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45 views31 pages

Pme Unit 1 Mam

Uploaded by

Shobhit Sinha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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UNIT 1(KHU701)

Entrepreneurship
The ability to start, organize and run a business enterprise by overcoming all the
hurdles and trying to maximize the profit is known as entrepreneurship. Starting a
new venture is the best example of entrepreneurship. The concept of
entrepreneurship was introduced by Joseph Alois Schumpeter.

As per economics, entrepreneurship is based on the profit earned with the help of
land, labor, natural resources, and capital. It plays a huge role in the development
of a country in this continuously changing world and competitive global market.

Definitions of Entrepreneurship

(i) According to Peter F. Drucker “Entrepreneurship is defined as a systematic


innovation, which consists in the purposeful and organized search for changes, and
it is the systematic analysis of the opportunities such changes might offer for
economic and social innovation”.

(ii) According to Ricardo Cantillon “Entrepreneurship entails bearing the risk of


buying at a certain price and selling at uncertain prices.”

(iii) In the words of Joseph A. Schumpeter “Entrepreneurship is any kind of


innovative function that could have a bearing on the welfare of an entrepreneur.”

(iv) According to Robert K. Lamb “Entrepreneurship is that form of social


decision making performed by economic innovators.”

(v) As per A.H.Cole “Entrepreneurship is 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.”

(vi) The concept of Entrepreneurship has also been defined as “a special skill or
ability to mobilize the factors of production – Land, labour & capital and use
them to produce new goods and services”.

(vii) Entrepreneurship can also be described as a process of action, which an


entrepreneur undertakes to establish his/her enterprise.
In a nutshell, concept of entrepreneurship can be understood as under:

(i) Entrepreneurship involves decision making, innovation, implementation,


forecasting of the future, independency, and success.

(ii) Entrepreneurship is a discipline with a knowledge base theory and is an


outcome of complex socio-economic, psychological, technological, legal and
other factors.

(iii) It is a dynamic and risky process.

(iv) It involves a fusion of capital, technology and human talent.

(v) Entrepreneurship is equally applicable to big and small businesses, to


economic and non-economic activities.

(vi) Different entrepreneurs might have some common traits but all of them will
have some different and unique qualities.

(vii) Entrepreneurship is a process. It is not a combination of some stray


incidents.

(viii) It is the purposeful and organized search for change, conducted after
systematic analysis of opportunities in the environment.

(ix) Entrepreneurship is a philosophy and is the way one thinks, one acts and
therefore it can exist in any situation, be it business or government or in the field of
education, science & technology.

(x) Entrepreneurship is a creative activity.

(xi) It is the ability to create and build something from practically nothing.

(xii) It is a knack of sensing opportunity where others see chaos and confusion.

(xiii) Entrepreneurship is the attitude of mind to seek opportunities, take


calculated risks and derive benefits by setting up a venture.

(xiv) It is made up of activities to conceive, create and run an enterprise.


(xv) Entrepreneurship is a dynamic process of vision, change and creation.

To sum up, “Entrepreneurship is a dynamic process of vision, change and


creation. It 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, ability to
formulate an effective venture team, creative skill to organize needed resources,
the fundamental skill of building a solid business plan and, above all, the vision to
recognize opportunity where others see chaos, contradiction, and confusion.’’

Who is an Entrepreneur?
A person who can establish, administer, and succeed in a new venture or start-up
along with the possibility of loss, to make more and more profit, is called an
entrepreneur. The entrepreneurs are known as the innovators who replace the old
inventions with new ones for the comfort of society.

Characteristics of Entrepreneurship:
Not all entrepreneurs are successful; there are definite characteristics that make
entrepreneurship successful. A few of them are mentioned below:

Ability to take a risk- Starting any new venture involves a considerable amount of
failure risk. Therefore, an entrepreneur needs to be courageous and able to evaluate
and take risks, which is an essential part of being an entrepreneur.

Innovation- It should be highly innovative to generate new ideas, start a company


and earn profits out of it. Change can be the launching of a new product that is new
to the market or a process that does the same thing but in a more efficient and
economical way.

Visionary and Leadership quality- To be successful, the entrepreneur should


have a clear vision of his new venture. However, to turn the idea into reality, a lot
of resources and employees are required. Here, leadership quality is paramount
because leaders impart and guide their employees towards the right path of
success.
Open-Minded- In a business, every circumstance can be an opportunity and used
for the benefit of a company. For example, Paytm recognized the gravity of
demonetization and acknowledged the need for online transactions would be more,
so it utilized the situation and expanded massively during this time.

Flexible- An entrepreneur should be flexible and open to change according to the


situation. To be on the top, a businessperson should be equipped to embrace
change in a product and service, as and when needed.

Know your Product-A company owner should know the product offerings and
also be aware of the latest trend in the market. It is essential to know if the
available product or service meets the demands of the current market, or whether it
is time to tweak it a little. Being able to be accountable and then alter as needed is
a vital part of entrepreneurship.

Importance of Entrepreneurship:
Creation of Employment- Entrepreneurship generates employment. It provides an
entry-level job, required for gaining experience and training for unskilled workers.

Innovation- It is the hub of innovation that provides new product ventures,


market, technology and quality of goods, etc., and increase the standard of living of
people.

