Entrepreneurship

Module 1

B Y : D R VA I D E H I S H U K L A
F U N D A M E N TA L S O F
ENTREPRENEURSHIP
 CONCEPT OF ENTREPRENEURSHIP

Definitions:
Entrepreneurship is both the study of how new businesses are created as well as the actual process of
starting a new business – the term is used interchangeably. An entrepreneur is someone who has an idea
and who works to create a product or service that people will buy, by building an organization to support
those sales.
Entrepreneurship refers to the process of creating a new enterprise and bearing any of its risks, with the
view of making the profit.
Characteristics of Entrepreneurship:
1. Economic Activity
2. Creativity and innovation
3. Profit
4. Risk Bearing
IMPORTANCE OF ENTREPRENEURSHIP

Entrepreneurial development today has assumed special significance, since it is a key to economic
development.

Entrepreneurs are, thus the seeds and fruits of industrial development.

They have invented new products and developed organizations and the means of production to bring
them to market.
IMPORTANCE OF ENTREPRENEURSHIP

1. Growth of Entrepreneurship.
2. Creation of job opportunities.
3. Innovation.
4. Impact on community development and standard of living
5. Balanced regional development
6. Political and economic integration of outsiders.
7. Contribution in GNP and Per capita income.
8. Enhances the standard of living.
9. Promotes research and development.
10. Promotion of export and trade.
(Entrepreneurship development & small business enterprises by Poornima Charantimath Second edition- chapter 1 Pg.
No. 4)
WHO IS AN ENTREPRENEUR?
WHO IS AN
ENTREPRENEUR ?

Interestingly enough, there is debate

over the definition of an
entrepreneur. Some experts have a wide
definition to include anyone who works
for himself. Others have a narrower
viewpoint, suggesting that an
entrepreneur doesn't just work
independently but also, their business
involves innovation and leadership. 
What they do agree on is that an
entrepreneur takes an idea and develops
a new business around it. They manage
the business and assume the risk for its
success. 
Another definition is that an
entrepreneur is someone who develops a
business model, acquires the necessary
physical and human capital to start a
new venture, and operationalizes it and
is responsible for its success or failure.
CHARACTERISTICS OF A SUCCESSFUL ENTREPRENEUR
(SKILLS REQUIRED TO BE AN ENTREPRENEUR)

1. Creativity & Innovation

2. Dynamism
3. Leadership & Team Building
4. Opportunity seeking & initiative
5. Tolerance of uncertainty
6. Adaptability
7. Problem Solving
8. Goal Orientation
9. Risk Taking and Decision-Making ability
10. Commitment, persistency and networking
(Entrepreneurship development & small business enterprises by Poornima Charantimath Second edition- chapter 1 Pg.
No. 11)
CLASSIFICATION OF ENTREPRENEUR

1. Based on the functional characteristics: Innovative, Imitative/Adoptive, Fabian, Drone.

2. Based on the Developmental Angle: Prime mover, Manager, Minor innovator, Satellite,
Local trading.

3. Based on the types of Business: Manufacturing, Wholesaling, Retailing, Service.

4. Based on the 9 Personality types: The Improver, The Advisor, The Superstar, The Artist, The
Visionary, The Analyst, The Fireball, The Hero, The Healer.

5. Based on the Schools of Thought on Entrepreneurship.

TYPES OF ENTREPRENEUR
EXTRA READING:
H T T P S : / / B L O G . T O P V I S U A L LY. C O M / 2 0 1 7 / 0 9 / H U S T L E R - P R O D I G Y-
O R - V I S I O N A RY- W H AT- K I N D - O F - E N T R E P R E N E U R . H T M L
5 TYPES OF ENTREPRENEUR

1. Innovators
2. Hustlers
3. Imitators
4. Researchers
5. Buyers
INNOVATORS
Innovators are the types of entrepreneurs who come up
with completely new ideas and turn them into viable
businesses.

