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Prof.

Shikhar Srivastava

Meaning & Definition Of Entrepreneur
 Someone who exercises initiative by

organizing a venture to take benefit of an opportunity and, as the decision maker, decides what, how, and how much of a good or service will be produced.
 An entrepreneur is a risk taker,

and monitors and controls the business activities.

 The entrepreneur is usually a sole proprietor, a partner, or the

one who owns the majority of shares in an incorporated venture.

 According to Oxford dictionaries

“a person who sets up a business or businesses, taking on financial risks in the hope of profit.”

 So The entrepreneur is the one who wants ultimately…….

He tries to have a least cost combination of factors of production. He pays the reward in the shape of rent.  Distribution of Rewards: He is responsible of distributing the rewards to all factors of production.  Management: The entrepreneur is also responsible for the management of business. He also faces the risk of other producers may enter the market. wage. and interest and bears the risk of profit or loss himself.FUNCTIONS OF AN ENTREPRENEUR  Planning of the project: He is the organizer to conceive the idea of launching the project and to program the structure of business. .  To Face Risks: He faces uncertainly and bears risks in his business uncertainly comprising those risks against which it is not possible to insure.

  . he takes the decision of what where and how to produce goods. These opportunities are not realized by common man. education. etc. but an entrepreneur senses the opportunities faster than others do. Sale of Products: An entrepreneur is also responsible of marketing. which are constantly changing. These are based on human needs like food. An entrepreneur therefore. Then.. fashion. He wants to maximize his profits by selling his product in the market. creativity and informativeness. advertising. Scale of Production: He decided the scale of business in according with the provision of capital. Identifying entrepreneurial opportunity – There are many opportunities in the world of business. has to keep his eyes and ears open and require imagination.

products. machine. and men to running the enterprise successfully. An essential function of an entrepreneur is to ensure the availability of all these resources. He also tries to find out a suitable location. design the premises. cost and sources of inputs required to run the enterprise. practices to suit the demand in the market. Resourcing – The entrepreneur needs various resources in terms of money. Feasibility study – The entrepreneur conducts studies to assess the market feasibility of the proposed product or services. install machinery and do many other things. He anticipates problems and assesses quantity. Such a blue print of all the activities is termed as a 'business plan' or a 'project report'. quality. Turning ideas into action – An entrepreneur should be capable of turning his ideas into reality. material. Setting up of the Enterprise – For setting up an enterprise the entrepreneur may need to fulfill some legal formalities. He collects information regarding the ideas.    .

He has to market each product and service. Managing the enterprise – One of the important function of an entrepreneur is to run the enterprise. the entrepreneur has to explore another higher goal for its proper growth and development.  . The entrepreneur is not satisfied only with achieving a set goal but constantly strives for achieving excellence. He has to manage men. after ensuring appropriate returns (profits) of the investment. finance and organize production of goods and services. material. Only a properly managed organization yields desired results. Growth and Development – Once the enterprise achieves its desired results.

or events are called "driving forces or environmental factors or forces”  There are two kinds of driving forces. These things. or situations that occur that affect the way a business operates. .Internal and External Factors of Entrepreneurship  There are things. events. either in a positive or negative way. Internal driving forces. and external driving forces. situations.

· financial management · employee morale. · management systems. · organizational culture. and are generally under the control of the company. Internal driving forces are those kinds of things. or events that occur inside the business. situations. . · technological capacity. · machinery and equipment.  Examples might be as follows.

one thing is certain for both.  Examples of external driving forces might be. and willing to respond to them in an appropriate way. situation. · competition. flexible. or events that occur outside of the company and are by and large beyond the control of the company. . · the industry itself · the economy. External driving forces are those kinds of things. · political interference. Change will occur! A company must be cognizant of these changes. Whether they are internal or external driving forces. · demographics.

Entrepreneurial motivation and Barriers Reasons or factors that are responsible for entrepreneurial motive in a person  What is the intrinsic value that drives a person to start a new venture ?  Is it financial scarcity or financial abundance that motivates an individual to start a business?  Is it family support. social status or dissatisfaction with the present life that motivates an entrepreneur to start a new business venture? .

