Management, Entrepreneurship & Cyber Law Module 3

ENTREPRENEURSHIP

MEANING OF ENTREPRENEUR

 Entrepreneur is a person who undertakes an enterprise. The process of

creation is called entrepreneurship.
 An entrepreneur can be considered as a person who bears the risk of
operating a business in the face of uncertainty about the future conditions.
 Who innovates and introduces something new in the economy Who shifts
resources out of an area of lower and into an area of productivity and
greater yield.
 Who plays a critical role in economic development and an integral part
of economic transformation
 To conclude an entrepreneur can be considered as an agent who buys
the four factors of production at certain prices in order to combine
them into product with a view to selling it at uncertain prices in
future.
 Entrepreneur is one who is endowed with more than average capacities
in the task of organizing and coordinating the factors of production, i.e.
land, labour capital and enterprises.
 Peter F. Drucker defines an entrepreneur as one who always searches for
change, responds to it and exploits it as an opportunity.
 Innovation is the basic tool of entrepreneurs, the means by which they
exploit change as an opportunity for a different business or service.
 International Labour Organization (ILO) defines entrepreneurs as those
people who have the ability to see and evaluate business opportunities,
together with the necessary resources to take advantage of them and to
initiate appropriate action to ensure success.

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Evolution of Concept

 The word “entrepreneur” is derived from French word “Entreprendre”

which was used to designate an organizer of musical or other
entertainments. It means “to undertake”.
 The Frenchmen who organized and led military expeditions were
referred to as “entrepreneurs”. Around 1700 A.D. the term was used for
architects and contractor of public works.
 In many countries, the term entrepreneur is often associated with a person
who starts his own new business.
 Business encompasses manufacturing, transport, trade and all other self
employed vocation in the service sector.
 16th century: In 16th century it was applied to those who were engaged
in military expeditions.
 17th century: In 17th century it was extended to cover civil engineering
activities such as construction and fortification. But it was Richard
Cantillon, an Irishman living in France who first used the term
entrepreneur to refer to economic activities. According to Cantillon “An
entrepreneur is a person who buys factor services at certain prices with a
view to selling its product at uncertain prices”.
 18th century: In the beginning of the 18th century the word was used for
economic aspects. In the way the evolution of the concept of entrepreneur
can be considered to be over more than four centuries.

CHARACTERISTICS OF ENTREPRENEUR

A good entrepreneur should posses the following Characteristics:

1. Creativity
2. Innovation
3. Dynamism
4. Leadership

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5. Teambuilding
6. Achievement motivation
7. Problem solving
8. Goal Orientation
9. Risk taking & Decision making ability
10. Commitment
“NOTE: EXPAND AND WRITE THESE POINTS ”
Functions of Entrepreneur:
Performs functions such as planning, organizing, managing, risk bearing and
decision making.
1. Planning of the project: He is the organizer to conceive the idea of
launching the project and to Program to structure of the business.
2. Management: The entrepreneur is also responsible for the management of
business. He tries to have a least cost combination of factors of production.
3. To Face Risks: He faces uncertainly and bears risks in his business
uncertainly comprising those risks against which it is not possible to insure. He
also faces the risk of other producers may enter the market
4. Distribution of Rewards: He is responsible of distributing the rewards to all
factors of production. He pays the reward in the shape of rent, wage, and
interest and bears the risk of profit or loss himself
5. Sale of Products: An entrepreneur is also responsible of marketing,
advertising. He wants to maximize his profits by selling his product in the
market.
6. Scale of Production: He decided the scale of business in according with the
provision of capital. Then, he takes the decision of what where and how to
produce goods.
7. Joint stock Organization: In a partnership, the entrepreneurial functions are
divided between the partners. But in public limited company, the board of
directors takes this responsibility with nationalized enterprise; the

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entrepreneurial decisions are left to the government or a body to which

government has delegated its Powers.