In most cases, these entrepreneurs change the way

people think about and do things. Such entrepreneurs
tend to be extremely passionate and obsessive, deriving
their motivation from the unique nature of their business
idea.
innovative entrepreneurs also find new ways to market
their products by choosing product differentiation
strategies that make their company stand out from the
crowd. And sometimes it is not just standing out from
the crowd but actually creating a new crowd.

To say that innovators like Steve Jobs, Larry Page of

Google and Microsoft founder Bill Gates were obsessed
with their business would be an understatement.
 HUSTLERS
Unlike innovators whose vision is the gas in their engine, hustlers just
work harder and are willing to get their hands dirty. Hustlers often start
small and think about effort – as opposed to raising capital to grow their
businesses. These types of entrepreneurs focus on starting small with the
goal of becoming bigger in the future.

Hustlers are motivated by their dreams and will work extremely hard to
achieve them. They tend to be very focused and will get rid of all forms of
distractions, favoring risks over short-term comfort.

A perfect example of a hustler is Mark Cuban. He started in business very

young selling trash bags, newspapers and even postage stamps and this
hustle later created a goldmine which was acquired by internet giant
Yahoo!
 IMITATORS
Imitators are the types of entrepreneurs who
copy certain business ideas and improve upon
them. They are always looking for ways to
make a particular product better so as to gain an
upper hand in the market.

Imitators are part innovators and part hustlers

who don’t stick to the terms set by other people
and have a lot of self-confidence.
RESEARCHERS
Even after having an idea, researchers will take their time to
gather all the relevant information about it. To them, failure is
not an option because they have analyzed the idea from all
angles.

Researcher entrepreneurs usually believe in starting a business

that has high chances of succeeding because they have put in
detailed work to understand all aspects.

As a result, these types of entrepreneurs usually take a lot of

time to launch products to make decisions because they need
the foundation of deep understanding. These entrepreneurs rely
much more on data and facts than instincts and intuition.
BUYERS

One thing that defines buyers is their

wealth. These types of entrepreneurs
have the money and specialize in buying
promising businesses.

Buyer entrepreneurs will identify a

business and assess its viability, proceed
to acquire it and find the most suitable
person to run and grow it.
MYTHS OF ENTREPRENEURSHIP

1. Entrepreneurs are born not made

2. Entrepreneurs are academic and social misfits
3. Entrepreneurs fit an ideal profile.
4. All you need is money to be an entrepreneur
5. All you need is luck to be an entrepreneur
6. A great idea is the only ingredient in a recipe for business
7. My best friend will be a great business partner
8. Having no boss is great fun
9. I can make lots of money
10. I will definitely become successful
11. Life will be much simpler if I work for myself
PROBLEMS FACED BY ENTREPRENEURS

1. Internal problems
2. External problems
3. Specific management problems.
INTERNAL PROBLEMS

1. Planning
Technical Feasibility
Economic viability
2. Implementation
3. Production
Production Management
Labour Management
Marketing Management
Financial Management
Administrative Management
 EXTERNAL PROBLEMS
1. Infrastructure (Location, power, water, communication)
2. Financial ( Capital, long-term funds, recovery)
3. Marketing
4. Taxation
5. Raw material
6. Industrial and financial regulation
7. Inspections
8. Technology
9. Government policy
10. Administrative hurdles
11. Corruption
12. Lack of direction
13. Competitive environment
SPECIFIC MANAGEMENT PROBLEMS

Cash flow Time Delegating

management. management. tasks.

Choosing Marketing
Capital.
what to sell. strategy.

Strapped Business
budget growth
FORMS OF
BUSINESS
ORGANIZATIONS
FORMS OF BUSINESS
ORGANIZATIONS

A business entity is an organization that uses economic

resources to provide goods or services to customers in
exchange for money or other goods and services.

