businesses are not
immune from this risk either.

In order to minimize this risk one must run a proper SWOT analysis and come with
strategies to counter attacks from competition.

2. Technological Risk
Thanks to the changing times every business has to face technological risk. This includes
change in technology that are taking place at a rapid pace. What’s in today goes obsolete
tomorrow. It is difficult for entrepreneurs to be able to gauge the future properly.

The solution in this regard is not to plan for today but tomorrow so that you are ready with
the new technology by the time it goes huge.

3. Political and Legal Risk

This risk is everywhere especially in the case of businesses that run in uncertain
environments. This includes the changing political scenario including the changes in laws
and regulations. Multinationals have to face this risk to a great degree because they do not
only have to worry about the political and legal situation of their country but of every
country they have a business in.

The right solution in this regard is to have flexible policies so that changes can be
incorporated just in case the government changes any of its policies.

4. Economical Risk
A good example of this type of risk is the recent economic slump that was seen globally.
This risk includes the changes in the cycle that includes periods of high prosperity (boom)
and recession. These cannot be predicted correctly and must be taken into account at the
planning stage.

5. Financial Risk
Financial risk is the risk of a business running out of finances. Entrepreneurs need to have a
good financial sense in order to run a business successfully. They need to manage cash
flow, predict demand and supply so that financial decisions can be taken properly.

Every decision, big or small, has a significant impact on profit and a company’s financial
position which is why it is very important to be careful.

6. Employee Risk
The human capital is one of the most important things for a business to be successful. It is
the duty of the entrepreneurs to build an impressive team of managers who can lead the
employees in the right direction. No company can attain its goals without the support of its
employees that act as the backbone.

There is always the risk of a key employee deciding to switch or not reporting to work on an
important day. Some of the risk factors related to the employees can be controlled, such as
many employees may be convinced from jumping ship by motivating them in several ways
including a pay raise. However, certain problems such as a low output employee cannot be
solved easily.

7. Strategic Risk
Strategic risk is the risk of a strategy failing due to one reason or another. Since companies
plan keeping the future in mind there is always a chance of things going wrong as the future
is uncertain and cannot be predicted correctly. The strategy they apply cannot be taken back
which it why it needs to be sound.

Entrepreneurs need to have foresight so that they can plan properly. Plus, an entrepreneur
may not have knowledge about every aspect of a business; hence he or she should seek help
from relevant departments.

8. Health and Safety Risk

This risk involves how a business functions. It is the duty of the businessperson to provide
the right environment to its employees so that they do not have to face any kind of health
hazard. There are employee and labor laws that clearly highlight the rules regarding
everything from having a canteen to a bathroom etc.

If a company fails to practice this then it may lead to injured workforce that may trigger a
lawsuit for the company.

9. Environmental Risk
Risks that are associated with the environment are called environmental risks. Most of the
risks that fall under this category cannot be controlled. These include natural disasters like
flood and drought. Plus, a lack of natural resources also falls under this category.

The best option to overcome this risk factor is to do proper research before opening a
business.

10. Operational Risk

The risk associated with administrative procedures is called operational risk. This includes
outdated IT systems, poor supply chain and disorganized record keeping. These problems
result in big issues for the company as having wrong records would not give a true picture
of the company’s growth and may lead to poor decisions.

It is important for businesses to run continuous checks and keep an eye on everything to
ensure that this risk factor is minimized.

1.5 Entrepreneur as creator of employment:

Entrepreneur plays a significant role in generation of employment opportunities. As we all
know, entrepreneurship is a purposeful activity indulged in initiating, promoting and
maintaining economic activities for production and distribution of goods and commodities,
the person behind these economic activities is, therefore, a critical factor as well as an
integral component of socio-economic transformation. The development strategy of our
country confronts two important problems-unemployment and poverty of the masses. These
problems can be effectively minimized by activating the latent human potentials through
entrepreneurship. This leads to the creation of self-employment avenues for large number of
people.