TYPES OF ENTREPRENEUR
The entrepreneur have been broadly classified as according to the type of
1. According to the type of Functional Characteristics:
a. Innovative Entrepreneurs: Such an Entrepreneur introduces New Goods /
Products / Services or New Methods of Production or discovers New Markets
or Reorganizes his Enterprise. Entrepreneurs in this Group are characterized by
an aggressive collection of information for trying out Novel Combination of
Factors. Such Entrepreneurs do well when a certain level of development is
Already achieved; they look forward to improve upon the Past.
b. Imitative or Adoptive Entrepreneurs :Such Entrepreneurs do not Innovate
themselves, but Imitate or Copy Techniques & Technology innovated by other
Innovative Entrepreneurs. They are characterized by their readiness to adopt
Successful Innovations by other Entrepreneurs. They are particularly suitable for
under Developed Regions as Adoption saves Costs of Trial & Error.
c. Fabian Entrepreneur: They display great caution & skepticism in experimenting
with any change in their Enterprise. They adopt changes only when there is an
imminent threat to the very Survival of their Enterprise.
d. Drone Entrepreneur: These Entrepreneurs are characterized by a Die – Hard
Conservative Attitude. They do not easily seize opportunities to make changes in
their production techniques or the Technology employed, even at the Cost of
Low Returns on their Investments compared to other similar enterprises. Such
entrepreneurs may even incur Huge Losses but they will not be ready to make
Changes in their existing production techniques.
2. According to the type of Development Angle:
a. Prime Mover: This Entrepreneur sets into Motion a Powerful Sequence of
Development, Expansion & Diversification of Business.
b. Manager: Such an Entrepreneur does not initiate Expansion & is content just
Staying in Business.
c. Minor Innovator: He contributes to Economic Progress by finding better use for
Existing Resources.

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d. Satellite: The Entrepreneur assumes a Supplier’s Role & slowly moves towards a
Productive Enterprise.
e. Local Trading: Such an Entrepreneur limits his enterprise to the Local Market.
3. According to the type of Business:
a. Manufacturing: Entrepreneur is involved in Production of Value Added Goods by
using Various Inputs – Raw Materials, Consumables, Labor, Power & Other
Utilities. Goods can be a Variety of Products like Castings, Forgings, Soaps,
Detergents, Various chemicals, Textiles, Plastic Components, Footwear, School
Bags, Electronic & Electrical Items, Computer Related Products etc.
b. Wholesaling: An Entrepreneur with such a Business sells Products to the Middle
Men or Retailers
c. Retailing: An Entrepreneur with such a Business sells Products directly to the
Consumers or End Users.
d. Service: An Entrepreneur in this Business sells Services & not the Products.
4. According to the type of Behavioral Scientists:
a. Solo Operators: Such Entrepreneurs usually Work alone & if needed at all, employ
a few employees to assist. Most of the Entrepreneurs begin their entrepreneurial
career in this fashion.
b. Active Partners: These Entrepreneurs start their enterprise in Partnership. All the
Partners actively participate in the Operation of the Enterprise. Entrepreneurs
who only contribute funds to the enterprise but do not actively involve in
Business Activity are called simply “Partners”.
c. Inventors: Such Entrepreneurs with their Competence & Inventive Nature Invent
new products. Their Basic Interest lies in Research & Innovative Activities.
d. Challengers: Such Entrepreneurs plunge into Business because of the Challenges it
presents. When One Challenge is satisfied, they will be on the lookout for New
Challenges.
e. Buyers: Such Entrepreneurs do not wish to bear much Risk. Hence, in order to
Reduce Risk involved in establishing a New Enterprise, they wish to buy an
Ongoing One.
f. Life Timers: Such Entrepreneurs take Business as an Integral Part of their Life.
Usually, the Family Enterprise & Businesses which call for Personal Skills fall in
this Category of Entrepreneurs.

