entrepreneurship-development

Entrepreneurship development module 1

Entrepreneurship Development

This blog post covers the first module of entrepreneurship development & project management of MG university MBA syllabus.

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1 Entrepreneurship Development

Entrepreneur

  • An entrepreneur is a person with a vision who orchestrates other people’s time, talents and money to make his/her vision real.
  • An entrepreneur is a person who organizes and operates a business concern for the purpose of making a profit. He is a specially talented person having the qualities of skill, initiative, and insight of innovation to achieve high goals.
  • He looks for opportunities, identifies and seizes them for making economic gains.
  • The economic progress of a country mainly depends on the success or failure of entrepreneurial development in that country.

Two major problems faced by developing countries are unemployment and underemployment.

  • Unemployment – a situation where individuals do not get any jobs and thereby earns nothing. It reduces the standard of living and the economic development of the country.
  • Underemployment – a situation where the individuals are employed on jobs that are below their educational standard.
      • Example – An engineer appointed as a bank clerk
  • Entrepreneurship solves all these problems.

So Why Choose to be an Entrepreneur?

  • Freedom: “starting and running a business is the best way of controlling your destiny”
  • Changing the world: “creating an enterprise is perhaps the most effective way of making a positive difference to society that has ever been devised.” “What could be more important than creating jobs?”
  • Progress: “new business is about upsetting the status quo, thereby leading to progress. I think that is a virtuous mission”
  • Social mobility: “business is a fantastic way for someone from a modest background … to improve their life and get ahead.”
  • Creative destruction: inefficient and loss-making companies die … but productive companies tend to create a virtuous circle … attract talent, pay more, make investors good returns, and can afford to launch better products. This is called progress.”
  • Creating a better future: “the inventive ability of entrepreneurs to find solutions to … problems” such as global warming and so forth.

Entrepreneurship is about striving for a better future – not just dreaming.

Evolution of the word entrepreneur

  • Entrepreneur – word derived from the French verb ‘entreprendre’ which means ‘to undertake’.
  • Original meaning – Organizer of musical or other entertainments.
  • Early 16th century – Applied to those who were engaged in military expeditions.
  • In the 17th century – Extended to cover civil engineering activities
  • From the 18th century – Refer to economic activities.

Since then, the term ‘entrepreneur’ is used in various ways and views.

Entrepreneur – Definitions

Richard Cantillon (French economist)

  • He is the first one to use the term ‘entrepreneur’ in the business field.
  • To him, an entrepreneur means a dealer who purchases the means of production for combining them into marketable products.

J.B. Say (French economist)

“an entrepreneur is an economic agent who unites all means of production, the labor force of the one and the capital or land of the others and who finds in the value of the products which results from their employment, the reconstitution of the entire capital that he utilizes and the value of the wages, the interest and the rent which he pays as well as profit belonging to himself”

Joseph A Schumpeter

An individual who introduces something new in the economy – a new method of production not yet tested by experience in the branch of manufacture concerned, a product with which consumers are not yet familiar, a new source of raw material or of new markets and the like”.

According to him, entrepreneur = innovator

Innovation may be in the areas of,

  • Introduction of a new product
  • Introduction of a new method of production
  • Development of a new technology
  • Development of a new market
  • Finding out the source of new materials
  • Making changes in the organization and management

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Entrepreneurship

Different scholars have given different definitions to the term ‘entrepreneurship”

For some, entrepreneurship is risk ‘risk-bearing’, for some others, it is ‘innovating’ and for certain others, it is ‘thrill-seeking’.

An entrepreneur is essentially a business leader and the function performed by him is entrepreneurship.

A.H Cole defines entrepreneurship as “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”.

The concept of entrepreneurship involves four key elements

  1. Organizing
    • Mobilization of resources and utilization of them to initiate, maintain or enhance profit by the production of goods and services.

2. Risk-bearing

    • Starting a new enterprise always involves risk. The enterprise may earn a profit or incur a loss. The entrepreneurs should be bold enough to assume the risk.

3. Vision

    • The entrepreneurial vision includes the relentless pursuit of operational excellence, innovative technology, and responsiveness to the needs of the market.

4. Innovating

    • Innovation refers to the introduction of something new into the market.

In short, entrepreneurship is the practical ability to create and buildup something new from nothing. It is fundamentally an act of human activity. The act of merely observing, analyzing or interpreting a process is not entrepreneurship.

Features of entrepreneurship

  • It is a process of action to set up an enterprise
  • It is an innovative response to the environment
  • It means creating something new
  • It is the organizing of a business or other enterprise and coordinating of managerial functions
  • It is the undertaking of risks and the handling of economic uncertainties.