Business organizations come in different types and in

different forms of ownership.
SOLE-PROPRIETORSHIP

Sole Proprietorship in simple words is a one-man business organisation. It is the type of entity that is
fully owned and managed by one natural person (not a legal person/entity) known as the sole
proprietor. The business and the man are the same, it does not have a separate legal entity.

A sole proprietorship usually does not have to be incorporated or registered. It is the simplest form of
business organisations and the ideal choice to run a small or medium scale business. Let us look at
some important features of a proprietorship.
Further reading:
https://www.toppr.com/guides/business-studies/forms-of-business-organisations/sole-proprietorship/
PARTNERSHIP

In India, we have a definite law that covers all aspects and functioning of a partnership, The Indian
Partnership Act 1932. The act also defines a partnership as “the relation between two or more
persons who have agreed to share the profits from a business carried on by either all of them or any
of them on behalf of/acting for all”

So in such a case two or more (maximum numbers will differ according to the business being
carried) persons come together as a unit to achieve some common objective. And the profits earned
in pursuit of this objective will be shared amongst themselves.

The entity is collectively called a “Partnership Firm” and all the individual members are the
“Partners”. So let us look at some important features.
Further reading:
https://www.toppr.com/guides/business-studies/forms-of-business-organisations/partnership/
LIMITED LIABILITY PARTNERSHIP

Limited liability partnership is a combination of both partnership and corporation. It has the feature
of both these forms.
As the name suggests partners have limited liability in the company which means that personal
assets of the partners are not used for paying off the debts of the company. Nowadays it has become
very popular form of business as many entrepreneurs are opting this.
There are a number of partners in the firm and hence they are not liable or responsible for others
misconduct. Every one is liable for their own acts. All limited liability partnership is governed under
the limited liability partnership act of 2008. However in India LLP was introduced in April 2009.
It is a separate legal entity distinct from its owners. It can enter into a contract and acquire property
in its name. LLP form is not just prevailing in India. It is also seen in countries like the United
Kingdom, Australia etc.
 ADVANTAGES OF LIMITED LIABILITY PARTNERSHIP
1. Easy to form- Forming an LLP is an easy process. It is not complicated and time consuming like the process of a
company. The minimum amount of fees for incorporating an LLP is Rs 500 and the maximum amount which can be
spent is Rs 5600.
2. Liability- The partners of the LLP is having limited liability which means partners are not liable to pay the debts of
the company from their personal assets. No partner is responsible for any other partner misbehaves or misconduct.
3. Perpetual succession- The life of the Limited Liability Partnership is not affected by death, retirement or insolvency
of the partner. The LLP will get winded up only as per provisions of the act of 2008.
4. Management of the company- All the decisions and various management activities are seen and done by the
directors of the company. Shareholders receive very less power as compared to the board of directors.
5. Easy transferability of ownership- There is no restriction upon joining and leaving the LLP. It is easy to admit as a
partner and to leave the firm or to easily transfer the ownership on others.
6. Taxation- Yes, it is the benefit of LLP. Limited liability partnership is exempted from various taxes such as dividend
distribution tax and minimum alternative tax. The rate of tax on Limited Liability Partnership is less than as
compared to the company.
7. No compulsory audit required- Every business has to appoint an auditor for checking the internal management of
the company and its accounts. However, in the case of LLP, there is no mandatory audit required. The audit is
required only in those cases where the turnover of the company exceeds Rs 40 lakhs and where the contribution
exceeds Rs 25 lakhs.
DISADVANTAGES

1. Not covered all states- Due to various tax benefits and provisions many states restricts the
formation of LLP in their states. This leads to a disadvantage as many states don’t allow their
entrepreneurs to form this.
2. Less credibility- One of the major demerits of Limited Liability Partnership is that many people
do not consider this as a credible business. People still trust more on company or partnerships.
3. Partners not consulting- Partners of the Limited Liability Partnership don’t consult each other
in case of decisions and agreement.
4. Transfer of interest- Though interest and ownership can be transferred but it usually takes long
procedure. Various formalities are required to comply with the provisions of the act.
5. Lack of recognition- As LLP is introduced in India in 2009 only it is not recognized by all. Due
to its less recognition, it leads to hindrance in smooth functioning of the firm. People are not
likely to form LLP.
HINDU UNDIVIDED FAMILY (HUF)

The Joint Hindu Family Business or the Hindu Undivided Family (HUF) is a unique type of business
entity. It is governed and dictated by the Hindu Law, which is one of the several religious laws
prevalent in India.