 Maslow’s need Hierarchy theory: Primary needs Safety needs Social needs Esteem needs Self Actualization need .

Promising demand for the Product . Availability of raw material and Labor C.Factors Motivating the entrepreneurs into two types  Internal Factors: A. Desire to do Something B. Education background C. Government assistance and Support B. Experience  External Factors: A. Encouragement from big business houses D.

 Barriers to Entrepreneurship: Environmental Barriers:  Raw Material Labor  Machinery  Land and building  Other infrastructure requirement  Financial Barriers Personal Barriers:  Lack of confidence  Lack of Dependability on others.  Lack of Patience .  Lack of Motivation.

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Classification of Entrepreneurs • • • • • • • Based on Functional Characteristics. . Based on Types of Entrepreneurial Business. Based on the nine Personality Types of Entrepreneurs. Based on Types of Motivation. Based on Types of Area. Based on Developmental Angle. Based on Types of Gender.

• • . Drone Entrepreneur: One who refuses to adopt opportunities to make changes in production even at the cost of severely reduced returns. Fabian Entrepreneur: One who is very cautious and skeptical about experimenting any change in the enterprise. inaugurates new methods of production. discovers new market and reorganizes the enterprise.• Innovating Entrepreneur: One who introduces new goods. Based on Functional Characteristics • Imitative Entrepreneur: One who is ready to adopt successful innovations inaugurated by innovating entrepreneurs.

Satellite: This entrepreneur assumes a supplier’s role and slowly moves towards a productive enterprise. expansion. and diversification of business. Local trading: Such an entrepreneur limits his enterprise to the local market.Based on Developmental Angle • Prime Mover: this entrepreneur sets in motion a powerful sequence of development. . Manager: Such an entrepreneur does not initiate expansion and is content just staying in business. • • • • Minor innovator: this entrepreneur contributes to economic progress by finding better use for existing resources.

Retailing: An entrepreneur with such a business sells products directly to the people who use or consume them. Service: An entrepreneur in this business sells services rather than products. . Wholesaling: An entrepreneur with such a business sells products to the middle man.Based on Types of Entrepreneurial Business • • • • Manufacturing: an entrepreneur who runs such a business actually produces the products that can be sold using resources and supplies.

The Advisor: This business personality type will provide an extremely high level of assistance and advice to customers. you are focused on using your company as means to improve the world. The Superstar: Here the business is centered on the charisma and high energy of the superstar CEO. . The Artist: This business personality is the reserved but a highly creative type.Based on the nine Personality Types of Entrepreneurs • • • • The Improver: if you operate your business predominately in the improver mode. As an artist type you’ll tend to build your business around the unique talents and creativities that you have.

your company focus in on fixing problems in a systematic way.Based on the nine Personality Types of Entrepreneurs • The Visionary: A business built by a visionary will often be based on the future vision and thoughts of the founder. engineering or computer firms. analyst companies excel at problem solving. The Analyst: if you run a business as an Analyst. • • . Often the basis for science. The Fireball: A business owned and operated by a fireball is full of life. energy and optimism.

• • Based on the nine Personality Types of Entrepreneurs The Hero: You have an incredible will and ability to lead the world and your business through any challenge. . you provide nurturing and harmony to your business. You have an uncanny ability to survive and persist with an inner calm. The Healer: If you are a healer.

. rewards.Based on Types of Motivation • Pure Entrepreneur: Individual who is motivated by psychological and economic rewards. • Induced Entrepreneur: One who is induced to take up entrepreneurship due to government assistance. • Motivated Entrepreneur: Motivated by the desire for self-fulfillment & self-actualization. • Spontaneous Entrepreneur: These entrepreneurs start business by their natural talent. The basic objective is to earn profit. concessions etc.

• Rural Entrepreneur: One who has its industrial set up in rural area and has engaged workers from the same area. .Based on Types of Area • Urban Entrepreneur: One who has his industrial unit in urban area and has engaged workers from that area.

• • Based on Types of Gender Male Entrepreneur. . Women Entrepreneur.

THEORIES OF ENTREPRENEURSHIP .