Enterprise

  • An enterprise represents a business unit or a service unit which has been established by an entrepreneur.
  • It is the end result of all the entrepreneurial activities initiated by him.
  • Enterprise is the fourth factor of production.
  • Enterprise is the basic unit of economic organization

Relation of entrepreneur, entrepreneurship & enterprise

relation between entrepreneur, enterprise & entrepreneurship

Difference between entrepreneur and entrepreneurship

Barriers to entrepreneurship

  • Lack of a viable concept
  • Lack of marketing knowledge
  • Lack of technical skills
  • Lack of seed capital
  • Lack of business know-how
  • Lack of motivation
  • Time pressures and distractions
  • Legal constraints and regulations
  • Monopoly and protectionism
  • Inhibitions due to patents

Entrepreneur v/s manager

Entrepreneur v/s manager

Intrapreneurs

  • Entrepreneurs are people that notice opportunities and take the initiative to mobilize resources to make new goods and services.
  • Intrapreneurs also notice opportunities and take initiative to mobilize resources, however, they work in large companies and contribute to the innovation of the firm.
  • Intrapreneurs often become entrepreneurs.
  • In recent times, a new breed of entrepreneurs is coming to the fore in large industrial organizations, known as intrapreneurs. They emerge from within the countries of an existing enterprise.
  • An intrapreneur is a person who takes on the responsibility to innovate new ideas, products, and processes or any new invention within the organization
  • In big industrial organizations, the top executives are encouraged to catch hold of new ideas and then convert these into products through research and development activities within the framework of the organization. Intrapreneur with his innovations and dedicated effort is considered a valuable asset by the organization. He serves as a champion to others in the organization, inspiring them.
  • Learning organizations encourage intrapreneurship.
  • Organizations want to form:
      • Product Champions: people who take ownership of a product from concept to market.
      • Skunkworks: a group of intrapreneurs kept separate from the rest of the organization.
      • New Venture Division: allows a division to act as its own smaller company.
      • Rewards for Innovation: link innovation by workers to valued rewards.
  • In many countries, it is found that an increasing number of intrapreneurs are leaving their jobs in big organizations and are starting their own enterprises. The reason for leaving their parent organization are many.
  • They feel that they can stand on their own legs from their successful performance in the parent organization.
  • These persons find that the management is not receptive to their new ideas

Entrepreneur v/s Intrapreneur

Entrepreneur vs intrapreneur

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Characteristics of an entrepreneur

  • An analytical study on successful entrepreneurs like Tata, Birla, Kirloskar, Dalmia, and others reveals that they all had a humble beginning leading them up to great heights.
  • The success or failure of a small enterprise mainly depends on the personal abilities of the entrepreneur.
  • A successful entrepreneur must possess certain important qualities.
  • The most important characteristic of an entrepreneur is his achievement motivation. All other characteristics emanate from this achievement motivation. Some of the important characteristics of an entrepreneur are:
    • Hard work: The success or failure of an entrepreneur mainly depends on his willingness to work hard. It is the most distinguishing characteristic of a successful entrepreneur. An entrepreneur’s tireless, tedious and laborious work will enable him to lead his business to success even in unfavorable situations.
    • The desire for high achievement: Achievement motivation is the single most factor that determines the success of an entrepreneur. Strong desire to achieve high goals in business will help the entrepreneur to develop his business empire. The achievement motive enables him to overcome the obstacles and anxieties, to encounter misfortunes, to devise remedial actions and to run the business successfully.
    • Optimism: Successful entrepreneurs are not anxious or worried about the problems faced by them in the present. They are optimistic and think that the situations will become favorable to business in the future. This optimistic approach will result in the effective management of the enterprise.
    • Independence: A successful entrepreneur does not like to be guided by others. He should have his own ways and means of performing things. He should be independent in matters related to business.
    • Foresight: An entrepreneur must have the ability to foresee future changes in the business environment. He must be vigilant with regard to the changes that are taking place in the market such as consumer attitudes, technological changes, demand and supply gaps.
    • Organizing ability: An entrepreneur should possess organizing capacity. He should have the ability to mobilize the factors of production – land, labor, and capital – required for starting an enterprise and then to produce the goods. The fortune of an enterprise mainly depends on the organizing abilities of the entrepreneur.
    • Innovative skill: Every business firm is set up to cater to the needs of consumers: so the production will be consumer-oriented. For this, the entrepreneur has to evaluate the changes in the tastes and preferences of the consumers from time to time. He must conduct research and innovative activities with a view to producing goods to satisfy the consumer’s changing demands for the products.
    • Mental ability: An entrepreneur should possess intelligence and analytical mind to evaluate the business situation for making innovations
    • Ability to guard business secrets: Business secrecy is one of the fundamental aspects of a successful business. Disclosure of business secrets will favor the rival firms.
    • Decision making: For running a business, a number of decisions are to be taken. In order to make decisions, the entrepreneur should have the capacity to analyze the various aspects of the business.
    • Ability to maintain human relations: An entrepreneur has to deal with a number of persons like customers, suppliers, govt. officials, employees, etc. He should be tactful in dealing with them or else it will affect the reputation of the business.
    • Initiative and risk-bearing: He should have the initiative and drive to venture into new areas and to accept responsibility. Entrepreneurs should also possess the caliber to take the risks associated with their business. Profit is his reward for taking the risk.

