DIPLOMA IN ENGINEERING

NOWGONG POLYTECHNIC
6TH SEMESTER
INDUSTRIAL MANAGEMENT & ENTREPRENEURSHIP – Hu – 601
UNIT 8 – ENTREPRENEUR AND ENTREPRENEURSHIP

ENTREPRENEURSHIP:

Entrepreneurship refers to the process of identifying, developing, and bringing a new

business idea to life. It involves taking risks, organizing resources, and managing the operations
of a business with the goal of making a profit. Entrepreneurs drive innovation by creating
products, services, or processes that meet market needs or solve problems.

CHARACTERSTICS OF ENTREPRENEURSHIP

💡 1. Innovation: Developing New Ideas, Products, or Services

Innovation is at the heart of entrepreneurship. It involves introducing something new or

significantly improving existing products, services, or processes.

 Types of Innovation:
o Product Innovation: Creating entirely new products or enhancing existing
ones (e.g., electric cars, smartphones).
o Process Innovation: Improving manufacturing, delivery, or operational
methods to enhance efficiency (e.g., automation in factories).
o Business Model Innovation: Introducing new ways to deliver value, such as
subscription-based services (e.g., Netflix).

⚠️ 2. Risk-taking: Investing Time, Money, and Resources with No Guaranteed Return

Entrepreneurship inherently involves taking calculated risks. Entrepreneurs invest their

resources despite the uncertainty of success.

 Types of Risks:
o Financial Risk: Using personal savings or loans to fund the business.
o Market Risk: The possibility that the product/service may not be accepted by
customers.
o Operational Risk: Challenges in managing day-to-day business activities.

🔧 3. Resource Management: Efficiently Utilizing Capital, Labor, and Technology

Efficient use of available resources is essential for sustaining and scaling a business.

 Types of Resources:
o Financial Resources: Managing capital for investments, expenses, and cash
flow.
o Human Resources: Hiring and retaining skilled employees.
 o Technological Resources: Leveraging technology for operations, marketing,
and innovation.
 Effective Resource Management Involves:
o Budgeting and cost control to prevent overspending.
o Optimizing workforce productivity through proper training and delegation.
o Using technology to automate and streamline processes.

💎 4. Value Creation: Generating Profits or Contributing to Social Impact

Entrepreneurs aim to create value by solving problems, fulfilling needs, or improving lives.

 Value Creation for Customers:

o Offering products/services that enhance convenience or quality of life.
o Providing better solutions than existing alternatives.
 Value Creation for Society:
o Social entrepreneurs address social issues like poverty, education, or healthcare
(e.g., TOMS Shoes’ "One for One" model).
o Environmentally-conscious businesses promote sustainability.
 Financial Value Creation:
o Generating profits and increasing shareholder value.
o Expanding the business, creating jobs, and boosting the economy.

🎯 5. Vision and Leadership: Entrepreneurs Need a Clear Vision and the Ability to
Inspire Others

Entrepreneurs need a strong vision to guide their business and the leadership skills to execute
it effectively.

 Vision:
o A clear picture of what the business aims to achieve.
o Guides decision-making and strategic planning.
o Helps the entrepreneur stay focused during challenges.
 Leadership:
o Inspiring and motivating employees.
o Building a positive company culture.
o Effective communication and conflict resolution skills.

📚 DEFINITIONS OF ENTREPRENEURSHIP:

 Peter Drucker (Management Expert):