Impact on Society and Community Development- A society becomes greater if


the employment base is large and diversified. It brings about changes in society
and promotes facilities like higher expenditure on education, better sanitation,
fewer slums, a higher level of homeownership. Therefore, entrepreneurship assists
the organization towards a more stable and high quality of community life.

Increase Standard of Living- Entrepreneurship helps to improve the standard of


living of a person by increasing the income. The standard of living means, increase
in the consumption of various goods and services by a household for a particular
period.

Supports research and development- New products and services need to be


researched and tested before launching in the market. Therefore, an entrepreneur
also dispenses finance for research and development with research institutions and
universities. This promotes research, general construction, and development in the
economy.

Q1. Who is the father of entrepreneurship?

Joseph Alois Schumpeter is regarded as the father of entrepreneurship. He


introduced the concept of entrepreneurship.

Q2. What are the two main types of entrepreneurship?

There are many types of entrepreneurship, two examples of such are:


Small business entrepreneurship
Large company entrepreneurship

Q3. What are the key concepts of entrepreneurship?

The 4 key concepts of entrepreneurship are as follows:


Innovation
Risk taking
Vision
Organisation

Q4. What are entrepreneur traits?

Some of the most important entrepreneurial traits are:


Passion
Risk taking ability
Persisting nature
Innovative
Leading from the front
Ethical in nature
Entrepreneurship and its Scope
The scope of entrepreneurship is far-reaching.
 Entrepreneurship moves even beyond the closed system of an enterprise.
 Entrepreneurship in its capacity stimulates the economy which enables
societal change not only for fulfilling a need but also to generate revenue for
the entrepreneur, entrepreneurship thus provides jobs for the society and
develops communities.
 Entrepreneurship instigates a lot more than the mere creation of business.
 Entrepreneurship promotes the new business and provides opportunities to
improve the new business sectors.
In the long back, when washing machines were not invented, women had to spend
their time washing clothes without energy resources or water resources. This once
inspired a new company to sell low energy washing machines. This would save
time which in turn utilized the extra time to educate themselves.

Need of Entrepreneurship
The need for entrepreneurship is detailed down in the following section:
1. Passion, Perseverance & Persistence
Passion is a strong and uncontrollable emotion that is based on something higher to
achieve than what the person is carrying within himself. Perseverance is a mature
emotion that comes through experiences gathered and analysed. While persistence
is the sail that will row the boat of an entrepreneur through the toughest of
climates.
2. Big Dreamer
Dreaming big further strengthens an entrepreneur with his ability to dream and see
the wide picture. This is the very first step that sets the path to self-discovery.
3. Learning
Learning is never to stop irrespective of age and thus arming oneself with
education does play a vital role in forming leadership qualities when needed.
4. Good Listener
The ability to contribute will only come once we have abundance in ourselves, and
this comes by absorbing the words of others. The ability to truly listen to the
customers and employees is actually what makes a difference. This very skill leads
to a successful venture.
5. Financing Partner
Choosing a financing partner who understands the business needs is very much
essential. This is as critical as choosing the business which the entrepreneur wants
to pursue. Also, a business loan from the right lender will for sure play a pivotal
role in realizing the dreams of becoming a successful entrepreneur.

Core competencies in entrepreneurship


While there are a lot of core competencies in entrepreneurship, here are some
basic ones you can look for in your employees the next time there is a competency
evaluation process happening.

 Risk-taking abilities
 Out-of-the-box thinking and creativity
 Problem-solving abilities
 Taking initiative
 Persistence
 Persuasion and social skills
 Business management skills
 Critical thinking skills
 Networking skills
 Effective communication skills

Factors affecting Entrepreneurship Development(10 marks )


Entrepreneurship is influenced by four distinct factors:

# Economic development,

# Culture,

# Technological development

# Education

In areas where these factors are present, you can expect to see strong and
consistent entrepreneurial growth.
These conditions may have both positive and negative influences on the emergence
of entrepreneurship. Positive influences constitute facilitative and conducive
conditions for the emergence of entrepreneurship, whereas negative influences
create inhibiting milieu to the emergence of entrepreneurship.

Let us look at each one of them in details.

Economic Factors
Economic environment exercises the most direct and immediate influence on
entrepreneurship. This is likely because people become entrepreneurs due to
necessity when there are no other jobs or because of opportunity.

The economic factors that affect the growth of entrepreneurship are the following:

1. Capital

Capital is one of the most important factors of production for the establishment of
an enterprise. Increase in capital investment in viable projects results in increase in
profits which help in accelerating the process of capital formation.
Entrepreneurship activity too gets a boost with the easy availability of funds for
investment.

Availability of capital facilitates for the entrepreneur to bring together the land of
one, machine of another and raw material of yet another to combine them to
produce goods. Capital is therefore, regarded as lubricant to the process of
production.

2. Labor

Easy availability of right type of workers also effect entrepreneurship. The quality
rather than quantity of labor influences the emergence and growth of
entrepreneurship. The problem of labor immobility can be solved by providing
infrastructural facilities including efficient transportation.