Entrepreneurial competencies

For the successful completion of any job, the organizer should possess certain special qualities. These qualities are known as competencies or traits.

The major competencies are,

  • Knowledge: It means the collection and retention of information in one’s mind. Knowledge is necessary for performing a task but is not sufficient. A person with knowledge can describe things to others, but a mere description will not enable the listener to perform a job. For example, one can acquire knowledge in football by reading books regarding the rules of football or by any other means, but it does not mean that he can be a good football player. Knowledge is only one aspect of performing things. In order to be successful one needs to have the skill to translate the knowledge into practice.
  • Skill: Skill means the ability to practice knowledge. As in the above example, knowledge regarding football can be acquired by reading, talking, etc. But the skill to play football can be acquired only through practice. i.e., playing the game a number of times. Both knowledge and skill are required to perform the task.
  • Motive: Motive is an urge to achieve the goals. This achievement motivation directs a person to perform his duties in a better manner.

Entrepreneurial traits

  • Mental ability
  • Consist of intelligence and creative thinking. An entrepreneur should possess the ability to analyze problems to find out solutions.
  • Clear objectives
  • Without objectives, an entrepreneur cannot succeed.
  • Guarding business secrets
  • Leakage of business secrets is a serious matter. So entrepreneurs should be vigilant while selecting their employees.
  • Effective communication
  • Ability to mobilize resources
  • Technical knowledge
  • Risk-bearing capacity
  • Looking for opportunities
  • Persistence
  • Self-confidence
  • Hard-working mentality
  • Leadership
  • Effective strategist
  • Willingness to change

Creativity for entrepreneurs

A thorough observation of the entrepreneurial process shows that creative thinking is the must-have “skill” of an entrepreneur for the creation of new ideas. Creativity allows a person to devise interesting processes, which gives so many advantages to entrepreneurs.

But what exactly makes creativity so crucial and important in an entrepreneur’s work life?

  • Creativity leads to success by:
    • Creating new ideas for competitive advantage
    • Thinking of novel ways to develop your product and improve the business
    • Thinking the unthinkable.
    • Finding similar patterns in different areas
    • Developing new niches through creativity and entrepreneurship.

Creating new ideas for competitive advantage

The whole process of entrepreneurship is rooted in the creation and exploration of new ideas. When an entrepreneur is able to generate a new idea that is feasible as well as efficient, it gives him an edge over the competition. The ability to explore different niches is just like a learned skill or a resource that is possessed by an individual.

  • Thinking of novel ways to develop your product and improve the business. 
    • Creativity helps develop new ways of improving an existing product or service and optimizing a business. There is always a room for improvement in the deliverables of an enterprise; it is the creative entrepreneur who can assess how to do it.
  • Thinking the unthinkable.
    • Creativity requires imagination to produce the most obscure ideas. Imagination is needed to cross the boundary of “usual” and “normal” or to think outside the box. This allows entrepreneurs to think beyond the traditional solutions, come up with something new, interesting, versatile, and yet have success potential.
  • Finding similar patterns in different areas
    • Creativity enables people to connect dissimilar and unrelated subjects and make successful entrepreneurial ideas. Merging different fields creates interesting intersections that create new niches. Most people are afraid of bringing different disciplines together, but most interesting ideas come from colliding different fields.
  • Developing new niches through creativity and entrepreneurship.
    • In entrepreneurship, it is important that new aspects of traditional business are explored. This can be in the form of changing the method of manufacturing the product or delivering the service or how are they supplied to the user. All these areas can create a niche that has great potential in business.

Problem-solving skills for entrepreneurs

When it comes to problem-solving, each situation is different and therefore requires a different approach each time. Some business challenges, such as taking a new product to market to sell online can be very tough, and their solutions may require a lot more thought and critical evaluation than others.

Other problems are very simple, and you can solve them easily, but regardless of how big or how complex a problem is, you will always need to find a viable solution.

Part of being a great problem solver is knowing how to evaluate each situation and look at outcomes on a holistic level, analyzing how your solutions will affect you or your business in the long term.

Decision making for entrepreneurs

As an entrepreneur, you must make different types of decisions on an everyday basis. You must choose the directions. Also, you must solve problems. You must take action. The decision-making process is one of the most critical processes in your company.

  • Simply, you as an entrepreneur will make decisions about everything.
  • Some decisions are more influential on your overall business processes, but some of them are small decisions without a significant effect on your business as a whole.
Decision-Making Process

decision making process for entrepreneurs

  1. Recognize the problem – the gap
    • Every decision-making process starts with the problem or some discrepancy that exists between the desired and current state. You have the desired state, and you have an existing state. The difference between these two is the gap or problem that you must solve through the decision-making process.

     2. Analyze the problem

    • After you find possible problems that require solutions you can start with the analysis of already defined problems. How these problems impact the achievements of your small business?
    • At the end of this step, you will need to have a list of possible problems sorted by their urgency for the solution. In your analysis, you need to find causes and how the problem impacts your small business. If the impact of the problem is higher, also the importance of the problem will be higher.