The theories propounded by them can be categorized as under•Sociological theories •Economic theories •Cultural theories •Psychological theories .Entrepreneurship is an evolved thing. Various writers have developed various theories on entrepreneurship and popularized the concept among the common people. With the advancement of science and technology it has undergone metamorphosis change and emerged as a critical input for socio-economic development.

the important elements of Weber’s theory are discussed further- . According to him. entrepreneurism is a function of religious beliefs and impact of religion shapes the entrepreneurial culture.Sociological Theories The following theories explain how sociological factors acclelerate the growth of entrepreneurs: 1-Theory of religious beliefs 2.Theory of social change Theory of religious beliefs Max Weber has propounded the theory of religious belief. He emphasized that entrepreneurial energies are exogenous supplied by means of religious beliefs.

1. The spirit of capitalism intertwined with the motive of profit resulted in creation of greater number of business enterprises. 2. so also the entrepreneurial culture. 3. Entrepreneurship culture is influenced by both these factors. the former is influenced by the strict discipline whereas the latter is affected by free force of impulse. According to him. We all know that capitalism is an economic system in which economic freedom and private enterprise are glorified. .Protestant ethicaccording to Max Weber the spirit of capitalism can be grown only when the mental attitude in the society is favorable to capitalism 4 -Inducement of profitWeber introduced the new businessman into the picture of tranquil routine.Spirit of Capitalismin the Webrian theory. spirit of capitalism is highlighted.Adventurous SpiritWeber also made a distinction between spirit of capitalism and adventurous spirit.

.In fact. is discouraged. Economic Growth : product of social change and political change : According to Hagen. This theory was vehementaly criticized by many researchers because of the unrealistic assumpitions. most of the economic theories of underdevelopment are inadequate. Rejection of followers syndrome : Hagen rejected the idea that the solution to economic development lies in imitating western technology. So the followers syndrome on the part of the entrepreneur. The theory exhorts the following feature which presumes the entrepreneur’s creativity as the key element of social transformation and economic growth. Presentation of general model of the society. personality and culture. who desired to encourage European entrepreneursip in India. social structure.the theory reveals a general model of the society which considers interrelationship among physical environment. Theory of Social Change Everett E. in his theory of social change propounded how a traditional society becomes one in which continuing technical progress takes place. Hagen. this theory suited the british rulers.

Historic shift as a factor of initiating change. Hagen’s thesis of disadvantaged minority groups ha its own limitations. but Hagen’s analysis fails to give policy measures for backward countries which are striving for economic development as he identifies status withdrawal as the causal factor in the emergence of creative presonality.Hagen in his book. There are many disadvantaged minority groups in India which have not supplied a good number of entrepreneurs. hence. Withdrawal of status respects as the mechanism for rigorous entrepreneurial activity- Closely consistent with the historic shift it is the social group that plunges into rigorous entrepreneurism which experiences the status withdrawal or withdrawal of status respects. How Economic Growth Begins. Hagen’s creative personality is the admixture of Schumpeters innovation and McClellands high need for achievement. depicts historic shift as the crucial force which has brought about social change technological progress thereby leading to the emergence of entrepreneurial class from different castes and communities. .

e. Economic development takes place when a country' real rational income increases overall period of time wherein the role of entrepreneurs is an integral part. According to Schumpeter an entrepreneur is one who perceives the opportunities to innovate. Schumpeter’s Theory of Innovation Schumpeter’s theory of entrepreneurship is a pioneering work of economic development.The introduction of new goods. 2. i. development in his sense. In his views. the concept of new combination leading ti innovation covers the following 5 cases1. to carry out new combinations or entreprise. that is the one with which consumers are not yet familiar.the conquest of new source of supply of raw material 5-The carrying out of new organization .The introduction of new method of production 3. implies that carrying out of new combination of entrepreneurship is basically a creative activity. of a new quality.The opening of new market 4.ECONOMIC THEORIES Entrepreneurship and economic development are interdependent.