Most less developed countries are labor rich nations owing to a dense and even
increasing population. But entrepreneurship is encouraged if there is a mobile and
flexible labor force. And, the potential advantages of low-cost labor are regulated
by the deleterious effects of labor immobility. The considerations of economic and
emotional security inhibit labor mobility. Entrepreneurs, therefore, often find
difficulty to secure sufficient labor.

3. Raw Materials

The necessity of raw materials hardly needs any emphasis for establishing any
industrial activity and its influence in the emergence of entrepreneurship. In the
absence of raw materials, neither any enterprise can be established nor can an
entrepreneur be emerged.

It is one of the basic ingredients required for production. Shortage of raw material
can adversely affect entrepreneurial environment. Without adequate supply of raw
materials no industry can function properly and emergence of entrepreneurship to
is adversely affected.

4. Market

The role and importance of market and marketing is very important for the growth
of entrepreneurship. In modern competitive world no entrepreneur can think of
surviving in the absence of latest knowledge about market and various marketing
techniques.

The fact remains that the potential of the market constitutes the major determinant
of probable rewards from entrepreneurial function.

“if the proof of pudding lies in eating, the proof of all production lies in
consumption, i.e., marketing.”

The size and composition of market both influence entrepreneurship in their own
ways. Practically, monopoly in a particular product in a market becomes more
influential for entrepreneurship than a competitive market. However, the
disadvantage of a competitive market can be cancelled to some extent by
improvement in transportation system facilitating the movement of raw material
and finished goods, and increasing the demand for producer goods.

5. Infrastructure
Expansion of entrepreneurship presupposes properly developed communication
and transportation facilities. It not only helps to enlarge the market, but expand the
horizons of business too.

Apart from the above factors, institutions like trade/ business associations, business
schools, libraries, etc. also make valuable contribution towards promoting and
sustaining entrepreneurship’ in the economy. You can gather all the information
you want from these bodies. They also act as a forum for communication and joint
action.

Social Factors

Social factors can go a long way in encouraging entrepreneurship. The social


setting in which the people grow, shapes their basic beliefs, values and norms.

The main components of social environment are as follows:

1. Family Background

This factor includes size of family, type of family and economic status of family.
In a study by Hadimani, it has been revealed that Zamindar family helped to gain
access to political power and exhibit higher level of entrepreneurship.

Background of a family in manufacturing provided a source of industrial


entrepreneurship. Occupational and social status of the family influenced mobility.
There are certain circumstances where very few people would have to be
venturesome. For example in a society where the joint family system is in vogue,
those members of joint family who gain wealth by their hard work denied the
opportunity to enjoy the fruits of their labor because they have to share their wealth
with the other members of the family.

3. Education

Education enables one to understand the outside world and equips him with the
basic knowledge and skills to deal with day-to-day problems. 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 till
on preparing students for standard jobs, rather than marking them capable enough
to stand on their feet.

4. Attitude of the Society

A related aspect to these is the attitude of the society towards entrepreneurship.


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(Economical Motivation)

Motives impel men to action. Entrepreneurial growth requires proper motives like
profit-making, acquisition of prestige and attainment of social status. Ambitious
and talented men would take risks and innovate if these motives are strong. The
strength of these motives depends upon the culture of the society. 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 the less
developed countries, people are not economically motivated. Monetary incentives
have relatively less attraction. People have ample opportunities of attaining social
distinction by non-economic pursuits. Men with organizational abilities are,
therefore, not dragged into business. They use their talents for non-economic end.

Psychological Factors

Many entrepreneurial theorists have propounded theories of entrepreneurship that


concentrate especially upon psychological factors. These are as follows :
1. Need Achievement

The most important psychological theories of entrepreneurship was put forward in


the early) 1960s by David McClelland. According to McClelland ‘need
achievement’ is social motive to excel that tends to characterize successful
entrepreneurs, especially when reinforced by cultural factors. He found that certain
kinds of people, especially those who became entrepreneurs, had this
characteristic. Moreover, some societies tend to reproduce a larger percentage of
people with high ‘need achievement’ than other societies. McClelland attributed
this to sociological factors. Differences among societies and individuals accounted
for ‘need achievement’ being greater in some societies and less in certain others.

The theory states that people with high need-achievement are distinctive in several
ways. They like to take risks and these risks stimulate them to greater effort. The
theory identifies the factors that produce such people. Initially McClelland
attributed the role of parents, specially the mother, in mustering her son or
daughter to be masterful and self-reliant. Later he put less emphasis on the parent-
child relationship and gave more importance to social and cultural factors. He
concluded that the ‘need achievement’ is conditioned more by social and cultural
reinforcement rather than by parental influence and such related factors.

2. Withdrawal of Status Respect

There are several other researchers who have tried to understand the psychological
roots of entrepreneurship. One such individual is Everett Hagen who stresses the-
psychological consequences of social change. Hagen says, at some point many
social groups experience a radical loss of status. Hagen attributed the withdrawal
of status respect of a group to the genesis of entrepreneurship.

Hage believes that the initial condition leading to eventual entrepreneurial behavior
is the loss of status by a group. He postulates that four types of events can produce
status withdrawal:

i. The group may be displaced by force;


ii. It may have its valued symbols denigrated;

iii. It may drift into a situation of status inconsistency; and

iv. It may not be accepted the expected status on migration in a new society.