3. Define possible solutions

    • This is the step when you need to start brainstorming all possible solutions for a given problem, or problem you want to solve with those solutions. For the most critical problems, you analyze in the previous step, create possible solutions.
    • When you think about solutions, also think about the causes of the problems. If you don’t remove the causes, your solutions will be only a temporary solution. Your decision-making process needs to include possible causes of each identified problem.

    4. Analyze all possible solutions

    • Because in the third step you come to more than one possible solution for a given problem, in this step you need to analyze all proposed solutions to rank them and make a decision that you will implement in the future. This step will need to give you the rankings of all possible solutions from the best ones at the top to the worst ones at the end of your list for each problem you discover at the beginning of the decision-making process.

     5. Select the best solution for the application

    • Now is time for the real decision. The final result from the decision-making process is a selection of the best possible solution to the problem. What will you implement as a solution for the given problem? The answer to this question will be the decision you are making.

     6. Implement the decision

    • We can’t talk about the decision-making process without the implementation of the decision you have made. You will not finish the job until you don’t implement what you have decided. Can you solve the problem only by discovering the solution and making the right solution? No, you will not solve your problem. You need to implement the solution and check the results to see if the specific solution really solve the identified problem.

Communication skills for entrepreneurs

Your success as an entrepreneur is determined in large part by your ability to communicate. You can be the best at what you do, but if you’re not communicating effectively with clients, staff and the market, then you’re missing opportunities.

Mastery of these different communication skills ensures that you’ll be effective at every level.

  • Listen deeply
    • Solid listening skills help you more effectively serve clients, make sales and manage employees because you’re picking up on and connecting to people’s most urgent concerns.
  • Interpret non-verbal cues
    • Don’t just practice awareness of your own body language. Analyze specific cues — such as posture, expressions, and gestures — being made by others when they’re speaking.
  • Conversing:
    • The conversation is one of the most basic forms of communication, but don’t underestimate it. A simple, friendly conversation with your employees can build trust and expose issues before they become serious. An innocuous bit of small talk with a stranger can turn into a sales opportunity. Learn to speak in an approachable, friendly way that you can apply to any situation.
  • Body Language:
    • Much of communication is nonverbal, so mastering your body language presentation is a must. In any situation, posture matters — sit or stand up straight with your shoulders back and your head high and straight. Look people in the eye. Don’t fidget. Keep your hands out of your pockets. And these are just the basics! Mastering body language can allow you to command a room.
  • Writing:
    • You don’t have to be a perfect writer, but you do need to learn to be direct and concise in written forms. You’ll be emailing and texting people within and outside your organization regularly, and it’s important that you communicate your ideas clearly in this medium, with minimal opportunities for misinterpretation.
  • Presenting :
    • You’ll be presenting in a few different formats as an entrepreneur, but they can be collectively grouped into one skill. You may be presenting company financials to your top employees or investors. You may present your business’ services to an interested buyer. You may even give a speech about entrepreneurship at a speaking event. In all these cases, clarity, conciseness, confidence, and poise are all key.
  • Negotiating:
    • You have to negotiate for almost everything in business, so the better you are at negotiating, the more successful your business will be. You’ll be able to secure better terms for your office’s lease, more reasonable salaries for your most talented employees and even more lucrative options for your top clients. Negotiating effectively is more than just using the right words; it employs timing, a knowledge of the right facts and the ability to remain confident throughout the process.
  • Mediating:
    • Though your role as a mediator will be less often necessary than your role as a converser, for example, there will be times when you have to step up and resolve conflict. It might be between two employees with differing opinions about whose responsibility something is. Or it might be between two competing vendors who suffered a lapse in communication. In any case, you’ll have to acknowledge both sides and help them work out their own problems.
  • Debating:
    • Debating here doesn’t necessitate arguing. It can be a healthy discussion of two or more alternative options in a productive, respectful setting. Your job in a debate isn’t to win against the enemy — it’s to present your case and opinions clearly. Doing so, whether you’re dealing with investors, partners or employees can help you elucidate your ideas with greater strength and clarity.
  • Leading:
    • Your responsibilities as a leader are multifaceted, but from a communications perspective, your biggest responsibilities are instilling confidence, trust, and passion in your team. You’ll be inspiring people through everyday messages, public and private, and retaining your poise as a leader throughout those situations is key to achieving and maintaining a powerful image.