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5. According to technology:
i. Technical entrepreneur: are individuals they get an idea of new product or
service in business. They deal with product development, marketing and sales.
ii. Non-technical entrepreneur: is not concerned with technical aspect of product.
They mainly concerned with development of alternative marketing and
distribution strategies to promote their business.
iii. Professional entrepreneur: is a person whose interest is to establish a business
but does not deals with management and organizing it.
6. According to growth:
Growth of an enterprise may be termed as low, medium or high. Growth
entrepreneurs are those who take up an industry with substantial growth
prospects.
7. According to stages of development:
i. First generation entrepreneur: is one who start an industry by his own innovative
ideas and skills.
ii. Modern entrepreneur: is one who undertakes those prpjects that are well needed
and suited for changing demands.
iii. Classical entrepreneur: is one who is concerned with the customer and marketing
needs.
8. Classification of Entrepreneurs According to the area
a. Urban
b. Rural
9. Classification of Entrepreneurs According to the gender:
a. Men
b. Women
10. Classification of Entrepreneurs According to the sale of operation
a. Small
b. Medium
c. Large

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Stages in Entrepreneurial process:

 The process of starting a new venture can be referred to as an Entrepreneurial
process
 This process has 5 important stages:
i. Identification of an opportunity
ii. Evaluation of the opportunity
iii. Preparation of the business plan
iv. Determination & organizing the resources
v. Management of the Enterprise
i. Identification of an opportunity:
This is the first step in the Entrepreneurial process
 This may be from his own idea or from external sources like consumers,
business associates, members of distribution system, independent technical
organizations consultants etc.
 Consumers are the best source of idea for new venture who spells out the need
of a product or service
 The business associates also can give ideas of a product or service
 One can identify new business opportunities through discussion with a
retailer, wholesaler or trade representative
 Some individuals are highly technical oriented & are not interested in any
Entrepreneurship, such people conceptualize new business opportunities that
can be given to the interested
 Some government organizations & R&D centers also provide new ideas.
ii. Evaluation of the opportunity:
 The opportunity identified by using input from consumers, business
associates, members or technical people, must be carefully screened &
evaluated.
 This is the most critical element as it allows the Entrepreneur to assess
whether the specific Product or service provides sufficient return on investment.
 The evaluation process involves looking at the length of the opportunity, risks
& returns, its fit with personal skills and goals of the entrepreneur, its
uniqueness & differential advantage in its competitive environment.

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 The length of the opportunity & the market size & share are the 2 main aspects
for deciding the risks & gains or profits.
 Strengths, weakness, opportunities & threats analysis is one of the useful
analysis tools.
iii. Preparation of the business plan:  To achieve the proposed business
opportunity, a well defined business plan needs to be developed.
 This is tedious & time consuming activity; the business plan should contain the
following in order
 Title of the project, table of contents & executive summary  Description of
business & industry
 Technology plan
 Financial plan
 Organization plan
 Production & operation plan
 Summary of plan
iv. Determination & organizing the resources:  This process begins with
assessment of present resources. Enough care should be taken not to
underestimate the amount & nature of resources required
 The risk involved with insufficient or incorrect resources should be calculated.
 Organizing the resources at the appropriate time, alternative sources of supply,
process of manufacture etc.
 An entrepreneur should have a good idea of the various resources required with
respect to the quality, quantity, prices & sources. This will improve the
operational capability
v. Management of the Enterprise:
 After resources are acquired, the entrepreneur must use them to implement the
business plan
 The operational problem of the growing enterprise must also be examined
 An entrepreneur has to be aware of the legal & practical hurdles that he has to
face in the process of physically creating his business.
 This calls for a Management with all functions like planning, organizing,
staffing, directing & controlling.

