Classifications and Models of

Entrepreneurship

CONTENTS

Objectives
Introduction
Types of Entrepreneurship
Classification on the Basis of Ownership
Classification on the Basis of Personality Traits and their Style of Running
Business Classification based on the Type of Business
Classification based on the Stages of Development
Other Classifications
Entrepreneurial Models
The Opportunist Model
The Enabler Model
The Advocate Model
The Producer Model
Problems Faced by Entrepreneurs in India
Challenge of Globalization
Liberalization in India, 1991
Adapting a Modern Technology
Changing Workforce in India
Marketing is a Big Challenge
Managing the Finance of Business
Challenges in the Field of Production
Balancing Economic and Social Objectives
Summary
 Objectives

After studying this unit, you will be able to:

Classify the entrepreneurship on several basis of ownership

Discuss the emerging models of entrepreneurship

Explain the problems faced by entrepreneurs in India

 Introduction

In the previous unit we dealt with the meaning and importance of

entrepreneurship and also discussed about the various characteristics of an
entrepreneur. This unit will help you to understand the classification of
entrepreneurship and various emerging models of
entrepreneurship. The various sections and sub-sections of this unit will also
summarize the problems faced by entrepreneurs in India. Entrepreneurship is
the best tool for creation of money, specifically for people with a business
mind. There are various types of entrepreneurs
and each and every one of them has their good and bad traits. In order to be
successful in business, one must know what kind of entrepreneur he is and be
aware of himself. This is the first step on the way to transform oneself into a
better person. An individual can become a very proficient entrepreneur
within no time at all.
 Types of Entrepreneurship

By simple definition – all active owner-managers are entrepreneurs. They can

be classified into following categories:

 Classification on the Basis of Ownership

Entrepreneurship can be classified on the basis of ownership as follows:

Founders or “Pure Entrepreneurs”: As the term suggests, they are those
individuals who are the Founders or “Pure Entrepreneurs”: founders of the
business. They are the ones who conceptualize a business plan and then put
in efforts to make the plan a success. For example, Dhirubhai
Ambani of the Reliance Group.

Second-generation operators of family-owned businesses: They are the

individuals who have inherited the business from their fathers and forefathers.
Like Mukesh Ambani and Anil Ambani sons of Dhirubhai Ambani of the
Reliance Group now split into two: Reliance – Reliance Industries Limited
and Reliance – Anil Dhirubhai Ambani Group.

Franchisees: Franchisee has been derived from a French word which means
free. It is a method of doing business wherein the parent owner (the
franchiser) licenses his trademarks and tried and proven methods of doing
business to a franchisee in exchange for a recurring payment. Here, the
franchisee has not conceptualized the business but has invested his money
and time in the business.
 Classification on the Basis of Personality Traits and their
Style of Running Business .

The 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 aretotally 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 go-getters.
This personality often will cause them to build their business around their
own personal brand. These entrepreneurs have dreams and dare to fulfill
their dreams.

 Classification based on the Type of Business

Industrial Entrepreneur: Industrial entrepreneur is an entrepreneur who is

into manufacturing of a product. He identifies the needs and wants of
customers and accordingly manufactures products to satisfy these needs and
wants. It would include all the entrepreneurs essentially into
manufacturing.

Trading Entrepreneurs: Trading entrepreneur is one who undertakes trading

activities (buying and selling of goods and services) and is not concerned with
the manufacturing of products. He
identifies potential markets, stimulates demands and generates interests
among buyers to
purchase a product.
Corporate Entrepreneur: Corporate entrepreneur is a person who
demonstrates his innovative skill in organizing and managing a corporate
undertaking (which is registered under some
statute or act that gives it a separate legal entity).

Agricultural Entrepreneur: Agricultural entrepreneurs are thoseentrepreneurs

who undertake business related to agricultural activities. Like farm
equipments, fertilizers and other inputs of agriculture. They provide
supportive products that can increase the agricultural production
through biotechnologies, mechanization and improvement in agricultural
yield.

 Classification based on the Stages of Development

First Generation 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.