3. Motives

Other psychological theories of entrepreneurship stress the motives or goals of the


entrepreneur. Cole is of the opinion that besides wealth, entrepreneurs seek power,
prestige, security and service to society. Stepanek points particularly to non-
monetary aspects such as independence, persons’ self-esteem, power and regard of
the society.

On the same subject, Evans distinguishes motive by three kinds of entrepreneurs


 Managing entrepreneurs whose chief motive is security.
 Innovating entrepreneurs, who are interested only in excitement.
 Controlling entrepreneurs, who above all other motives, want power and
authority.

Finally, Rostow has examined inter gradational changes in the families of


entrepreneurs. He believes that the first generation seeks wealth, the second
prestige and the third art and beauty.

Difference between Entrepreneur and Entrepreneurship

Following are the differences between entrepreneur and entrepreneurship:

Basis Entrepreneur Entrepreneurship

Entrepreneurship refers to the


An entrepreneur is someone process of creating and
who takes the initiative to managing a new business
Meaning
create a new business venture to achieve financial
venture. success and make a positive
impact on society.

Decision- Entrepreneurs make critical Entrepreneurship involves the


Basis Entrepreneur Entrepreneurship

making decisions about their process of making informed


businesses. The decisions decisions throughout the life of
are focused on the initial the business. It is mostly
creation and growth of their ongoing decision-making to
business. ensure the long-term success of
the business.

Entrepreneurs have an Entrepreneurship has an impact


impact on the market by on the economy by creating jobs,
creating new products or generating wealth, and driving
Impact services. Its impact is innovation. It includes the
focused on the creation of broader impact of creating and
their specific product or managing a successful business
service. on the economy and society.

Entrepreneurs focus on Entrepreneurship involves


growing their businesses creating a business that can
through innovation and sustain growth over the long
Growth expansion. Their main term. It includes the ongoing
focus is on the initial management and maintenance
growth of their necessary to ensure that growth
business. is sustainable.

Entrepreneurship involves the


Entrepreneurs own and process of starting and managing
manage their businesses. a business, regardless of who
Ownership They have a personal stake owns it. It is focused on the
in the success of their processes necessary to make a
business. business successful, regardless
of who owns it.

Entrepreneurs take Entrepreneurship involves


calculated risks to achieve assessing and managing those
Risk-taking
their goals. There is a risks throughout the process of
willingness to take risks. creating and managing a
Basis Entrepreneur Entrepreneurship

Risk-taking is an essential business. It requires ongoing risk


element of creating a management to ensure the
successful business. business’s long-term success.

Entrepreneurs are known


Entrepreneurship is focused on
for their ability to innovate
creating a business that can
and develop new products
sustain that innovation. It
Innovation or services. Their primary
includes the processes necessary
focus is on developing new
to support innovation over the
ideas and bringing them to
long term.
market.

Entrepreneurship involves
Entrepreneurs bear the various processes and activities
responsibility for the involved in creating and
success or failure of their managing a business. It includes
Responsibility
businesses. So, they have broader responsibilities such as
the ultimate responsibility financial management,
for their business. marketing, strategic planning,
and leadership.

Entrepreneurs focus on
identifying business
Entrepreneurship is focused on
opportunities and turning
creating and managing a
them into profitable
Focus successful business. It includes
ventures. They have a
the long-term management and
narrower focus on the
growth of that business.
initial creation of a
business.

Difference between Entrepreneur and Intrapreneur


As both entrepreneur and intrapreneur share similar qualities like conviction,
creativity, zeal and insight, the two are used interchangeably. However, the two are
different, as an entrepreneur is a person who takes a considerable amount of risk to
own and operate the business, with an aim of earning returns and rewards, from
that business. He is the most important person who envisions new opportunities,
products, techniques and business lines and coordinates all the activities to make
them real.

On the contrary, an intrapreneur is an employee of the organization who is paid


remuneration according to the success of the business unit, for which he/she is
hired or responsible.

The primary difference between an entrepreneur and intrapreneur is that the former
refers to a person who starts his own business with a new idea or concept, the latter
represents an employee who promotes innovation within the limits of the
organization.

BASIS FOR
ENTREPRENEUR INTRAPRENEUR
COMPARISON
Meaning Entrepreneur refers to a Intrapreneur refers to an employee
person who set up his own of the organization who is in
business with a new idea or charge of undertaking innovations
concept. in product, service, process etc.
Approach Intuitive Restorative
Resources Uses own resources. Use resources provided by the
company.
Capital Raised by him. Financed by the company.
Enterprise Newly established An existing one
Dependency Independent Dependent
Risk Borne by the entrepreneur Taken by the company.
himself.
Works for Creating a leading position in Change and renew the existing
the market. organizational system and culture.
Types of Entrepreneurs
Entrepreneurs are categorized into different types based on the following classifications:

o Based on the Business Type


o Based on the Technology
o Based on Ownership
o Based on Gender
o Based on the Enterprise size
o Based on Clarence Danhof

Based on the Business Type

Depending on the type of business, entrepreneurs are classified into the following
types:

Trading Entrepreneur

A trading entrepreneur refers to a person who undertakes business-related


activities. These types of entrepreneurs usually buy finished products in bulk from
manufacturers at some discount. They then sell these products directly or with the
help of retailers or vendors with profits. A business entrepreneur usually acts as a
middleman between manufacturers and customers. This may include wholesalers,
retailers, dealers, etc.
Manufacturing Entrepreneur

The founder of a business to manufacture products is known as a manufacturing


entrepreneur. Manufacturing entrepreneurs analyze market needs or customer
needs and manufacture products to meet such needs using various resources or
technologies. In simple words, manufacturing entrepreneurs transform raw
materials into finished products according to the customer's needs.

