Pme Unit 1 Mam
Pme Unit 1 Mam
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
(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”.
(vi) Different entrepreneurs might have some common traits but all of them will
have some different and unique qualities.
(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.
(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.
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.
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.
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.
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
# 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.
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
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.
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.
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
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.
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:
iv. It may not be accepted the expected status on migration in a new society.
3. Motives
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.
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:
Depending on the type of business, entrepreneurs are classified into the following
types:
Trading Entrepreneur
Agricultural Entrepreneur
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
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
Joint Entrepreneurs
Based on Gender
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
Medium-Scale Entrepreneur
Large-Scale Entrepreneur
Innovating 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
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.
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
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
Life-Timers
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.
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.
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.
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
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
Focuses on "establishing, maintaining, and restoring positive affective relations with others"
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
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 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.
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.
Enjoy winning
Tend to be more concerned with prestige and gaining influence over others than with effective
performance
Means of influence includes anything available to the person to control the behavior of others
Risk taking
Present oriented
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.
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.
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.
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
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.
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
So that they can start their project. Post-training phase is a review phase of a training
programme.
Capital Formation
Economic Independence