For reduction of unemployment, entrepreneurship in small and tiny sector industries, both
in manufacturing and service sectors, is imperatively needed. Thus, the role of entrepreneur
and its significance in generation of employment opportunities can be depicted under the
following heads.

 Establishing tiny, micro and small scale enterprises:

Role of entrepreneur in establishment the above types of enterprises are perceived as a

powerful medium to address several socio-economic issues and the chief among them is
generation of employment opportunities for millions. In a developing economy like India,
where population pressure is quite high and job employment is limited, the role of
entrepreneur is very much significant. Entrepreneurial development gives rise to economic
independence through self-employment. Creation of tiny, micro and small enterprises by the
entrepreneurs can lead to creation of both self- employment and wage- employment
opportunities, thereby solving the problem of unemployment in the economy

 Giving emphasis upon village and cottage industries

Up liftment of economically backward sections of the society can be possible if self-
employment opportunities can be provided at the grass root level. To enable these people in
backward regions of the state to set up village and cottage industries, government has
implemented several antipoverty programmes. As such, entrepreneur can play a significant
role in setting up and reviving the cottage and village industries, thereby creating
employment opportunities to a large number of people living in rural and backward pockets
of the country.

3. Utilising the surplus labour force in industrial activities

India is a primary producing country. This characteristics feature is further accentuated by
seasonality feature of the agriculture. Therefore, for a large part of the year, people remain,
more unemployed. Disguised unemployment is a chronic phenomenon in agriculture where
in more people work in a field than actually required. So the surplus labour force is
transferred and utilized by the entrepreneur in non-farm sector activities like small tiny,
cottage and village industries which are labor intensive in nature.

1.6 Difference between entrepreneur and manager:

Entrepreneurs are known for their innovative ideas and creative skills. They are the people
who create something from nothing.

Professional management, of course, is characterized by concepts such as – orders,

procedures, rules and regulations meant to put activities on track.

Entrepreneurial management is noted for its ability to react quickly and effectively to new
business opportunities. This ability is the foundation for rapid growth of the company in its
entrepreneurial stage.
1.7 Factors to choose the profession of entrepreneur:

 Favouritism towards the product

 Continue family business
 Lack of suitable employment
 Generate wealth
 Personal traits
 Latent desire to own a firm than having a job
 Working for one self
 Formal education and practical experience

1.8 Challenges of entrepreneurs:

The following lists the “Top 10” challenges faced by entrepreneurs today, defines why each
problem exists, and offers solutions so you can operate an efficient and successful business.

1. Cash flow management

The solution: Proper budgeting and planning are critical to maintaining cash flow, but even
these won’t always save you from stressing over bills. One way to improve cash flow is to
require a down payment for your products and services. Your down payment should cover all
expenses associated with a given project or sale as well as some profit for you. By requiring a
down payment, you can at least rest assured you won’t be left paying others’ bills; by padding
the down payment with some profit, you can pay your own.

2. Hiring employees

The solution: Be exclusive. Far too many help wanted ads are incredibly vague in terms of what
qualifications candidates must have, what the job duties are, what days and hours will be worked,
and what wages and benefits will be paid. You can save yourself a ton of time by pre-qualifying
candidates through exclusive help wanted ads that are ultra-specific in what it takes to be hired at
your firm, as well as what the day-to-day work entails. Approach your employee hunt the same
way you would approach a customer-centric marketing campaign: through excellent targeting.

3. Time management

The solution: Make time. Like money, it doesn’t grow on trees, of course, so you have to be
smart about how you’re spending it.

4. Delegating tasks

The solution: Find good employees (see above) and good outsourced contract help, for starters.
You might have to pay a little more for it, but the savings in time (and the resulting earning
potential) more than make up for it.

5. Choosing what to sell

The solution: Admit that you’re weak in identifying prosperous niches, and delegate the task to
someone who is strong in this area. You don’t have to hire a huge, expensive marketing firm;
rather, recruit a freelance researcher who has experience in whatever type of field you’re
considering entering (retail e-commerce, service industry, publishing, etc.). Have them conduct
market research and create a report with suggested niches, backed by potential profit margins
and a complete SWOT analysis: Strengths, Weaknesses, Opportunities and Threats.