Agricultural Entrepreneur

Agricultural entrepreneurs refer to the types of entrepreneurs who primarily do


agricultural work. They participate in a wide range of agricultural activities such as
farming, irrigation, agricultural produce, mechanization, technology, etc.

Based on the Technology

Based on technology, entrepreneurs are classified into the following types:

Technical Entrepreneur

Such entrepreneurs are called technology entrepreneurs who use to start and
continue industries primarily based on science and technology. These
entrepreneurs develop new ideas and turn those ideas into technology-based
innovations and inventions. They always work to create new methods of
production in the fields of technology and science. Besides, they also manufacture
products that can help ordinary citizens and other non-technical entrepreneurs in
their enterprises.

Non-Technical Entrepreneur

As the name suggests, entrepreneurs who do not set up and run enterprises based
on science and technology are known as non-technical entrepreneurs. In short, non-
tech entrepreneurs are those who work for innovations using traditional methods.
They typically use alternative and exemplary marketing methods and follow non-
technical delivery strategies to engage directly with customers. This ultimately
helps them to survive and grow their business in a competitive market. Moreover,
they create better relationships and meet customer needs.
Based on Ownership

Based on ownership, entrepreneurs are classified into the following types:

Private Entrepreneur

When an entrepreneur starts something personal of his or her own, such as setting
up an enterprise, he/she is called a private entrepreneur. A private entrepreneur is
the only person who plays the sole proprietor role for a business venture and bears
the risk associated with it.

State Entrepreneur

When a state or government does a business or industrial undertaking, it is referred


to as a 'state entrepreneur'. In this case, the government is the sole owner of the
enterprise and will bear all the profits and losses involved with it.

Joint Entrepreneurs

When a business or industrial undertaking is established and operated jointly by


the private entrepreneur and the government, it is called joint entrepreneurship.
The parties involved are called joint entrepreneurs. In this case, risk and profits are
shared by both parties. However, the sharing percentages generally depend on the
type of business and the agreement between the two parties.

Based on Gender

Based on gender, entrepreneurs are classified into the following types:

Men Entrepreneurs

When any business venture is formed, managed and operated by men, these men
are referred to as men entrepreneurs.

Women Entrepreneurs

When any business venture is formed, managed and operated by women, these
women are referred to as women entrepreneurs. Besides, if women have a
minimum 51 percent share of the capital, they can also be known as women
entrepreneurs.
Based on the Enterprise size

Based on the size of the enterprise, entrepreneurs are classified into the following
types:

Small-Scale Entrepreneur

If an entrepreneur has invested up to a maximum of 1 crore in starting an


enterprise, including plant and machinery, such entrepreneur is called Small Scale
Entrepreneur.

Medium-Scale Entrepreneur

If an entrepreneur has invested a minimum of 1 crore to a maximum of 5 crores in


starting an enterprise, including plant and machinery, then such entrepreneur is
called Medium Scale Entrepreneur.

Large-Scale Entrepreneur

If an entrepreneur has invested more than 5 crores in starting an enterprise,


including plant and machinery, such an entrepreneur is called a large-scale
entrepreneur. This includes any investment above 5 crores.

Based on Clarence Danhof Study

Clarence Danhoff conducted a study on American agriculture and classified


entrepreneurs accordingly. According to him, entrepreneurs generally have less
initiative and drive when they start any business venture. However, they learn
things with their continued economic work and become more innovative and
enthusiastic. Based on his study, he classified entrepreneurs as follows:

Innovating Entrepreneurs

Innovative entrepreneurs, also known as innovators, are the type of entrepreneurs


who usually come to the market with new ideas or innovations. In particular, they
create new products, find new production methods, create new markets and
restructure the business. Such entrepreneurs always try to innovate and invest their
time and money in research and development.
Imitative Entrepreneurs

Imitative entrepreneurs or imitating entrepreneurs are often called 'copy cats'. This
is because these entrepreneurs mainly follow and adopt the innovative
entrepreneurs' existing successful enterprise system. They do nothing new of their
own. Imitative entrepreneurs apply strategy from other enterprises in a manner
where all core fundamentals of the original business model are replicated, and all
efficiencies are retained. These entrepreneurs help improve any product,
production process or suggest the use of improved technology addressed by other
enterprises.

Fabian Entrepreneurs

Fabian entrepreneurs are defined as those types of entrepreneurs who generally do


not seek to implement changes in their enterprise techniques. They are very careful
in applying any approach and cautious in exercising any change. These
entrepreneurs are known for not making sudden decisions. They imitate the change
in their strategy only when it is completely clear that failing to do so will not harm.