Leadership skills for entrepreneurs

  • Spotting and Retaining the Best Talent:
    • Your business is as successful as the people working in it. Great leaders who created successful companies have one thing in common: They surround themselves with talented, courageous, loyal people. Once you have recruited them, invest in their development through training and coaching.
  • Delegation:
    • Entrepreneurs by nature have a healthy ego. “When it comes to their company, almost all entrepreneurs will say: Nobody can do it better than me.”
    • But those who are going to be successful are those who admit they can’t be the CEO, the chief financial officer, the marketing director, and the sales manager at the same time. They share, delegate and empower their teams.
  • Leading by Example:
    • Be honest and ethical in everything you do. Have strong values. Live what you are preaching.
  • Asking for Advice:
    • No matter how well you know your industry, change is reshaping business so fast that entrepreneurs develop blind spots or become uncertain about how to proceed.
  • Developing Leaders:
    • Leadership should start at the top of the organization, but leaders don’t necessarily come from positions of power. They can be found at all levels in an organization. Identify them and help them to develop their leadership skills. The transfer of knowledge through mentoring allows you to build a strong leadership pipeline in your company.

Entrepreneurial self-efficacy

  • The entrepreneurial self-efficacy is the perception of the confidence of the entrepreneurs in themselves in their own entrepreneurial capacities before they are laid out to launch out in the business.
  • The individuals having a high feeling of self-efficacy regard the situations as realizable opportunities.
  • The people with strong insurance concerning their capacities in a particular field regard the difficulties as challenges to take up rather than like threats to be avoided.
  • These individuals set stimulative goals and maintain a strong commitment to reaching them. They increase and maintain their efforts face to the difficulties and thus quickly recover their direction of the effectiveness after a failure or a delay. The failure is regarded as due to insufficient efforts or a lack of knowledge or know-how which can be acquired. The threatening situations are approximate here with insurance because the individuals estimate to exert control on those. This whole of characteristics of self-efficacy supports the personal achievements reduced stress and vulnerability.

Technology backup for entrepreneurs

Technology has important effects on entrepreneurship. No matter the size of your enterprise, technology has both tangible and intangible benefits that will help you make money and produce the results your customers demand. Technological infrastructure affects the culture, efficiency, and relationships of a business. It also affects the security of confidential information and trade advantages.

  • Communication with customers

First and foremost, technology affects a firm’s ability to communicate with customers. In today’s busy business environment, it is necessary for employees to interact with clients quickly and clearly. Websites allow customers to find answers to their questions after hours. Fast shipment options allow businesses to move products over a large geographic area. When customers use technology to interact with a business, the business benefits because better communication creates a stronger public image.

  • Efficiency of operations

Technology also helps a business understand its cash flow needs and preserve precious resources such as time and physical space. Warehouse inventory technologies let business owners understand how best to manage the storage costs of holding a product. With proper technology in place, executives can save time and money by holding meetings over the Internet instead of at corporate headquarters.

  • Research capacity

A business that has the technological capacity to research new opportunities will stay a step ahead of its competition. For a business to survive, it must grow and acquire new opportunities. The Internet allows a business to virtually travel into new markets without the cost of an executive jet or the risks of creating a factory abroad.

  • Web-Based Advertising

One of the most beneficial uses of technology is advertising to millions of people around the globe just at a click of a button. Web-based advertising consists of websites and social media. Websites can be built using DIY tools such as WordPress or Squarespace or professional web developers can be hired to create them. Unlike websites, social media accounts are very easy to build for your business and provide exposure on a wide variety of platforms such as Facebook, Twitter, and YouTube.

 

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Types of entrepreneurs

An entrepreneur is an adventurous innovator who acts on his own account and introduces changes that others do not dare to experiment with. Every entrepreneur gives his business a means for the achievement of certain objectives. On the basis of these objectives, Clarence Danhof classifies the entrepreneurs into 4 categories.

  1. Innovative entrepreneurs
  2. Adoptive or imitating entrepreneurs
  3. Fabian entrepreneurs
  4. Drone entrepreneurs
    1. Innovative entrepreneurs
      • Is one who introduces new goods and new methods of production, discover new markets and recognizes a better combination of an enterprise. Among the different types of entrepreneurs, the innovative entrepreneur is the most vigorous type of entrepreneur. According to Peter F. Drucker, the innovative entrepreneur is one who always searches for change, responds to it, and exploits every opportunity. Example. Elon Musk
       2. Adoptive or imitating entrepreneurs
    • Adoptive entrepreneurs are adopting or imitating the successful innovations made by other entrepreneurs. They play a vital role in developing countries, where innovative entrepreneurs are scarce. In developing countries scarcity of capital and skilled labor act as a hindrance in the path of innovative entrepreneurship.
    • Adoptive entrepreneurs are the most suited for developing countries because such countries can adopt technology, knowledge, and skills already available in advanced countries.
      • Eg. Cochin Shipyard has adopted the technology of Mitsubishi Heavy Industries Ltd. of Japan.
      • Flipkart
      • OLA
     3. Fabian entrepreneurs
  • Fabian entrepreneurship is characterized by great caution in introducing any change. These entrepreneurs have neither the will to introduce new changes nor the desire to adopt new methods. Fabian entrepreneurs are shy and lazy. Their dealings are determined by customs, religion, tradition and past practices. Being not interested in taking risks, they follow the footsteps of their predecessors.
    • E.g. Kodak, a company that happened to be the market leaders in producing analog cameras but they did not realize the change and the introduction of the Digicam.
    4. Drone entrepreneurs
  • A drone entrepreneur follows the traditional method of production. Under no circumstances, he will change the method of production that he has introduced. He sticks on to his existing position even at the cost of losses. He is hesitant to deviate from the traditional method of functioning. In majority cases, drone entrepreneurs are thrown out of the market due to the poor marketability of their products.
  • E.g. Traditional industries of Kerala like bamboo and coir industries. There is a tobacco making industry that is still making tobacco entirely by hand. Not willing to use the machines.