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Role of Entrepreneur in Economic Development

 Entrepreneurs play an important role in the economic development of any
country
 The role of entrepreneurs in shaping the economic development is:
1. Entrepreneurs help create business organization by mobilizing the savings of
public
2. They provide large scale employment which reduces the unemployment
problem in the country
3. They promote industrialization in rural areas & reduce regional imbalances
4. They cause equitable distribution of wealth & income in many cases
5. They help reduce over-dependence on agriculture by rural people
6. They help reduce concentration of wealth in few hands
7. They encourage learning & usage of skills which might otherwise remain
unutilized
8. They increase reserves of the country by exporting their goods & services
9. They are basically changes-agents. They can initiate & bring in vast changes in
the structure of business & society
10. Successful Entrepreneurs become icons & can inspire a whole new breed of
Entrepreneurs
Entrepreneurship in India:
 The evolution of Entrepreneurship in India is the efforts of great people as well
as professionals.
 It started as family business around 1850s with the starting of cotton mill in
Bombay. From then on, Entrepreneurship had grown in all directions from cotton
mill to manufacture, to services, to electronic goods, healthcare, exports &
imports, IT, transport, education etc.
 Past: In the past “business community" was involved in trade. The following
points are respect to Entrepreneurship in the past:
 Manufacture & supply of a product was based on demand. The traders used to
book orders from the required people & get them from the producer.
 All the members of the family were involved in the business from planning to
manufacture stage &finally selling them

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 The industrial activity was controlled by caste system. For ex, weavers used to
weave cloths, gold, smith used to make ornaments, farmers used to produce food
products etc.
 The skill of any enterprise was inherited from ancestors  The trade activity
was dependant on caste system
 The family based industries & trade were badly affected during British rule
Indian Entrepreneurship was mainly in the areas of textiles, Iron & hydroelectric
projects etc.
 Present:  There is tremendous growth of industries & services over last 50-60
years. Banking, Automobiles, Software development, petrochemicals, steel,
cement etc are some of the major modern entrepreneurship areas where lot of
innovation has taken place.
 Some of the noteworthy highly talented Entrepreneurs of India are: Birla, J.R.D
Tata, Godrej, Hindujas, Azim Premji of Wipro, Narayan Murthy of Infosys, Raju
of Satyam computers, Dhirubhai Ambani of Reliance.
 Before 1940s the Indian Business were dominated by British companies except
for some well established companies like Tata Steel, Birla group  After 2nd
World war business opportunities were projected like cement, Steel & other
Infrastructures.
 Indian business began to expand after independence (1947).
Barriers of Entrepreneurship
 The various barriers of Entrepreneurship can be classified as follows:
1) Environmental Barriers:
 Raw materials: Non availability of raw materials for production, especially
during peak season is a big barrier
 Labour: Human resources is the most important resource in any organization.
Lack of availability both quantity & affects the Entrepreneur
 Machinery: Machinery becoming obsolete & the need for their maintenance &
upgrading is big difficulty for small organization
 Land, building & Infrastructure: these go a long way in deciding, the fortunes
of the company & the lack of good facilities

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2) Financial Barriers:  Finance is the life-blood of any organization. If there is

no proper flow of finances both in the company & in the country, there are bound
to be problems
 There are plenty of successful small businesses in India. But the Entrepreneurs
lack the will & strength to Scale up their operations
3) Personal Barriers:
 Lack of Self-Confidence: This is a very big emotional barrier an individual. It
is caused by peer pressure & lack of experience
 Lack of Motivation: In the beginning all Entrepreneurs are enthusiastic about
their projects. But they may lose interest in the face of challenges & competition.
 Lack of Patience: This barrier is most dominant in youth Entrepreneurs. When
things do not go as expected they may lose interest because of lack of
perseverance.
 Inability to invest in R&D and Innovate: This is one of greatest barriers of
Indian Entrepreneurs .Since they does not invest in R&D heavily, there will be no
technological breakthrough nor they have contributed to innovative products,
hence lack of innovation affects them.
4) Society Barriers:
 Religious & conservative attitudes of the society & communication
5) Other barriers:
1. Lack of technical knowledge
2. Government regulations
3. Obsolescence of technology or idea
4. Unstable & unpredictable markets
5. Globalization & entry of foreign goods
6. Risks

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