Entrepreneurship

Dr. Ranjul Rastogi

 Why Study Entrepreneurship?
There are two primary reasons why studying entrepreneurship
makes sense: you learn to think like an entrepreneur and you
develop a vision for your life.

Entrepreneurship: Owning Your Future, 11th ed. © 2010 Pearson Higher Education, 2
Steve Mariotti Upper Saddle River, NJ 07458. • All Rights Reserved.
 THE ENTREPRENEUR
• The BOSS !!!!
• The Business Owner
• The Risk Taker

• One Who Starts A

New Business
• The Resourceful Guy
 What Is an Entrepreneur?
Someone who creates and runs a business is called an
entrepreneur.

 When an entrepreneur starts a new business, risk is involved.

Risk is the chance of losing something.
 Because employees work for someone else and entrepreneurs
work for themselves, entrepreneurs risk more than employees.
 Small firms employ about half of the U.S. private work force,
and they create around 64 percent of all new jobs.
 One way you can gain a sense of what business is like is by
investigating an internship, or apprenticeship.

Entrepreneurship: Owning Your Future, 11th ed. © 2010 Pearson Higher Education, 4
Steve Mariotti Upper Saddle River, NJ 07458. • All Rights Reserved.
The Evolution of Entrepreneurship
• Entrepreneur is derived from the French
entreprendre, meaning “to undertake.”
– The entrepreneur is one who undertakes to
organize, manage, and assume the risks of a
business.
– Although no single definition of entrepreneur
exists and no one profile can represent today’s
entrepreneur, research is providing an increasingly
sharper focus on the subject.
1–5
 Definitions
• Richard Carleton: “a person who buys factors of production at certain
prices in order to combine them into a product with a view to sell them at
uncertain prices.”
• Considered as a risk bearer. Ex. Farmer pays definite price for seeds,
fertilizers, pesticides, labours etc but not certain at which price he could
sell his produce.
• B. HIGGINS: “ The function of seeing investment & production
opportunities; organising an enterprise to undertake a new production
process; raising capital; hiring labour, arranging for raw material, finding a
site & combining these factors of production into a going concern;
introducing new techniques, new commodities, discovering new sources
of natural resources & selecting top-managers for day-to-day operations.”
 Definitions
• SCHUMPETER: “Entrepreneurship is based on purposeful & systematic
innovation. It includes not only the independent businessman but also
company directions & managers who actually carryout innovative functions.”
• AMERICAN CONFERENCE ON ENTREPRENUERSHIP: “Entrepreneurship is
attempt to create value through recognition of business opportunity, the
management of risk taking appropriate to the opportunity & through the
communicative & management skills to mobilise human, financial & material
resources, necessary to bring a project to fruition.”
• Peter F Drucker: “One who considers the changes that take place in market
as an opportunity to do business. Innovation is his tool.”
• Joseph Schumpeter: “Individuals who introduce something new in the
market or economy.”
• New encyclopedia: An individual who bears the risk of operating business in
the face of uncertainty about the future conditions.
 A Summary Description
of Entrepreneurship
• Entrepreneurship (Robert C. Ronstadt)
– The dynamic process of creating incremental wealth.
– This wealth is created by individuals who assume
major risks in terms of equity, time, and/or career
commitment of providing value for a product or
service.
– The product or service itself may or may not be new
or unique but the entrepreneur must somehow
infuse value by securing and allocating the necessary
skills and resources.
1–8
 An Integrated Definition
• Entrepreneurship
– A dynamic process of vision, change, and creation.
• 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.
• The vision to recognize opportunity where others see chaos,
contradiction, and confusion.

1–9
 Entrepreneurs versus
Small Business Owners: A Distinction
• Small Businesses Owners
– Manage their businesses by expecting stable sales,
profits, and growth
• Entrepreneurs
– Focus their efforts on innovation, profitability and
sustainable growth
 Why Become an Entrepreneur?

The three primary reasons that people become

entrepreneurs and start their own firms

Desire to be their own boss

Desire to pursue their

own ideas

Financial rewards
 The Benefits/importance of Entrepreneurship
or Why Be an Entrepreneur?

– Opportunity to create your own destiny

• Owning a business provides an entrepreneurs the
independence and the opportunity to achieve what is
important to them.
• Entrepreneurs want to decide what they want in their
lives, and they use their businesses to make their desire
a reality (come true).
 The Benefits/importance of Entrepreneurship
or Why Be an Entrepreneur?