Drone Entrepreneurs

Drone entrepreneurs are defined as entrepreneurs who do not like to adopt any
changes in their enterprise techniques. They strictly follow their traditional
strategies or methods for development, production or marketing. These
entrepreneurs feel or experience pride and tradition in the old ways of doing
business. This is why drone entrepreneurs sometimes suffer losses, yet they do not
adopt changes in their current methods.

Other Types of Entrepreneurs

Apart from the above types, there are several other types of entrepreneurs as given
below:

Solo Operators

Solo operators include those types of entrepreneurs who start their work primarily
alone. However, these entrepreneurs employ few employees if they require. It is
the most common type of entrepreneur, and most people start their ventures like
solo operators.
Active Partners

Active partners include entrepreneurs who jointly start their ventures. This may
include two or more people. However, each person should have equal participation
in the operation of the business. Besides, when the entrepreneurs support only with
the money but do not actively participate in the business's operation, they are just
called 'partners'.

Inventors

Inventors include entrepreneurs who work effectively and invent new products,
using their ability and inventiveness. These entrepreneurs are generally primarily
interested in innovative strategies.

Challengers

Challengers include entrepreneurs who seek new challenges in enterprise ventures,


including manufacturing, distribution, and marketing. Once they achieve their set
challenge, they begin to set and acquire new challenges.

Buyers

Buyers include entrepreneurs who do not like to take too much risk in completely
new business establishments. These entrepreneurs mainly purchase on-going
enterprises by paying a decent amount and start their operations. This ultimately
reduces the risk of establishing a new enterprise as the existing enterprise typically
has better business value and customer reach.

Researchers

Researchers include entrepreneurs who believe in facts and figures based on


business studies. These entrepreneurs analyze all aspects of an enterprise and take
enough time to gather enough information to make a clear assumption. Then they
put their detailed work and understanding to launch the products. Researchers are
usually least likely to fail because they leave no room for mistakes. They gather
information and analyze all ideas from all angles based on all aspects.

Life-Timers

Life-timers includes entrepreneurs who consider enterprises as an integral part of


their lives. In particular, these entrepreneurs mainly learn skills from their elders
and continue to operate family ventures further. These entrepreneurs usually
consider their enterprises a family tradition.

McClelland’s Theory of Motivation


Introduction

David McClelland (American psychologist) in his book , “The Achieving Society” identified
three motivators that he believe every person has: a need for achievement, a need for affiliation
and need for power. People will have different characteristics depending on their dominant
motivator. According to McClelland these motivators are not inherent but rather learned. We
develop them through our culture and life experiences.

McClleland’s Need Theory of Motivation

David mcClelland’s Human motivation theory gives a way for identifying people’s motivating
drivers. This theory helps one to give praise and feedback, effectively assign suitable tasks and
keep people motivated.

Achievement Need (n-Ach)

According to McClelland , achievement oriented people are highly motivated to achieve goals in
life; they have a high drive for achieving targets and they are performance oriented. Desire to do
better, solve problems, master complex problems.

The people who possess achievement motive take moderate risk in their profession. They avoid
Low risk and high risk. They avoid low risk because there are few chances of getting
acknowledgement for their efforts. And in high risk, they see major part of the outcome is
‘chance’ than their efforts. Hence, they prefer to take moderate risk where they get
acknowledgement. These people tend to work alone or with other successful persons. The n-
Achievement individuals seek accomplishment of realistic but challenging or thought-provoking
goals, and progress in the job. They feel a strong need for feedback. Sense of accomplishment
motivates them.

Characteristics of Achievement need (n-Achievement) people People needing achievement


display the following behaviors:

 Strive to find solutions of problems

 Has a strong need to set and accomplish challenging and thought provoking goals.

 Self motivated and insists on getting rapid feedback on their performances to assess their
progress
 Takes calculated risks to accomplish their goals

 Wants to take challenging job and takes personal responsibility for getting things done

 Wants to feel successful at doing something over which they have control.

 Task centered

 Future oriented

 Prefer to work alone

 Performs to internal standard of excellence

 Take responsibility for results of behavior

 Set moderate achievement goals

 Prefer to set performance standards for themselves

 Prefer non routine tasks to routine assignments

Affiliation Need (n-Aff)

Another motive mentioned in McClelland Need theory of motivation is affiliation motive.


According to McClelland, affiliation oriented people like to work in a group and tend to stick to
the group norms or work cultural norms. They feel the need to be loved and accepted in the
group. Let us try to understand this need in the context of above scenario.

Affiliation oriented people believes in maintaining long close personal relationships and values
people than accomplishment of tasks assigned. Individuals with a high need for affiliation strive
for building and maintaining relationships with people. They value people more than
accomplishment of goals and objectives. They are fit for fields such as public relations and
human resources where interaction with people and understanding of human resources is highly
appreciated. The n-Affiliation person has a need for friendly relationships and is motivated
towards interaction with other people. These people are team players. Individuals having the
need for affiliation look for companionship, social acceptance, and satisfying interpersonal
relationships. Characteristics of Affiliation need (n-Affiliation) People People needing affiliation
display the following behaviors:

 Take a special interest in work that provides companionship and social acceptance

 Strive for friendship

 Prefer cooperative situations rather than competitive ones


 Desire relationships involving a high degree of mutual understanding

 Doesn't like high risk or uncertainty

 Focuses on "establishing, maintaining, and restoring positive affective relations with others"

 Want close, warm interpersonal relationships

 Seek the approval of others, especially those about whom they care

 Like other people, want other people to like them, and want to be in the company of others

 Prefer work that provides significant personal interaction; they perform well in customer
service and client interaction situations

 Wants to belong to the group

 Will often go along with whatever the rest of the group wants to do Individuals with affiliation
need do not make the best managers because their desire for social approval and friendship may
complicate managerial decision making.