Modern Entrepreneur: A modern entrepreneur is one who undertakes

business to satisfy the contemporary demands of the market. They undertake
those ventures which suit the current
socio-cultural trends.

Classical Entrepreneur: A classical entrepreneur a stereo-type entrepreneur is

one whose aim is to maximize the economic returns at a level consistent with
the survival of the firm, with or without element of growth.
 Other Classifications

Innovative Entrepreneurs: Innovative entrepreneurs are the forbearers of

change in the business. They are full of creative ideas and offer innovate
products to the society. It is because of these innovative entrepreneurs that
many important changes occur in our society. They experiment
and conduct permutations and combinations of ideas to yield new products
and services. Thanks to these innovative entrepreneurs, our society is more
networked now; we started off networking by transfer of letters through a
messenger (stories even speak of pigeons as messengers), then
came formal postage system, then communication evolved to telephonic
conversation, mobile, internet, email, and video conferencing. The
innovations in networking have been tremendous
and are still happening which is bringing the world closer every day. One
need not invent but add incremental values (like ringtones, camera, mobile
television, mobile radio in mobiles), or change the utility of the same thing
(like using mobile for net surfing).

Imitative Entrepreneurs: Imitative entrepreneurs adapt a successful

innovation. They are risk aversive and so they do not try out new ideas or
products, but if a new idea is accepted by the market, they imitate the new
idea and hence join in the competition.

Fabian Entrepreneurs: Fabian entrepreneurs are highly cautious and sceptic in

their approach. They are not readily interested in introducing any change in
their organization and when they do so it is because unless they the change
they would be out of the market.
 Drone Entrepreneurs: Drone entrepreneurs are not open to creativity
and change. They do not like changing the working of organizations with
the changing times. They prefer facing losses to introducing changes in
their present processes, equipments and policies. In the present
competitive world, these entrepreneurs are simply kicked out of the
business for not being able to adapt themselves to the changing dynamics
of business.

Women Entrepreneurs: 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 propriety concerns, or in which she/they individually or
jointly have a share capital of not less than 51 per cent as company/ members
of a cooperative society, as a Women’s Enterprise.

Copreneurs: When both husband and wife together start and run a business
venture then they are called copreneurs. Emergence of copreneurs in the
present times is a reflection of the fact that women’s role in business is
increasing.

Entrepreneurial Models

First, though, what exactly is corporate entrepreneurship? We define the term

as the process by which teams within an established company conceive, foster,
launch and manage a new business that is distinct from the parent company
but leverages the parent’s assets, market position,
capabilities or other resources.
It differs from corporate venture capital, which predominantly
pursues financial investments in external companies. Although it often
involves external partners and capabilities (including acquisitions), it engages
significant resources of the established company, and internal teams typically
manage projects. It’s also different from spinouts, which are generally
constructed as stand-alone enterprises that do not require continuous
leveraging of current business activities to realize their potential.

 The Opportunist Model

All companies begin as opportunists. Without any designated organizational

ownership or resources, corporate entrepreneurship proceeds (if it does at all)
based on the efforts and serendipity of intrepid “project champions” – people
who toil against the odds, creating new businesses often in spite of the
corporation.
The opportunist model works well only in trusting corporate cultures that are
open to experimentation and have diverse social networks behind the official
hierarchy (in other words, places where multiple executives can say “yes”).
Without this type of environment, good ideas can easily fall through
organizational cracks or receive insufficient funding. Consequently, the
opportunist approach is undependable for many companies. When
organizations get serious about organic growth, executives realize they need
more than a diffused, ad hoc approach. As a result of its past success with
minimally invasive surgical procedures, Zimmer has instituted
more formalized development practices for bringing new businesses to
market. As such, the company has begun to evolve beyond the opportunist
model.
 The Enabler Model

The basic premise of the enabler model is that employees across an

organization will be willing to develop new concepts if they are given
adequate support. Dedicating resources and processes
(but without any formal organizational ownership) enables teams to pursue
opportunities on their own in so far as they fit the organization’s strategic
frame. In the most evolved versions of the enabler model, companies provide
the following: clear criteria for selecting which opportunities to pursue,
application guidelines for funding, decision-making transparency,
both recruitment and retention of entrepreneurially minded employees and,
perhaps above all, active support from senior management.