So who all are members of such an organization? Well, any person born into the family (boy or girl)
up to the next coming three generations is a part of the HUF. These members are the co-parceners.
The head of such a Joint Family Business is the eldest member of the family, the “Karta”. He is the
main person responsible for the business and the finances.
Further reading:
https://www.toppr.com/guides/business-studies/forms-of-business-organisations/joint-hindu-family-b
usiness/
PRIVATE LIMITED COMPANY

Meaning
A private limited company is a company which is privately held for small businesses. The liability of
the members of a Private Limited Company is limited to the amount of shares respectively held by
them.Shares of Private Limited Company cannot be publically traded. Alll the aspects of Private
Limited Company is discussed in the article.
Characteristics of Private Limited Company
• Members– To start a company, a minimum number of 2 members are required and a maximum number of
200 members as per the provisions of the Companies Act, 2013
• Limited Liability– The liability of each member or shareholders is limited. It means that if a company faces
loss under any circumstances then its shareholders are liable to sell their own assets for payment. The
personal, individual assets of the shareholders are not at risk.
• Perpetual succession– The company keeps on existing in the eyes of law even in the case of death,
insolvency, the bankruptcy of any of its members. This leads to the perpetual succession of the company. The
life of the company keeps on existing forever.
• Index of members– A private company has a privilege over the public company as they don’t have
to keep an index of its members whereas the public company is required to maintain an index of its
members.
• A number of directors– When it comes to directors a private company needs to have only two
directors. With the existence of 2 directors, a private company can come into operations.
• Paid-up capital– It must have a minimum paid-up capital of Rs 1 lakh or such higher amount which
may be prescribed from time to time.
• Prospectus– Prospectus is a detailed statement of the company affairs that is issued by a company
for its public. However, in the case of a private limited company, there is no such need to issue a
prospectus because this public is not invited to subscribe for the shares of the company.
• Minimum subscription– It is the amount received by the company which is 90% of the shares
issued within a certain period of time. If the company is not able to receive 90% of the amount, then
they cannot commence further business. In the case of a private limited company, shares can be
allotted to the public without receiving the minimum subscription.
• Name– It is mandatory for all the private companies to use the word private limited after its name.
 PUBLIC LIMITED COMPANY
The simplest way to describe a joint stock company is that it is a business organisation that is owned
jointly by all its shareholders. All the shareholders own a certain amount of stock in the company,
which is represented by their shares.
Professor Haney defines it as “a voluntary association of persons for profit, having the capital divided
into some transferable shares, and the ownership of such shares is the condition of membership of the
company.” Studying the features of a joint stock company will clarify its structure.
FEATURES

Artificial Legal Person

separate Legal Entity
Incorporation
Perpetual Succession
Limited Liability
Common Seal
Transferability of Shares
C R E AT I V I T Y
&
I N N O VAT I O N
CREATIVITY

Creativity can take many forms. It is the ability to create or innovate something new, the skill to
create something new from nothing. It also the generation of new and innovative ideas or a unique
application of old ideas. The adapting, combining, application of existing ideas also require
creativity.