• :
– Opportunity to make a Difference
• More and more entrepreneurs are starting businesses because
they see this as an opportunity to make a difference in a route or
way that is personally important to them.
– Opportunity to reach your full potential.
• Many people find their work not challenging and not exciting.
• For entrepreneurs there is little difference between work and
play.
• Entrepreneurs see their business as a vehicle of self expression of
personal desire and eventual self actualization of their personal
goals – the pinnacle of their career success.
 The Benefits/importance of Entrepreneurship
or Why Be an Entrepreneur?

• Opportunity to reap extraordinary (luar biasa) profits.

– The profit earned by an entrepreneur are an important
motivation and indication factor for further increased
performance. Thus these could spur them to greater
achievement and success.
 Societal Responsibility and Recognition.
• Small business owners are among the most admired, respected
and trusted individuals of society.
• Customers have shown their trust and faithfulness over their
years for their business.
• Help to contribute employment, business opportunity in a
particular locality or area.
 The Benefits/importance of Entrepreneurship
or Why Be an Entrepreneur?

• Opportunity to engage in work of their choice

– Small business owners tend to engage in business that
gives them personal satisfaction.
– Though they may work long hours and engage in very
industrious work that is beneficial to their organization and
themselves.
– Most of all the work they engage in helps to benefits the
community, society and the nation.
Risks/drawbacks of Being an Entrepreneur
 Potential Business Failure. Being fully responsible means
the success or failure of your business rests on you.
 Unexpected Obstacles. Problems can happen that you don’t
expect.
 Financial Insecurity. Many new businesses don’t make
much money in the beginning, so you may not always be
able to pay yourself.
 Long Hours and Hard Work. It’s not unusual for
entrepreneurs to work a lot of extra hours to make their
businesses successful. This is especially true during the
initial start-up process.

Entrepreneurship: Owning Your Future, 11th ed. © 2010 Pearson Higher Education, 16
Steve Mariotti Upper Saddle River, NJ 07458. • All Rights Reserved.
Risks/drawbacks of Being an Entrepreneur

– Uncertainty of Income
• Opening and a running a business provides no
guarantee that an entrepreneur will earn enough
money and survive.
• Engaging in the wrong business and not able gain an
advantage in the short run and eventually in the long
run can be disastrous.
• Great effort and proper and effective management
need to used in beginning to ensure the organization
success.
 Risks/drawbacks of Being an Entrepreneur

• Risk of losing your entire Investment

– Small business have a high failure rate.
– Though is successful initially it faces financial difficulty within
the next five years.
– Entrepreneurs must be prepared to face the consequence of
failure.
– Entrepreneurs must have acute sense of observation and be
able to detect the early signs of failure.
– If a business fails the entrepreneur must have a contingency
plan to overcome a bankruptcy or personal failure.
Risks/drawbacks of Being an Entrepreneur

– Long Hours and Hard Work

• Entrepreneurs tend to be generally workaholic, and
under tremendous pressure to produce the result they
expect.
• Entrepreneurs seldom find time to be away from the
business but tend to pour all their effort and resources
to achieve their personal entrepreneurial objective.
• Some even go to extent of making big sacrifice and
deprive themselves of a personal life, wife and children
and social and family associates.
Risks/drawbacks of Being an Entrepreneur

– Lower Quality of Life until the business get

established.
• In order for the business to be successful the
entrepreneur must engage himself to produce the kind
of result he expects.
• He cannot rest on his laurels (take it easy) until and
certain the business has stabilized and established.
Risks/drawbacks of Being an Entrepreneur

– High level of stress

• Starting the business can be very rewarding experience, but it can be
stressful.
• An entrepreneur have left the comfort and security of secured job to
venture into their own business.
• Failure can bring about tremendous personal failure, and in turn
creates intense levels of anxiety and stress.
• Financial burden may increase and the entrepreneur may face
difficulty sustaining the business or may decide to call it for day and
wind up the business for good.
Risks/drawbacks of Being an Entrepreneur
– Complete Responsibility
• Must be prepared to make decision that are
unfavorable (swallow the bitter pill).
• Must make decision in areas that the entrepreneur is
not familiar at all.
• Fear of making decision that can have a devastating
effect on the business and its people.
• Tremendous pressure to perform as the entrepreneur is
too deeply engaged in the business
Risks/drawbacks of Being an Entrepreneur

– Discouragement
– To undertake a business requires a lot of dedication,
discipline and tenacity.
– During running the business they will face many difficulties,
obstacles which may difficult to overcome.
– Further difficulties, discouragement and disillusionment are
common emotions.
– Successful entrepreneurs escape through rough times or
difficult times through sheer hard work, self confidence and
full of optimisms.
Different outcomes of engaging in entrepreneurship

– Innovation or newness – product or service.