Types of entrepreneurs in the Indian context

  • In the Indian context, entrepreneurs are classified as follows.
  1. Entrepreneurs by inheritance
  2. Individual entrepreneurs
  3. Institutional entrepreneurs
  4. Technologist turned entrepreneurs
  5. Self-employed entrepreneurs
  6. Foreign returned entrepreneurs
  7. Non-resident Indian entrepreneurs (NRI entrepreneurs)
  • Entrepreneurs by inheritance
    • In India, such entrepreneurs are very common. Most of these enterprises are family-controlled business units and their management is passed from one generation to another. Only a minor portion of such entrepreneurs are innovative and a majority of them want to conduct business as drone entrepreneurs
      • Eg. Wipro
  • Individual entrepreneurs
    • This type of entrepreneurs is seen mainly in the small scale sector. As an individual, he encounters many limitations like lack of sufficient finance, lack of efficient hands in marketing the products, delay in the implementation of the decision, etc. In a highly populated country like India, where unemployment is the main problem, individual entrepreneurship has got a great scope.
  • Institutional entrepreneurs
    • Institutional entrepreneurship can co-ordinate different types of personal skills, ability, and risk-bearing capacity. Such entrepreneurs act as a corporate body where decision making is done after discussing with each other. The combined skill and ability of the group is maximized. The business can enjoy financial prosperity to a certain extent
  • Technologist turned entrepreneurs
    • They are technically qualified persons who find their own employment opportunities as self-made entrepreneurs. They commercially exploit their inventions and technical knowledge by establishing their own business units.
  • Self-employed entrepreneurs
    • Most of these entrepreneurs are educated but employed. They need financial assistance from the govt. or from other financial institutions. They are also called Govt. sponsored entrepreneurs. The circumstances force them to act like entrepreneurs. The success of self-employed entrepreneurs paves the way for the speedy economic development of the country
  • Foreign returned entrepreneurs
    • This type of entrepreneurs is many in India, especially in Kerala. People who were employed in foreign countries could earn attractive amounts. On return, some of them seek employment and business opportunities here. But, foreign returned entrepreneurs face many difficulties in making their business a success. Lack of technical knowledge, inefficiency in exploring markets, lack of knowledge in analyzing market conditions, etc. are some of the problems which they usually face. Many of them face severe setbacks within a short time.
  • Non-resident Indian entrepreneurs ( NRI entrepreneurs)
    • They are another type of entrepreneurs having a foreign connection. They are persons with Indian citizenship residing outside India. Our government extends attractive incentives to NRIs to start a business in India and to utilize their savings in a better way. Nowadays, the central and state governments persuade the NRI to make investments in India. SO the NRI entrepreneurs are also known as persuaded entrepreneurs.
    • Examples
      • Ravi Pillai
      • Yusaf Ali

Based on the Type of Business:

  1. Trading Entrepreneur:

As the name itself suggests, the trading entrepreneur undertakes trading activities. They procure the finished products from the manufacturers and sell these to the customers directly or through a retailer. These serve as the middlemen like wholesalers, dealers, and retailers between the manufacturers and customers

  1. Manufacturing Entrepreneur:

Manufacturing entrepreneurs manufacture products. They identify the needs of the customers and, then, explore the resources and technology to be used to manufacture the products to satisfy the customers’ needs. In other words, the manufacturing entrepreneurs convert raw materials into finished products.

  1. Agricultural Entrepreneur:

The entrepreneurs who undertake agricultural pursuits are called agricultural entrepreneurs. They cover a wide spectrum of agricultural activities like cultivation, marketing of agricultural produce, irrigation, mechanization, and technology.

Based on the Use of Technology:

  1. Technical Entrepreneur:

The entrepreneurs who establish and run science and technology-based industries are called ‘technical entrepreneurs.’ Speaking alternatively, these are the entrepreneurs who make use of science and technology in their enterprises. Expectedly, they use new and innovative methods of production in their enterprises.

         2. Non-Technical Entrepreneur:

  • Based on the use of technology, entrepreneurs who are not technical entrepreneurs are non-technical entrepreneurs. The forte of their enterprises is not science and technology. They are concerned with the use of alternative and imitative methods of marketing and distribution strategies to make their business survive and thrive in the competitive market.

Based on Ownership:

  1. Private Entrepreneur:

A private entrepreneur is one who as an individual sets up a business enterprise. He/she is the sole owner of the enterprise and bears the entire risk involved in it.