6. Marketing strategy

The solution: Again, if you’re not adept at creating marketing plans and placing ads, it’s a good
idea to outsource your marketing strategy to someone who is. At this point, all you need is a core
marketing plan: what marketing activities will you undertake to motivate purchases? Give your
planner a budget and tell them to craft a plan that efficiently uses that budget to produce profits.

7. Capital

The solution: There are many ways to earn funding, from traditional bank loans to family and
friends to Kickstarter campaigns. You can choose these routes, certainly, but I prefer the self-
fueled growth model in which you fund your own business endeavors.

8. Strapped budget

The solution: Unless you’re one of the Fortune 500 (and even if you are), every entrepreneur
struggles with their budget. The key is to prioritize your marketing efforts with efficiency in
mind — spend your money where it works — and reserve the rest for operating expenses and
experimenting with other marketing methods.

9. Business growth

The solution: Create new processes that focus on task delegation. Many entrepreneurs, used to
wearing all the hats, find themselves in this position once they’ve achieved a modicum of
success. Because you’re doing everything, your growth halts to a stop when it hits a self-imposed
ceiling. The only way to break through is to delegate tasks to others to take yourself out of the
production end, and segue into management and, finally, pure ownership.

10. Self-doubt

The solution: Being able to overcome self-doubt is a necessary trait for entrepreneurs. Having a
good support system will help: family and friends who know your goals and support your plight,
as well as an advisory board of other entrepreneurs who can objectively opine as to the direction
of your business.

1.9 Concept of Entrepreneurship

Entrepreneurship is the act of being an entrepreneur, which is a French word meaning “one who
undertakes an endeavour”. Entrepreneurs assemble resources including innovations, finance and
business acumen in an effort to transform innovations into economic goods. The most obvious
form of entrepreneurship is that of starting new businesses; however, in recent years, the term
has been extended to include social and political forms of entrepreneurial activity.

A. H. Cole, “Entrepreneurship is the purposeful activity of an individual or a group of associated

individuals, undertaken to initiate, maintain or aggrandize profit by production or distribution of
economic goods and services”.

1.10 Evolution of entrepreneurship:

Major
Stage Time Nature of business Concept Source
contributors
1 2500BC Handicrafts civilisation Historic era Harappa
Mesopotamia
2 6000BC Exchange of goods Giving & taking Exchange
tribes
M
14th Renaissance
3 erchant & Earliest European
century tradesmen
capitalist
15th to Oversees and
4 Clerical Middle Italy & India
16th manages
Pre Industrial
5 17th Spending wealth Risk taking
independence revolution
East India
6 18th Colonial expansion Capital provider During British
company
Profit & Post-
7 19-20th Information age Tata & Birla
innovation independence
Entrepreneurial
8 21st Disruptive tech Modern Industry 4.0
mind-set
1.11 Nature of Entrepreneurship:

 Entrepreneurship involves decision making, innovation, implementation, forecasting of