– Organizing resources – finance, people, physical and
information resource.
– Creating new product or service.
– Generating wealth
– Taking risk in a business venture.
– Prepared to face uncertainty.
– Create job opportunity
– Increase the abundance of wealth generation for the
nation.
 Who Are Entrepreneurs?

Entrepreneurship: Owning Your Future, 11th ed. © 2010 Pearson Higher Education, 25
Steve Mariotti Upper Saddle River, NJ 07458. • All Rights Reserved.
Characteristics of Successful Entrepreneurs
1 of 3

Four Primary Characteristics

Copyright ©2012 Pearson Education, Inc.

1-26
publishing as Prentice Hall
Characteristics of Successful Entrepreneurs
2 of 3

• Passion for the Business

– The number one characteristic shared by successful
entrepreneurs is a passion for the business.
– This passion typically stems from the entrepreneur’s belief
that the business will positively influence people’s lives.
• Product/Customer Focus
– A second defining characteristic of successful
entrepreneurs is a product/customer focus.
– An entrepreneur’s keen focus on products and customers
typically stems from the fact that most entrepreneurs are, at
heart, craftspeople.
Copyright ©2012 Pearson Education, Inc.
1-27
publishing as Prentice Hall
Characteristics of Successful Entrepreneurs
3 of 3

• Tenacity Despite Failure

– Because entrepreneurs are typically trying something new,
the failure rate is naturally high.
– A defining characteristic for successful entrepreneurs is
their ability to persevere through setbacks and failures.
• Execution Intelligence
– The ability to fashion a solid business idea into a viable
business is a key characteristic of successful entrepreneurs.

Copyright ©2012 Pearson Education, Inc.

1-28
publishing as Prentice Hall
 Characteristics of Entrepreneur
• Thus Entrepreneurship is a combination of
various qualities like organisation skills,
innovativeness, risk-bearing, managing
uncertainty, ability to bring together & use
factor of production, analysing market
opportunities, observing the change taking
place in the market, methods & technologies
& studying the tastes & preferences of
consumers.
 Other Characteristics
• Mental ability: intelligent person.
• Organising ability: good organisation.
• Hard work: ready to work for long hours.
• Discipline: highly disciplined- everything to be
in order for them.
• Clear objectives: regarding nature of business
& products to be produced.
 Other Characteristics
• Need for high achievement- they have a strong
desire for achieving something great.
• Optimistic: highly optimistic- not disturbed by
present problems-hope favourable future.
• Risk taking: they like challenges.
• H.R. ability: maintain good relations with other
people (employee, vendors, customers, bankers).
• Emotional stability: have considerable amount of
self-control- business pressure can be handled.
 Other Characteristics
• Communication ability: good communication.
• Self-confidence: tackle problems immediately with
self-confidence.
• Adaptability: highly flexible- adapt themselves for
any conditions.
• Positive attitude: always think positively, they do
not leave hopes even under difficult conditions.
• They are also good managers, pro-active, realistic,
have comprehensive awareness & conceptual ability.
 Traits of An Entrepreneur: D’s
• Dream
• Determined
• Details
• Dollar
• Decision
• Doer
• Distribute
• Destiny
• Devotion
• Dedication
 Traits of An Entrepreneur: F’s
• Founder
• Faith
• Focused
• Frugal
• Fast
• Fun
• Flexible
• Flat
• Forever Improving
 Characteristics of Successful
Entrepreneurs

Self-assessment—evaluating your strengths and weaknesses—is an

important part of becoming an entrepreneur.

 An aptitude is a natural ability to do a particular type of work

or activity well.
 An attitude is a way of viewing or thinking about something
that affects how you feel about it. Entrepreneurs tend to be
people with positive attitudes.