 The Advocate Model

What about cases in which funding isn’t really the issue? In the advocate
model, a company assigns organizational ownership for the creation of new
businesses while intentionally providing only
modest budgets to the core group. Advocate organizations act as evangelists
and innovation experts, facilitating corporate entrepreneurship in conjunction
with business units.

 The Producer Model

A few companies such as IBM, Motorola and Cargill pursue corporate

entrepreneurship by
establishing and supporting formal organizations with significant dedicated
funds or active influence over business-unit funding. As with the enabler and
advocate models, an objective is to encourage latent entrepreneurs. But the
producer model also aims to protect emerging projects from turf battles,
encourage cross-unit collaboration, build potentially disruptive businesses
and create pathways for executives to pursue careers outside their business
units.

Problems Faced by Entrepreneurs in India

The Indian entrepreneurs have to face the following problems:

1. To follow marketing techniques that are result and consumer-oriented.
2. To understand, tackle and survive the era of globalization.
3. To improve production process and produce high-quality goods.
4. To take optimum advantage of business opportunities arose due to
liberalization of Indian economy since 1991.
5. To replace outdated technology with improved modern technology.
6. To motivate and properly manage needs and expectations of women and
young managers that make an Indian workforce.
7. To professionally manage the financial activities of the business.
8. To balance profit earning capacity and social-welfare activities.
Discussed below are the problems before Indian entrepreneurs:
 Challenge of Globalization

A few years back the Indian entrepreneurs had to fight regional and national
competition. However, today, the scenario has changed and become much
more complex than what it was earlier. Now, almost all countries have
opened up their economies, and the world (globe) has become one giant
global market.In this global competitive scenario, the Indian entrepreneurs
have to compete with well-established giant foreign companies.

Liberalization in India, 1991

Liberalization is a process of giving liberty or freedom to someone to do
something, which was previously restricted, banned or prohibited.In context
of this article, liberalization means removing all restrictions imposed on the
entry and growth in trade or business. The Government of India (GOI) started
the process of liberalization in India in year 1991. With its initiation, private
entrepreneurs were granted liberty (freedom) to start any business in any
open domain (unreserved sector) of choice. However, this openness came
with few exceptions that were strictly restricted only for Indian government
to operate and manage, this included Railways, Water Supply, Defence, and
other reserved public sectors.

 Changing Workforce in India

In the recent decade, the workforce in India has undergone a remarkable

change. Statistics indicate the dominance of men in the workforce is shrinking
day-by-day. A new breed (generation) of highly educated Indian women has
entered the workforce in India. Breaking all traditional and social barriers,
they have established themselves as efficient employees and professional
managers. Today, it is very common to see a lady professional working in a
corporate office. This presence of women in the workforce has brought new
challenges before Indian entrepreneurs.To handle women’s workforce-related
challenges efficiently, Indian entrepreneurs must know and follow all the
special Labour Laws for women.

 Marketing is a Big Challenge

Today, companies have formulated many new techniques to market their

products and services.High pressure salesmanship is used. Children are often
targeted in the many advertisements. It is so since kids compel their parents
to buy products they are lured by. Advertising is done to propagate
marketing message and this is done through various media like television,
newspapers, magazines, the internet, radio, cell phones, hoardings, etc.
Advertising is now become an inseparable part of modern marketing.
Marketing is a big challenge before every Indian entrepreneur. He has to
select an efficient and experienced marketing team. He must train and
develop this team into a result-oriented one. He
must motivate his marketing team with high salaries, attractive incentives
and good commissions. Indian entrepreneur must try his level best to satisfy
needs and expectations of his customers. He must use marketing research and
produce his product by taking into consideration the consumers likes and
preferences. He must sell high-quality goods at lower prices. He must also
provide after-sale services. In short, he must make his business a consumer-
oriented and service oriented one. He must always give his customers full
value for their money. If not, they will lose trust in his brand and go to the
competitors.