Example: Yusuf Ali

  1. State Entrepreneur:

When the trading or industrial venture is undertaken by the State or the Government, it is called ‘state entrepreneur.’

Example: Indian Railway

  1. Joint Entrepreneurs:

  When a private entrepreneur and the Government jointly run a business enterprise, it is called ‘joint entrepreneurs.’

Example:  Cochin International Airport Limited – CIAL

Based on Gender:

  1. Men Entrepreneurs:

When business enterprises are owned, managed, and controlled by men, these are called ‘men entrepreneurs.’

  1. Women Entrepreneurs:

Women entrepreneurs are defined as the enterprises owned and controlled by a woman or women having a minimum financial interest of 51 percent of the capital and giving at least 51 percent of employment generated in the enterprises to women.

Based on the Size of Enterprise:

  1. Small-Scale Entrepreneur:

An entrepreneur who has made an investment in plant and machinery up to Rs 1.00 crore is called ‘small-scale entrepreneur.’

  1. Medium-Scale Entrepreneur:

The entrepreneur who has made an investment in plant and machinery above Rs 1.00 crore but below Rs 5.00 crore is called ‘medium-scale entrepreneur.’

  1. Large-Scale entrepreneur:

The entrepreneur who has made an investment in plant and machinery more than Rs 5.00 crore is called ‘large-scale entrepreneur.’

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Role of entrepreneur in economic development

Entrepreneurs play a vital role in the economic development of a country. The economic resources alone will not produce development. There should be dynamic entrepreneurs with vision, initiative and drive to make changes in the economic field. It is often said that “ India is a rich country inhabited by the poor”. India is endowed with plenty of natural resources and a good climate. In spite of these blessings, our country is only a developing one. The main reason for this underdevelopment is the lack of a sufficient number of dynamic entrepreneurs. A country can achieve economic development only when it is able to utilize its natural resources effectively.

Economic development and entrepreneurship

  • Economic development essentially means a process of upward change by which the real per capita income of a country increases over a long period of time. Entrepreneurship is a very significant factor that brings about this change.
  • The economic history of the presently developed countries like America, Russia, Britain, France, and Japan bears testimony to the fact that entrepreneurship is an inevitable cause for their economic development. The entrepreneurs played a prominent role in the economic development of these countries. The people of underdeveloped and developing countries are now aware of the importance of entrepreneurship for economic development. Now they have realized that for achieving economic development it is necessary to develop entrepreneurial mentality among their people.

The following points elucidate the pivotal role played by entrepreneurs in economic development.

  1. Capital formation
    • Capital formation involves making more capital goods such as machines, tools, factories, transport equipment, materials, electricity, etc., which are all used for the future production of goods. One single individual will not be able to contribute the entire capital required for a big business concern. So, the entrepreneur mobilizes the small and scattered savings from the households and this will lead to capital formation.

 2. Generating employment opportunities

    • The most important socio-economic problem faced by developing countries is unemployment. The entrepreneurs by setting up new business concerns can generate employment opportunities. Most of the entrepreneurial concerns are labor-oriented and they provide large scale employment opportunities to the unemployed which will result in an improvement in the standard of the people.

     3. Balanced regional development

    • Setting up of business concerns in the rural or underdeveloped areas will help to achieve a balanced regional development of the nation. Small business concerns can be set up at places where raw materials & labor forces are available.

    4. Encourages the effective utilization of capital & natural resources

    • Entrepreneurs help in the effective utilization of idle funds in society. They can also profitably utilize the natural resources at their place of operation. In the absence of entrepreneurs, these funds & resources will be kept idle.

     5. Reduces the concentration of economic power

  • Entrepreneurship reduces the accumulation of economic power in a few hands. It ensures a wider distribution of economic power among the people.

    6. Promotes export trade

  • Exports are necessary for earning foreign exchange. So the countries follow a policy of export promotion & import substitution. Entrepreneurs setting up their business as EOUs (Export Oriented Units) at EPZs (Export Promotion Zones) will help to increase the exports of the nation. The level of exports is one of the vital ingredients of economic development.

 7. Promotes the equitable distribution of wealth & national income

Entrepreneurship helps to achieve the socialistic objective of the nation. It helps to reduce disparity in income & wealth of people. It creates wealth, generates employment & income & increases the standard of living of the people.

Factors affecting entrepreneurial growth in India

The development of a nation depends on the development of entrepreneurship. Emergence & development of entrepreneurship is not a spontaneous phenomenon. It depends on several economic, social, political & psychological factors that are often regarded as supporting conditions to entrepreneurship growth.

These conditions may have both positive & negative influences on the emergence & growth of entrepreneurship.