the future, independency, and success first and this is how entrepreneurship developed
 Entrepreneurship is a discipline with a knowledge base theory. It is an outcome of
complex socio-economic, psychological, technological, legal and other factors. It is a
dynamic and risky process. It involves a fusion of capital, technology and human talent.
Entrepreneurship is equally applicable to big and small businesses, to economic and non-
economic activities. Different entrepreneurs might have some common traits but all of them
will have some different and unique features. If we just concentrate on the entrepreneurs then
there will be as many models as there are ventures and we will not be able to predict or plan,
how and where, and when these entrepreneurs will start their ventures.
 Entrepreneurship is a process. It is the purposeful and organized search for change,
conducted after systematic analysis of opportunities in the environment.
 Entrepreneurship is a philosophy- it is the way one thinks, one acts and therefore it can
exist in any situation be it business or government or in the field of education, science and
technology or poverty alleviation or any others.
 Entrepreneurship is a creative activity. It is the ability to create and build something from
practically nothing. It is a knack of sensing opportunity where others see chaos, contradiction
and confusion.
 Entrepreneurship is the attitude of mind to seek opportunities, take calculated risks and
derive benefits by setting up a venture. It comprises of numerous activities involved in
conception, creation and running an enterprise.
 Entrepreneurship is a dynamic activity. It requires an application of energy and passion
towards the creation and implementation of new ideas and creative solutions. Essential
ingredients include the willingness to take calculated risks- in terms of time, equity, or
career; the ability to formulate an effective venture team; the creative skill to marshal needed
resources; the fundamental skills of building a solid business plan; and, finally, the vision to
recognize opportunity where others see chaos, contradiction, and confusion.
 Entrepreneurship is an economic activity: It involves creation and operation of enterprise.
It is basically concerned with production and distribution of goods & services.
 Entrepreneurship is a universal activity: Business is Omni present as they are needed in
all walks of life.
 Entrepreneurship is an environmental activity: Entrepreneurship is linked with social,
political and cultural environment.
 Entrepreneurship is a motivational activity: Entrepreneurship motivates businessmen and
industrialists to create new ideas and implement them.
 Entrepreneurship is a result oriented activity: Entrepreneurship focuses on results rather
than destiny.
 Entrepreneurship is a professional activity: Entrepreneurship is not inborn quality rather it
is acquired through entrepreneurship development programmes.

1.11 Need for Entrepreneurship:

Entrepreneurship is important as it has the ability to improve standards of living and create
wealth, not only for the entrepreneurs, but also for related businesses. Entrepreneurs also help
drive change with innovation, where new and improved products enable new markets to be
developed. The objectives of entrepreneurship are:

 Create own destiny

 Make a difference
 Achieve full potential
 Reap profits
 Contribute to society
 Fulfil inherent interest

1.12 Growth of entrepreneurship in India:

After taking a long sigh of political relief in 1947, the Government of India tried to spell out the
priorities to devise a scheme for achieving balanced growth. For this purpose, the Government
came forward with the first Industrial Policy, 1948 which was revised from time to time.
The Government in her various industrial policy statements identified the responsibility of the
State to promote, assist and develop industries in the national interest. It also explicitly
recognised the vital role of the private sector in accelerating industrial development and, for this;
enough field was reserved for the private sector.

The Government took three important measures in her industrial resolutions:

(i) To maintain a proper distribution of economic power between private and public sector.

(ii) To encourage the tempo of industrialisation by spreading entrepreneurship from the existing
centers to other cities, towns and villages.

(iii) To disseminate the entrepreneurship acumen concentrated in a few dominant communities to

a large number of industrially potential people of varied social strata

To achieve these adumbrated objectives, the Government accorded emphasis on development of

small-scale industries in the country. Particularly since the Third Five Year Plan, the
Government started to provide various incentives and concessions in the form of capital,
technical know-how, markets and land to the potential entrepreneurs to establish industries in the
industrially potential areas to remove the regional imbalances in development.

This was, indeed, a major step taken by the Government to initiate interested people of varied
social strata to enter the small-scale manufacturing field. Several institutions like Directorate of
Industries, Financial Corporations, Small-Scale Industries Corporations and Small Industries
Service Institute were also established by the Government to facilitate the new entrepreneurs in
setting up their enterprises.

The family entrepreneurship units (family business) like Tata, Birla, Mafatlal, Dalmia, Kirloskar
and others grew beyond the normally expected size and also established new frontiers in business
in this period. Notwithstanding, all this happened without the diversification of the
entrepreneurial base so far as its socio-economic ramification is concerned.

1.13 Theories of entrepreneurship:

An entrepreneur is someone who runs a business as a sole owner with the aim of making profit
even though they encounter a lot of challenges. Theories of entrepreneurship are very essential as
they help to explain what entrepreneurship entails. They are:

1. Innovation Theory:

According to Joseph A. Schumpeter, the effective function of an entrepreneur is to start

innovation in venture. This theory is also called innovation theory or dynamic theory. According
to this theory, the entrepreneurs emerges because of individuals having certain psychological
elements i.e., will power, self-intuitions, tolerance capacity. The entrepreneur is a person who
has creative nature.