Entrepreneurship: Owning Your Future, 11th ed. © 2010 Pearson Higher Education, 35
Steve Mariotti Upper Saddle River, NJ 07458. • All Rights Reserved.
 Characteristics of Successful
Entrepreneurs
Personal Characterisitics Skills
 Courage A skill is an ability that’s learned
 Creativity through training and practice.
 Curiosity  Business Skill
 Determination  Communication Skill
 Discipline  Computer Skill
 Empathy  Decision-Making and Problem-
 Enthusiasm Solving Skills
 Flexibility  Mathematical Skill
 Honesty  Organizational Skill
 Patience  People Skills
 Responsibility

Entrepreneurship: Owning Your Future, 11th ed. © 2010 Pearson Higher Education, 36
Steve Mariotti Upper Saddle River, NJ 07458. • All Rights Reserved.
Entrepreneurship and Economic growth /Development

• The Role of Entrepreneurship in Economic

Growth.
– In order for Entrepreneurs to thrive in a nation,
the Government must play important role in
creating the kind of business environment that
create the basis for growth, stability and future
success of entrepreneurs.
 The Role of Entrepreneurship in Economic Growth.

– This primarily involves the:

• Increasing the per capita output and income of the people

of the country.

• Initiating and creating change in the structure of business

and society. Further growth and increased output arises,
thus to enable more wealth to be divided among the
various participants ( stakeholders).

• Generation of innovation that leads to the creation of

new product and service.
 .
The Role of Entrepreneurship in Economic Growth

• Improvement and modification on existing product to

better suit market and customers’ needs.
• Creation of self employment and to cut back the
dependency of potential employment of new workers in
government sectors.
• Streamline of the private sector and encourage the
inclusion of new technology that is less labor dependent.
• Increase in the national output which in turn lead to
greater and stronger economic growth.
• OPTIMUM UTILISATION OF RESOURCES- Resources are put to proper
use by Entrepreneurs. They combine various resources Land, Labour,
Capital, and Organisation to produce goods.
• GENERATION OF EMPLOYMENT- provides employment, reducing
unemployment problem.
• IMPROVEMENT IN STANDARD OF LIVING OF PEOPLE- by providing
quality goods & services.
 The Role of Entrepreneurship in Economic
Growth
• BALANCED REGIONAL DEVELOPMENT- Government incentives encourage
entrepreneurs to establish industry units in rural & backward areas- create
employment opportunities in industrially backward areas.
• NEW/ IMPROVED GOODS & SERVICES: for the benefit of customers- by regulating
taking market research.
• HELP AGRI SECTOR- providing high yielding variety of seeds, fertiliser, pesticides,
agricultural implements etc many entrepreneurs buy agricultural produce for further
processing.
• PROMOTE INTERNATIONAL TRADE- exporting goods mfg by them help govt to earn
FIE.
• HELP COMMUNITY AT LARGE- by providing welfare activities- adopting villages,
schools, stating educational institutes, healthcare services, sports.
• CAPITAL FORMATION- pooling the savings of people by issuing shares/ debentures-
offering more returns comparatively.
• DISTRIBUTION OF INCOME & WEALTH- by establishing in rural / backward areas, not
only balance regional development but also redistribution of income & wealth.
Economic Impact of Entrepreneurial Firms

• Innovation
– Is the process of creating something new, which is central to
the entrepreneurial process.
– Several studies have found that small businesses outperform
their larger counterparts in terms of obtaining patents.
• Job Creation
– Small businesses are the creators of most new jobs in the
U.S., and employ half of all private sector employees.
– According to a Kauffman Foundation survey, 92% of
Americans say entrepreneurs are critically important to job
creation.
1-41
 Entrepreneurial Firms’ Impact on Society
and Larger Firms
• Impact on Society
– The innovations of entrepreneurial firms have a dramatic
impact on society.
– Think of all the new products and services that make our
lives easier, enhance our productivity at work, improve our
health, and entertain us in new ways.
• Impact on Larger Firms
– Many entrepreneurial firms have built their entire business
models around producing products and services that help
larger firms become more efficient and effective.

1-42
Ten Deadly Mistakes of Entrepreneurship

• :
– Business entrepreneurship fail because:-
• Management Mistakes
• Lack of Experience
• Poor financial control
• Weak marketing efforts
• Failure to develop a strategic and effective plan
• Uncontrolled Growth
• Poor location
• Improper inventory control
• Incorrect or unsuitable pricing
• The inability of to move into entrepreneurial thinking mindset
from the previous secured permanent managerial position held.
How to avoid failure in a Entrepreneurial business.

– Know your business in depth.

– Develop a good, effective and solid Business Plan.
– Manage your financial resources effectively.
– Have a thorough and complete financial statement.
– Learn hire and manage people effectively.
– Keep physically fit, consume healthy foods, and avoid
addictive consumption cigarettes and alcohol.