Power Need (n-Pow)

Power motive is the third motive mentioned in David McClelland Need theory of motivation.
According to McClelland Power oriented people desire to control others and influence others’
behavior. They want to make an impact on others, influence others, change people or events, and
make a difference in life. 5 Those with a strong power motivation are often divided into two
groups: personal and institutional. People with a personal power drive want to control others,
while people with an institutional power drive like to organize the efforts of a team to further the
company's goals. Those with an institutional power need are usually more desirable as team
members. Managers with a high need for institutional power tend to be more effective than those
with a high need for personal power.

There are Two ways of expressing the Need for Power

Dominance, physical aggression, exploitation- View situations from a win-lose perspective.-


Have approach that he / she must win and the other party must lose.

Persuasion and interpersonal influence-Tries to arouse confidence in those he or she wants to


influence, clarifies group’s goals and persuades members to achieve those goals, emphasizes
group members’ ability to reach goals,tries to develop a competence belief in group members.
McClelland felt this type of power behavior characterized effective leaders in organizations.

The Person with high need of power is 'authority motivated'. This drive generates a need to be
influential, effective and to make an impact. These individuals exhibit a strong need to lead.
They strive hard for their ideas to succeed. There is also motivation and need towards increasing
personal status and prestige.

Characteristics of Power need (n-Power)

People People needing power often demonstrate the following behaviors:

 Wants to control and influence others

 Likes to win arguments

 Enjoys competition and winning

 Enjoys status and recognition

 Enjoy being in charge

 Enjoy winning

 Tend to be more concerned with prestige and gaining influence over others than with effective
performance

 Like to win arguments

 Focuses on controlling the means of influencing the behavior of another person

 Have strong effects on other people

 Actively searches for means of influence

 Means of influence includes anything available to the person to control the behavior of others
 Risk taking

 Present oriented

 Assesses situations for change

 Use superior-subordinate relationship or external rewards to control the behavior of another

All three types of people are important for successful organizations. Strong Need for
Achievement managers keep an organization going. Strong Need for Power people bring
dramatic change and innovation. Strong Need for Affiliation people develop healthy and
cooperative environment in the organization. A high need to achieve does not necessarily lead to
being a good manager, especially in large organizations. People with high achievement needs are
usually engrossed in how well they do individually and not in influencing others to do well. On
the other hand, the best managers are high in their needs for power and low in their needs for
affiliation.

Application of McClleland’s Need Theory of Motivation

Manager should be capable of identifying the need of others.Managers should motivate


individuals according to their needs.

Let's take a closer look at how to manage team members who are driven by each of McClelland's
three motivators:

 Achievement need People motivated by ‘achievement’ need prefer challenging, but not
unachievable tasks. They work very effectively either alone or with other high achievers.
So it’s essential to provide feedback and let them be aware about their triumphs and
mistakes as well for further improvement. To satisfy this need in the workplace
employees must be able to take on responsibility and set their own goals. They must be
given freedom to recognise their achievements and accomplishments. People with high
Achievement need should be given challenging projects. They should be given feedback,
appreciation and recognition for their work. When providing feedback, give achievers a
fair and balanced appraisal. They want to know what they are doing right and wrong so
that they can improve.
 Affiliation need People motivated by ‘affiliation’ work best in a group environment, so
engage them in teamwork rather than asking them to work alone if or whenever possible.
This can be achieved in the workplace when employees are encouraged to have strong
relationship with one another. To accomplish this organizations can sress bonding
activities and strong ‘WE’ culture. As such individuals dislike uncertainty and risk do not
assign them task with high risk. While providing feedback, give it personally. People
with high affiliation need should be given task in team/group. They should be given
feedback in private rather than in front of others. When providing feedback to these
people, be personal. It’s important to give balanced feedback. Start appraisal by
emphasizing their good working relationship and your trust in them. Remember that these
people often don’t want to stand out, so it might be best to praise them in private rather
than in front of others.
 Power need People with a high need for power can work best when they're in command
of the situation. Such individuals enjoy competition. They can be proved very effective in
negotiations or in situations where the objective is to convince others. While providing
feedback, be direct with these team members. Fulfilling the need for power in the
workplace means allowing employees to pitch ideas and give inputs that might influence
the organization. People with need for power should be allowed to make decisions on
their own and ensure that they have some kind of influence. People with high power need
should be given leadership roles whenever possible.They should be motivated by offering
career development opportunities. Those with high need for power work best when they
are in charge because they enjoy competition. They do well with goal oriented projects or
tasks.
Entrepreneurship Development Program
Entrepreneurship Development Programme (EDP) is a programme which helps in developing
entrepreneurial abilities. The skills that are required to run a business successfully is developed
among the students through this programme. Sometimes, students may have skills but it requires
polishing and incubation. This programme is perfect for them. This programme consists of a
structured training process to develop an individual as an entrepreneur. It helps the person to
acquire skills and necessary capabilities to play the role of an entrepreneur effectively.