He regarded the entrepreneurship as a catalyst who checks the static conditions of the economy,
there by initiates and thrusts a process of economic development i.e., innovation. He carries
economy to new height of development 1. Psychological Theory – Entrepreneurship is a
psychological process and concept. According to this concept, psychological factors are the
primary source of entrepreneurship development. When there are sufficient numbers of persons
having the same psychological characteristics in the society, then there are bright chances of
development of entrepreneurship.

This innovation includes:

 Introduction of new goods,

 Introduction of new methods of production,
 Opening of a new market,
 Discovering a new source of raw materials,
 Carrying out a new source of an organisation.

2. Sociological Theory – Entrepreneurship is a sociological concept and process. According to

this concept, the sociological factors are the secondary source of entrepreneurship development.
As such, the social factors like social attitudes, values and institutions significantly influence the
entrepreneurial supply in a society.
3. Economic Theory – According to this theory, an entrepreneur executes all activities due to
economic incentives. The main aim of this theory is profit motive.

4. Theory of Leadership:

According to Hoselitz, entrepreneurship is a function of managerial skills and leadership.

Business also requires finance but that is of secondary importance. He further explains that a
person who is to become an industrial entrepreneur must have more than the drive to earn profits
and amass wealth. In this process, he has to show his ability to lead and manage

5. Theory of High Achievement:

This theory is developed by David McClelland. According to him entrepreneurship has been
identified with two characteristics such as: (i) Doing things in a new and better way, and

(ii) Decision making under uncertainty. He stressed that people with high achievement oriented
(need to succeed) were more likely to become entrepreneurs. Such people are not influenced by
money or external incentives. They consider profit to be a measure of success and competence.

1.14 Factors affecting entrepreneurship:

A business concept that looks perfect on paper may prove imperfect in the real world. Sometimes
failure is due to the internal environment – the company's finances, personnel or equipment.
Sometimes it's the environment surrounding the company. Knowing how internal and external
environmental factors affect your company can help your business thrive.

External Factors:

 The Economy

In a bad economy, even a well-run business may not be able to survive. If customers lose their
jobs or take jobs that can barely support them, they'll spend less on sports, recreation, gifts,
luxury goods and new cars. High interest rates on credit cards can discourage customers from
spending. You can't control the economy, but understanding it can help you spot threats and
opportunities.

 Competition from other Businesses

Unless your company is unique, you'll have to deal with competition. When you start your
company, you fight against established, more experienced businesses in the same industry. After
you establish yourself, you'll eventually have to face newer firms that try to slice away your
customers. Competition can make or break you – look at how many brick-and-mortar bookstores
crashed and burned competing with Amazon.

 Politics and Government Policy

Changes in government policy can have a huge effect on your business. The tobacco industry is a
classic example. Since the 1950s, cigarette companies have been required to place warning labels
on their products, and they lost the right to advertise on television. Smokers have fewer and
fewer places they can smoke legally.

 Customers and Suppliers

Next to your employees, your customers and suppliers may be the most important people you
deal with. Suppliers have a huge impact on your costs. The clout of any given supplier depends
on scarcity: If you can't buy anywhere else, your negotiating room is limited. The power of your
customers depends on how fierce the competition for their dollars is, how good your products
are, and whether your advertising makes customers want to buy from you, among other things.

Internal Factors:

 Employees and Managers

Unless you're a one-person show, your employees are a major part of your company's internal
environment. Your employees have to be good at their jobs, whether it's writing code or selling
products to strangers. Managers have to be good at handling lower-level employees and
overseeing other parts of the internal environment. Even if everyone's capable and talented,
internal politics and conflicts can wreck a good company.