 Managing the Finance of Business

Finance is the life blood of a business. It can either make a business or break it.
Under-capitalization and Over-capitalization are very harmful to the business.
Managing the finance of his business is a big challenge for an Indian
Entrepreneur.
He must manage both Fixed and Working capital
properly. He must borrow money from the right source. He must manage his
Cash Flow properly.

He must invest his excess funds correctly. He must create sufficient Reserves
and
surpluses. He must provide enough depreciation for his fixed assets, so that
he can replace them
when they become old and outdated. He must provide for repairs and
maintenance of machines.
He must also take steps to provide for but avoid bad debts.

 Challenges in the Field of Production

The Indian entrepreneurs have to face many challenges in the field of

production. They must replace all outdated plants and machineries with new
modern ones. They must provide continuous training to their production staff.
They must use good quality raw-materials to produce high quality finished
goods. They must have a good Inventory Control system. This
will avoid Over-stocking and Under-stocking. Over-stocking will block the
working capital, and Under-stocking will block the production process.
Indian entrepreneurs should use a part of their profits for Research and
Development (R&D). They must pay special attention to Quality
Control (QC). Nowadays most companies also use Total Quality Management
(TQM) to ensure their finished goods are of good quality.
 Summary

In the initial stages of economic development, entrepreneurs tend to be shy

and humble but as the development process picks up speed, they tend to
become more enthusiastic and confident. They help make the business
environment healthy and development oriented.

Highly enthusiastic and innovative entrepreneurs exist only in developed

countries as level of their -economic and technological development has
reached a certain level whereas in developing and under-developed countries,
imitative entrepreneurs are more successful.

Business entrepreneurs are those entrepreneurs who conceive the idea of a

new product or service and then translate their ideas into reality.
Entrepreneur examines the various possibilities of sources of finance, supply
of labour, raw-materials or finished product as the case may be.

A trading entrepreneur has to be creative enough as he has to identify the

market. He has to identify potential market, create demand through extensive
advertisement of his product and thus inspire people to buy his product.

An industrial entrepreneur has the ability to convert economic resources and

technology into a considerably profitable venture. Manufacturer of leather
products, textiles, electronics, food items and the like are industrial
entrepreneurs. Corporate entrepreneur is the one who plans, develops and
manages a corporate body.
He is a promoter, an essential part of board of directors, an owner as well as
an entrepreneur. He gets his corporate body registered under the requisite
Act which gives his company the status of separate legal entity.
Induced entrepreneur is attracted by the various incentives, subsidies and
facilities offered by the government. ‘An entrepreneur is not born’ – this is no
doubt true as every person can be trained to become a good entrepreneur.
Most of the entrepreneurs who enter into business are induced entrepreneur
as various kinds of financial, technical and managerial facilities are provided
by the government to promote entrepreneurship.

According to stages of development entrepreneurs can be: (a) First generation

entrepreneur are those entrepreneurs who do not possess any entrepreneurial
background. They start an industrial unit by means of their own innovative
skills. (b) Second generation entrepreneur are those entrepreneurs who inherit
the family business firms and pass it from one generation to another. (c) A
classical entrepreneur is a stereotype entrepreneur whose aim is to maximize
his economic returns at a level consistent with the survival of
the unit but with or without an element of growth.

In developed countries, people are highly developed and consistently look

forward for change. They want to consume such products which do not
commonly exist in the world. They want progress as they have achieved high
level of development. Innovating entrepreneur played a key role in the rise of
modern capitalism, through their enterprising spirit, hope of making money,
and ability to recognize and exploit opportunities.

Fabian entrepreneurs are cautious and skeptical in experimenting change in

their enterprises. Such entrepreneurs are shy, lazy and lethargic. They are
imitative by nature but are not determined and also lack power. They imitate
only when it becomes perfectly clear that failure to do so would result in a
loss of the relative position of the enterprise.