EDP is an effort of converting a person to an entrepreneur by passing him through thoroughly


structured training. An entrepreneur is required to respond appropriately to the market and he/she
is also required to understand the business needs. The skills needed are varied and they need to
be taken care in the best possible way. EDP is not just a training programme but it is a complete
process to make the possible transformation of an individual into an entrepreneur. This
programme also guides the individuals on how to start the business and effective ways to sustain
it successfully.

Definitions of Entrepreneurship Development Programme

According to Joseph E. Schumpeter, “Intelligence, motivation, knowledge and Opportunities


are the perquisites of entrepreneurship Development.”

According to other Experts, “A programme designed to help an individual in strengthening his


entrepreneurship motive and acquiring skills and capacities necessary for playing his
entrepreneurship role effectively.”

Objectives of EDP
The objective of this programme is to motivate an individual to choose the
entrepreneurship as a career and to prepare the person to exploit the market
opportunities for own business successfully. These objectives can be set both in the
short-term and long-term basis.

Short-term objectives: These objectives can be achieved immediately. In the


short-term, the individuals are trained to be an entrepreneur and made competent
enough to scan the existing market situation and environment. The person, who
would be the future entrepreneur, should first set the goal as an entrepreneur. The
information related to the existing rules and regulations is essential at this stage.

Long-term objectives: The ultimate objective is that the trained individuals


successfully establish their own business and they should be equipped with all the
required skills to run their business smoothly.
The overall objectives of EDP are mainly to help in the rapid growth of the
economy by supplying skilled entrepreneurs. This programme primarily aims at
providing self-employment to the young generation.

Roles of EDP
An Entrepreneurship Development Programme primarily plays four roles to help an individual to
become an entrepreneur. They are:
 Stimulatory Role: It aims at influencing people in large number to be the entrepreneur. This
includes:
1. developing managerial, technical, financial, and marketing skill
2. inculcating personality traits
3. promotes and reforms entrepreneurial behavior and values
4. identifying a potential entrepreneur applying scientific methods
5. motivational training and building a proper attitude
6. strengthening the motive of a person and giving recognition
7. the valuable know-how of the local products and the processes help in the selection of
products, preparation of project reports

 Supportive Role: It helps in the following ways:


1. registration of the business
2. procurement of fund
3. Incubation support
4. Team building and team development support
5. Mentorship and guidance from industry experts
6. Providing tax relief, subsidy, government schemes etc.
7. guidance in product marketing
8. support for management consultancy

 Sustaining Role: It aims at providing an effective safeguard to businesses to sustain against the
cut-throat market competition. This includes:
1. help in modernization, expansion, and diversification
2. additional financing for further development
3. Global Networking Opportunities
4. creating new marketing processes
5. helping access to improved services and co-working centers

 Socio-economic Role: It aims at upgrading the socio-economic status of the public and
includes:
1. identifying entrepreneurial qualities in practicality
2. creating employment opportunities in micro, small, and medium industries on an immediate
basis
3. arresting concentration of industries by supporting regional development in a balanced manner
4. focusing on the equal distribution of income and wealth of the nation
5. channelizing the latent resources for building an enterprise
Phases of Entrepreneurship Development Programme
After deciding on course contents and curriculum on EDP, the next important task is to
decide various phases of EDP.

There are three different phases of EDP like:

Phase1 – Pre-Training Phase:


Pre-training phase consists of all activities and preparation to launch the training
programme.

Pre-training phase of EDP consists of the following activities:

1. Selection of entrepreneurs for the training programme


2. Arrangements of infrastructure are for the programme like selection of place of
training
3. Deciding guest faculty for the programme from the education industry and banks
4. Taking necessary steps for the inauguration of the programme
5. Formation of selection committee to select trainees from the programme
6. Making provision with regard to publicity and campaigning for the programme

Phase 2 – Training Phase:


The primary objective of the training programme is to develop motivation and skill or
competency amongst the potential entrepreneurs. Care should be taken to impart both
theoretical and practical knowledge to various trainees.

The training phase of EDP will be so designed that it will answer the following
questions:

1. Whether the attitude of the entrepreneur has been tuned towards the proposed project
or not
2. Whether the trainee has been motivated to accept entrepreneurship as a career
3. How the trainee behaves like an entrepreneur
4. Whether the trainee has sufficient knowledge on resources and technology or not
5. What kind of entrepreneurship traits he lacks and what steps should be taken to set it

Phase3 – Follow-up Phase:


Follow up phase of EDP has been termed as the post-training phase. The ultimate objective
is to develop competent entrepreneurs.

So that they can start their project. Post-training phase is a review phase of a training
programme.

It consists of reviewing of work in the following manner:


1. Review of pre-training work
2. Review of actual training programme
3. Review of the post training programme so that the cost effectiveness of the present
programme can be evaluated.

Major Relevance of EDP


Relevance of EDP can be summarized as follows:

 Creation of Employment Opportunities

 Capital Formation

 Balanced Regional Development

 Use of Local Resources

 Improvement in Per Capita Income

 Improvement in the Standard of Living

 Economic Independence

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