 Money and Resources

Even in a great economy, lack of money can determine whether your company survives or dies.
When your cash resources are too limited, it affects the number of people you can hire, the
quality of your equipment, and the amount of advertising you can buy. If you're flush with cash,
you have a lot more flexibility to grow and expand your business or endure an economic
downturn.

 Company Culture

Your internal culture consists of the values, attitudes and priorities that your employees live by.
A cutthroat culture where every employee competes with one another creates a different
environment from a company that emphasizes collaboration and teamwork. Typically, company
culture flows from the top down. Your staff will infer your values based on the type of people
you hire fire and promote. Let them see the values you want your culture to embody.

1.15 Dynamics of Entrepreneurship:

Entrepreneurship is affected and motivated based on various driving forces as follows:

 Availability of resources
 Shift in economy
 Technological advancement
 International opportunities
 Entrepreneurial education
 Economic factors
 Attitude of people
 Market opportunities

1.16: role of entrepreneurship in Economic Development:

1. Employment opportunities

Entrepreneurs employ labour for managing their business activities and provide employment
opportunities to a large number of people. They remove unemployment problem.

2. Balanced Regional Development

Government promotes decentralized development of industries as most of the incentives are

granted for establishing industries in backward and rural areas. Thus, the entrepreneurs to avail
the benefits establish industries in backward and rural areas.
They remove regional disparities and bring balanced regional development. They also help to
reduce the problems of congestion, slums, sanitation and pollution in cities by providing
employment and income to people living in rural areas. They help in improving the standard of
living of the people residing in suburban and rural areas.

3. Mobilization Of Local Resources

Entrepreneurs help to mobilize and utilize local resources like small savings and talents of
relatives and friends, which might otherwise remain idle and unutilized. Thus they help in
effective utilization of resources.

4. Optimization Of Capital

Entrepreneurs aim to get quick return on investment. They act as a stabilizing force by providing
high output capital ratio as well as high employment capital ratio.

5. Promotion of Exports

Entrepreneurs reduce the pressure on the country’s balance of payments by exporting their goods
they earn valuable foreign exchange through exports.

6. Consumer Demands

Entrepreneurs produce a wide range of products required by consumers. They meet the demand
of the consumers without creating a shortage for goods

7. Social Advantage

Entrepreneurs help in the development of the society by providing employment to people and
paves for independent living They encourage democracy and self-governance. They are adept in
distributing national income in more efficient and equitable manner among the various
participants of the society.

8. Increase per capita income

Entrepreneurs help to increase the per capita income of the country in various ways and facilitate
development of backward areas and weaker sections of the society.
9. Capital formation

A country can attain economic development only when there is more amount of investment and
production.

Entrepreneurs help in channelizing their savings and savings of the public to productive
resources by establishing enterprises. They promote capital formation by channelizing the
savings of public to productive resources.

10. Growth of capital market

Entrepreneurs raises money for running their business through shares and debentures. Trading of
shares and debentures by the public with the help of financial services sector leads to capital
market growth.

11. Growth of infrastructure

The infrastructure development of any country determines the economic development of a

country, Entrepreneurs by establishing their enterprises in rural and backward areas influence the
government to develop the infrastructure of those areas.

12. Development of Trader

Entrepreneurs play an important role in the promotion of domestic trade and foreign trade. They
avail assistance from various financial institutions in the form of cash credit, trade credit,
overdraft, short term loans, secured loans and unsecured loans and lead to the development of the
trade in the country.

13. Economic Integration

Entrepreneur reduces the concentration of power in a few hands by creating employment

opportunities and through equitable distribution of income. Entrepreneurs promote economic
integration in the country by adopting certain economic policies and laws framed by the
government. They help in removing the disparity between the rich and the poor by adopting the
rules and regulation framed by the government for the effective functioning of business in the
country.

14. Inflow of Foreign Capital

Entrepreneurs help to attract funds from individuals and institutions residing in foreign countries
for their businesses.

1.17 Entrepreneurship Process:

Identification and evaluation of opportunity

Drawing a B plan

Determine required resources

Creating a venture

Managing entreprise