In view of the above. .entrepreneuralism dream and the will to found a private kingdom.emphasis on entrepreneurial function.in his views. 4. 3.Distinction between invention and innovation Schumpeter makes a distinction between innovation and invention. Schumpeterian theory of entrepreneurship has got the following features1.Schumpeter has given emphasis on the role of entrepreneurial functions in economic development.the motives of creating things and applying these things into practice inspire the entrepreneur to undertake innovation. a dynamic phenomenonand a break from the rotine or a circular flow or tendenct towards equilibrium. development means basic tranformation of the economy that is brought about by entrepreneurial functions.presentation of disequilibrium situation through entrepreneurial activity-the entrepreneurial activity represents a disequilibrium situation. Invention means craetion of new things and innovation means applical of new things onto practical use 2.

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Entrepreneurial talents come from cultural values and cultural system embedded into the cultural environment.in many countries. CULTURAL THEORIES Advocates of cultural theories point out that entrepreneurship is the product of culture. .Schumpeter remained silent about as to why some economics had more entrepreneurial talent than others. despite the above criticisms. Psychological characteristics affect the supply of entrepreneurs in the society. and culturally minority groups are the spark-plugs of entrepreneurial and economic develoment. Hoselitz’s Theory Hoselitz explains that the supply of entrepreneurship is governed by cultural factors. the Chinese in south Africa and Indian in east Africa in promoting economic development.5. entrepreneurs have emerged from a particular socio-economic class. However. He emphasized the role of culturally marginally groups like Jews and the Greeks in medieval Europe. Schumpeterian theory is regarded as one f the best theories in the history of entrepreneurial development. Psychological Theories Psychological theories centre's around the psychological characteristic so the individual in a society.

For example. According to him. According to Drucker. mineral oil was considered worthless until the discovery of its use. •Entrepreneurship is not confined to big businesses and economic institutions. successful entrepreneurship involves the following things•Value and satisfaction obtained from resource by the consumer are increased •New values are created •Material is converted into a resource or exiting resources are combined in a new or more productive configuration •Entrepreneurship is the practice which has a knowledge base. Drucker opined that “an entrepreneur is one who always searches for change. it is equally important to small business and non-economic institutions •Entrepreneurship behavior rather than personality trait is more important to enhance entrepreneurship •The foundation of entrepreneurship lies in concept and theory rather than in intuition. A thing is regarded as resource when its economic value is recognized.that led to emergence of entrepreneurship. responds to it and exploits it as an opportunity. innovation is the real hub of entrepreneurship which creates resource. purchasing power was considered an important resource by an American innovative entrepreneur who invented installment buying.DRUCKER ON ENTREPRENEURSHIP Peter F.” he laid emphasis on two important factors – innovation and resource. . Similarly.

Thus. Drucker has given his views that “an entrepreneur need not be a capitalist or an owner. . A banker who mobilizes other’s money and allocates it in areas of higher yield is very much an entrepreneur though he is not the owner of the money.

Investment is principally capital. 2. and the time and energy of a set of people.Entrepreneurial process Idea Generation: every new venture begins with an idea. . we take an idea to be a description of a need or problem of some constituency coupled with a concept of a possible solution. 1. whether from individuals in the company or from outside investors. Opportunity Evaluation: this is the step where you ask the question of whether there is an opportunity worth investing in. But you should also consider other assets such as intellectual property. personal relationships. etc. physical property. In our context.

A plan begins as a fairly simple set of ideas. you need a plan for how to capitalize on that opportunity. Planning: Once you have decided that an opportunity. and then becomes more complex as the business takes shape.3. . the entrepreneurial team will go through the process of choosing the right form of corporate entity and actually creating the venture as a legal entity. Company formation/launch: Once there is a sufficiently compelling opportunity and a plan. In the planning phase you will need to create two things: strategy and operating plan. 4.

the company works toward creating its product or service. Growth: After launch. . you continue to ask questions but spend more of your time carrying out your plans. At this point. The emphasis shifts from planning to execution. 5. generating revenue and moving toward sustainable performance.

Opportunity evaluation (investment prospectus) Company's plan Execution Need / problem Solution Competitive position Team Risk / reward profile Strategy Target customer Business model Position Company objectives Operating plan Company timeline Staffing plan Budget Financing plan Market research Marketing Business development Forecasting Sales planning R&D management Operations management People management Process and infrastructure Budgeting Financing .