  • Positive influence promotes entrepreneurship
  • Negative influence inhibit entrepreneurship

1. Economic Factors

    • Lack of adequate infrastructure facilities
    • Non-availability of capital
    • Lack of good quality cheap labor
    • Lack of good quality cheap raw materials
  1. Lack of adequate infrastructure facilities
    • Successful implementation of an enterprise requires various infrastructural facilities like transportation, communication, power supply, technical knowledge, irrigation facilities, etc.
    • These facilities help the entrepreneur improve his efficiency & reduce the cost of production.
    • Developing countries like India lack these facilities, & the entrepreneur has to obtain them at his own expense. This greatly affects his profit margin & discourages him.
    • It is not possible for entrepreneur to set up his own railway line or power project & then indulge in entrepreneurship

  2. Non-availability of capital

    • Maximization of production & minimization of cost is the twin objective of all inventions.
    • Huge amounts of capital are needed for conducting research & development activities.
    • Capital is needed for purchasing machinery & equipment, to adopt the latest innovations, to import raw materials and also to meet working capital requirements.
    • The rate of interest charged by banks on loans & the rate of domestic savings affects the capital requirements of an entrepreneur.
    • Non-availability of adequate capital & the low rate of domestic savings prevent the development of entrepreneurship in India.

3. Lack of good quality cheap labor

    • Easy availability of the right type of workers also affects entrepreneurship. The quality rather than the number of labor influences the emergence and growth of entrepreneurship. The problem of labor immobility can be solved by providing infrastructural facilities including efficient transportation.
    • Need cheap, quality labor

       4. Centralization of Economic Power

    • Dominance by few industrialists on most of the industries in India implies that small entrepreneurs do not get the opportunity to get ahead. The big industrialist is capable of molding the government policies and rules in their favor.
    • These big industrialists run their industrial empire, parallel to the government, and as a result, the government is also unable to have the adequate industrial development of the country.
    • The centralization of economic power in the hands of a few big Industrialists has also resulted in slow entrepreneurship growth in India.

      5. Low Expenditure on Research and Development

  • The government and private entrepreneurs incur expenditure on research and development activities.
  • The entrepreneurs regard expenditure on research and investigation is unnecessary.
  • As a result, innovations do not get encouragement. The Indian entrepreneurs incur expenditure on research and development only for strategy formation for competitions, whereas expenditure incurred on research and development is a long-term investment in the real sense.

     6. Insufficient Government Facilities and Incentives

  • In India, the development of infrastructural facilities is quite inadequate.
  • In backward areas, the entrepreneurs are unable to establish Industries because sufficient incentives are not being provided by the government to the entrepreneurs in the form of allotment of suitable land, sources of energy and other required infrastructural facilities.

Social Factors

  1. Caste Factor
  2. Family Background
  3. Education
  4. Attitude of the Society
  5. Cultural Value

 

  1. Caste Factor
    • There are certain cultural practices and values in every society which influence the’ actions of individuals. These practices and values have evolved over hundreds of years. For instance, consider the caste system (the varna system) among the Hindus in India. It has divided the population on the basis of caste into four divisions. The Brahmana (priest), the Kshatriya (warrior), the Vaishya (trade) and the Shudra (artisan): It has also defined limits to the social mobility of individuals.
    • By social mobility’ we mean the freedom to move from one caste to another.
    • The caste system does not permit an individual who is born a Shudra to move to a higher caste. Thus, commercial activities were the monopoly of the Vaishyas. Members of the three other Hindu Varnas did not become interested in trade and commerce, even when India had extensive commercial inter-relations with many foreign countries. The dominance of certain ethnical groups in entrepreneurship is a global phenomenon

2. Family Background

    • This factor includes the size of family, type of family and economic status of the family.
    • Muslim families -> More into business

      3. Education

  • In any society, the system of education has a significant role to play in inculcating entrepreneurial values.
  • In India, the system of education prior to the 20th century was based on religion. In this rigid system, critical and questioning attitudes towards society were discouraged. The caste system and the resultant occupational structure were reinforced by such education. It promoted the idea that business is not a respectable occupation.
  • Later, when the British came to our country, they introduced an education system, just to produce clerks and accountants for the East India Company, The base of such a system, as you can well see, is very anti-entrepreneurial.
  • Our educational methods have not changed much even today. The emphasis is still on preparing students for standard jobs, rather than marking them capable enough to stand on their feet.

   4. The attitude of the Society

  • Certain societies encourage innovations and novelties and thus approve entrepreneurs’ actions and rewards like profits.
  • Certain others do not tolerate changes and in such circumstances, entrepreneurship cannot take root and grow.
  • Similarly, some societies have an inherent dislike for any money-making activity.

5. Cultural Value

  • If the culture is economically or monetarily oriented, entrepreneurship would be applauded and praised; wealth accumulation as a way of life would be appreciated. In developing countries like India, people are not economically motivated. Monetary incentives have relatively less attraction.
Other factors
  1. Bureaucracy and Redtapism
    • Besides the fact that the Government of India has been provided providing very few facilities to the entrepreneur, another fact is that due to the prevalence of Bureaucracy and red-tapism, even these facilities have benefited very few entrepreneurs.
    • Several times, the entrepreneur runs away, rather than obtaining these facilities, on account of lots of formalities.
  2. Lack of Education Training Facilities
    • Education and training facilities relating to entrepreneurship skill lack in India.

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