Actually, every person has a creative side or aspect of their personality. It only requires exploration
and application. And creativity actually is very hard work because the only talent is not enough. Any
creative process requires a tremendous amount of commitment and passion.
PRINCIPLES OF CREATIVITY

1. Expertise
2. Creativity Thinking Skills
3. Motivation
CREATIVITY PROCESS
THE PREPARATION STEP OF THE CREATIVE
PROCESS MODEL

During the preparation step of the creative process model, an

individual becomes curious after encountering a problem.
Examples of problems can include an artistic challenge or an
assignment to write a paper. During this stage, she may
perform research, creates goals, organize thoughts and
brainstorm as different ideas formulate. For example, a
marketing professional may prepare for a marketing
campaign by conducting market research and formulating
different advertisement ideas.
 THE INC UBATION STEP OF
THE CR EATIVE PROCESS
MODEL

While the individual begins to

process her ideas, he begins to
synthesize them using his
imagination and begins to construct
a creation. During this step, the
individual does not actively try a
find a solution but continues to mull
over the idea in the back of his head.
THE ILLUMINATION STEP OF
THE CREATIVE PROCESS
MODEL

As ideas begin to mature, the

individual has an epiphany regarding
how to piece her thoughts together in a
manner that makes sense. The moment
of illumination can happen
unexpectedly. For example, an
individual with the task of putting
together an office party may have an
idea for a theme while driving home
from work.
THE EVALUATION STEP OF
THE CREATIVE PROCESS
MODEL

After a solution reveals itself in an

epiphany (Sudden realization), the
individual then evaluates whether
the insight is worth the pursuit. He
may make changes to his solution,
so it is clearer. He may consult with
peers or supervisors regarding his
insights during this step before
pursuing it further. If he works with
clients, he may seek a client’s input
and approval before moving on to
the next step.
THE IMPLEMENTATION STEP OF THE CREATI VE PROCESS MODEL

The implementation of an idea or solution in the creative process model is when an individual begins
the process of transforming her thoughts into a final product. For example, during this step, a painter
may begin outlining shapes on a canvas with charcoal before applying oil paints to the medium. An
individual may begin this step more than once in order to reach the desired outcome.

For example, a graphic designer may open a new digital canvas if she did not have the scale
calculated correctly on a previous work, and she will continue to implement his ideas and make
adjustments until she reaches a pleasing final product.
 WOMEN
ENTREPRENUER
 WOMEN ENTREPRENEURSHIP DEFINED

“An enterprise owned and controlled by a women having a minimum financial interest
of 51 per cent of the capital and giving at least 51 per cent of the employment generated
by the enterprise to women.” - Government of India

“A woman entrepreneur can be defined as a confident, innovative and creative woman

capable of achieving self economic independence individually or in collaboration,
generates employment opportunities for others through initiating, establishing and
running the enterprise by keeping pace with her personal, family and social life.” -
Kamal Singh
FACTORS INFLUENCING WOMEN ENTREPRENEURS

The following are the major factors influencing women entrepreneurs.

– Economic independence
– Establishing their own creativity
– Establishing their own identity
– Achievement of excellence
– Building confidence
– Developing risk-taking ability
– Motivation
– Equal status in society
– Greater freedom and mobility
SOME COMMON FEATURES OF WOMEN ENTREPRENEURS IN
INDIA

• Women with small families are more likely to become entrepreneurs.

• A majority of women entrepreneurs are married.
• Unmarried women face difficulties in getting financial support to launch their
enterprises.
• Many women entrepreneurs belong to the low-income group.
• Gender discrimination is encountered at every stage of business development.
• Though the trend is changing, it is not uncommon to find enterprises owned by
women but run by men.
WOMEN ENTREPRENEURSHIP ENVIRONMENT

Women entrepreneurs operate through different spheres or environment. The overall

context of women entrepreneurship development can be described in three different
spheres
– Micro sphere
– Meso sphere
– Macro sphere
CHALLENGES IN THE PATH OF WOMEN ENTREPRENEURSHIP

• Lack of Confidence Problems of Finance and Working

• Capital Socio-cultural

• Barriers Production

• Problems Inefficient Marketing Arrangements

GRASSROOT ENTREPRENEURSHIP THROUGH SELF-HELP GROUPS
(SHGS)

Entrepreneurship can make significant contributions towards women empowerment by

allowing her to participate in economic activity and decision-making process.

A Self-help Group is a small economically homogeneous and affinity group of

rural/urban poor, voluntarily formed to save and mutually agree to contribute to a
common fund to be lent to its members as per group decisions.
HOW DO SELF-HELP GROUPS WORK?

1. The group addresses a felt need and a common interest.

2. The benefits of working together outweigh the costs.
3. The group is embedded in the local social organisation.
4. The group has the capability, leadership, knowledge and skills to manage the tasks.
5. The group owns and enforces its rules and regulations
INSTITUTIONS SUPPORTING WOMEN ENTREPRENEURSHIP IN
INDIA

• Consortium of Women Entrepreneurs of India (CWEI)

• Federation of Indian Women Entrepreneurs (FIWE)
• Federation of Ladies’ Organisation(FLO), Women’s India Trust (WIT)
• Central Bank of India Credit Schemes
• NABARD
• DWCRA
• Small Industries Development Bank of India (SIDBI)
• Association of Women Entrepreneurs of Karnataka (AWAKE)
 I N T E R N AT I O N A L
ENTREPRENEURSHIP
INTERNATIONAL ENTREPRENEURSHIP

International entrepreneurship is the process of an entrepreneur conducting business activity across

the national boundaries. It may consist of exporting, licensing, opening sales office in another
country etc.
International entrepreneurship is defined as development of international new ventures or start ups
that from their inception engage in international business, thus viewing their operation domain as
international from the initial stages of international operations.
IMPORTANCE OF INTERNATIONAL ENTREPRENEURSHIP

• Advantage of cheap labour : quantity and quality of labour is one of the major challenge for every
business, if the labour is cheap in foreign countries than company can outsource required labour if
organization is into foreign operations. E.g increasing cost of labour in china has forced
companies to search in for other options for outsourcing company activity to other countries were
cost of labour is less.
• Utilization of talent and managerial competence : when business are not able to get required
talented work force in country, they can get the activity outsourced or hire host country employee
which has given birth to concept of expatriation.
• Growth opportunity : entrepreneurs whose core business strategy is expansion and diversification
of business, international business is one of the primary platform to achieve these objectives.
CONT..

• Increased sales and profit : when the entrepreneurs are not able to earn profit or demand for their
product decreases in local market they can sell their products in foreign market where life cycle
of product is in favourable condition. E.g. Apple earned more profits from international business
than in local market US in the year 1994. ( $ 390 million foreign market / $ 310 in Indian
market .
• Expansion of domestic market : international business causes domestic market to expand beyond
national boundaries. When the domestic market has bee fully tapped than company can go in for
expansion of business to market their products in international market. E.g Sony
• Globalization of customers : it refers to when customers in country prefer purchasing foreign
brand products than domestic companies have to go in for internationalization of business to keep
in pace with competition to attract customers.
CONT..

• Globalization of competitors : international business increases the opportunity not only for the
survival and growth but also motivates companies to face competition from global entrants in
market, which in turn leads to growth of market, pursuing global scale efficiencies etc.
• Pay offs of international business : international business improves image of the company in
domestic market and attracts more customers in domestic market due to internationalization of
business. E.g Ranbaxy
D I F F E R E N C E B E T W E E N I N T E R N AT I O N A L A N D D O ME S T I C
E N T R E P R E NE U R S H I P

Economic system : when an entrepreneur is operating in national level he is required to understand

economic conditions with in country, but at international level he should be having information
about economic system of countries he running business which includes currency rate, phase of
business cycle etc.
Stage of economic development : when entrepreneur is operating at domestic level he should focus
on development state of domestic country, on the contrary when he is operating on international
scale he has to view country from developed, developing and underdeveloped perspective and
accordingly plan in business strategies in economy.
Cultural sensitivity