"Entrepreneurship is about taking risk to innovate and create value by exploiting new
opportunities."
 Joseph Schumpeter (Economist):
"Entrepreneurship is the process of creating something new, with value, by devoting
the necessary time and effort, assuming the accompanying financial, social, and
psychological risks."
 Harvard Business School:
"Entrepreneurship is the pursuit of opportunity beyond resources controlled."
ENTREPRENEUR
An entrepreneur is a person responsible for setting up a business or an enterprise. He has the
initiative, skill for innovation and who looks for high achievements. He is a catalytic agent of
change and works for the good of people. He puts up new green field projects that create wealth,
opens up many employment opportunities and leads to growth of other sectors.
ENTREPRENEUR is a person who:
 Develops and owns his own enterprise.
 Is a moderate risk taker and works under uncertainty for achieving the goal.
 Is innovative.
 Is a persuader of deviant pursuits.
 Reflects a strong urge to be independent.
 Persistently tries to do something better.
 Is dissatisfied with routine activities.
 Is prepared to withstand the hard life.
 Is determined, but patient. Exhibits a sense of leadership.
 Exhibits a sense of competitiveness.
 Takes personal responsibility.
 Is oriented towards the future.
 Tends to persist in the face of adversity
An entrepreneur is a person who starts an enterprise and converts a situation into opportunity.
He/she searches for change and responds to it. A number of definitions have been given of an
entrepreneur. The economists view him/her as the fourth factor of production, along with land
labour and capital.
DEFINITIONS OF AN ENTREPRENEUR
Richard Cantillon: As a person, who pays a certain price to a product to resell it at an uncertain
price, thereby making decisions about obtaining and using the resources while consequently
admitting the risk of enterprise.
Adam Smith: An individual, who undertakes the formation of an organization for commercial
purposes by recognizing the potential demand for goods and services, and there by acts as an
economic agent and transforms demand into supply.
Joseph Schumpter: Entrepreneurs are innovators, who use the process of entrepreneurship to
shatter the status quo of the existing products and services, to set new products, new services.
He describes entrepreneurs as innovators.
Peter F. Drucker: An entrepreneur is one who always searches for changes, responds to it and
exploits it as an opportunity. He believes in increasing the value and consumer satisfaction.
Thus, a professional manager who mobilises resources and allocates them to make a
commercial gain from an opportunity, is also called an entrepreneur.
 QUALITIES OF AN ENTREPRENEUR
The qualities of an entrepreneur can be divided into three kinds of competencies.
1. ENTREPRENEURIAL COMPETENCIES:
These are certain basic competencies to be acquired by an entrepreneur.
They relate to the type of behaviour exhibited in the performing of various tasks in the
discharge of his functions. Some of these competencies are latent in the entrepreneur, which
need to be identified, nursed and nurtured. Others are acquired through training and practice.
i.Initiative: One of the most fundamental competencies required for the entrepreneurs is the
ability to take initiative. It is rather the first step in the enterprise. An entrepreneur has to be
keen observer of the society, the commercial trends, the product types, the change dynamics
and the consumer trends. Once he/she decides to take the initiative, what matters is the speed
with which he/she is going to function.
ii.Creativity and Innovation: Competency in creativity and innovation are sometimes basic
traits of certain individuals. He/she might not have any new ideas. He/she may use the creative
ideas and innovative products and services to meet the challenges of a situation, take advantage
of the utility of an idea or a product to create wealth.
iii.Risk Taking and Risk Management: An entrepreneur ventures into new ideas and new
service. He/she treads into areas of uncertainty. There are several elements such as demand
supply in the market, resources availability, acceptability of the product design and service
which throw a potential challenge to the entrepreneur. In order to attune oneself in the skill of
risk taking and management he should practice in several areas of entrepreneurial functions
such as entering into new market.
iv.Problem Solving: Once an entrepreneur is aware that he has ventured on a new area and has
taken certain calculated risks, he/she should also be aware that many problems are bound to
come in the path of progress. He/she should understand that there is more than one way of
solving problems, look for alternative strategies or resources that would help to solve the
problem, generate new ideas, products, services etc.
v.Leadership: An entrepreneur should also be an effective leader who should be able to guide
and motivate his/her entire team. Whenever a company faces problem it is the will power and
effective business acumen and communication skills which oversees the success of the
corporation.
vi.Persistence: In most cases, the entrepreneurial pursuits are new and need very close attention.
Creating a need in the market for the enterprise is one of the main requirements of the
entrepreneur. This calls for intense perseverance on the part of the entrepreneur. Roadblocks
to success should not deter the entrepreneur.
 vii.Quality Performance: Since entrepreneurs value outstanding performance, one of the
behavioural skills necessary is the sensitivity to and concern for the „standards‟ and „quality
of work‟. One develops the skill of comparing the quality of the product/services with certain
standards, which he/she himself evolves or are set by others.
viii.Information Seeking: Information plays a very crucial role at every stage of enterprise
building and management. The quality and extent of information collected and the way these
have been used to make various decisions by and large decides the success and failure of any
entrepreneurial venture. They can get this information by personally conducting research, using
feedback from previous related experience etc.
ix.Systematic Planning: Every entrepreneur has limited resources in terms of time, finance, and
manpower. They invest their life‟s saving and total energy in creating entrepreneurial ventures
and cannot afford to lose or waste these. Before putting the whole enterprise into operation, he
is required to develop a detailed blueprint.
x.Persuasion and Influencing Others: One of the important functions of an entrepreneur is to
influence the environment comprising of individuals and institutions, for mobilizing resources,
obtaining inputs, organising production and selling products and services. They have to
practice highlighting the strong points of their products and services in the market explaining
the technological competencies of their enterprise to produce quality goods and services.
2. ENTERPRISE LAUNCHING COMPETENCIES: Opportunities exist, but not all
people respond to them. Large groups in society can perceive only the apparent and traditional
openings of earning. Similarly, resources are also available to all members of the society, but
very few make efforts to ensure best use of these resources. Entrepreneurs should identify and
avail the facilities and resources needed to launch their enterprises.
3. ENTERPRISE MANAGEMENT COMPETENCIES: The enterprise may be small
or big but it demands management abilities on the part of its owner or manager. Various
management functions such as production, marketing, finance etc., are crucial functions to
entrepreneurs. These influence the result directly, and therefore, are necessary determinants for
the sustenance of an enterprise.
FUNCTIONS OF ENTREPRENEUR

A. ENTREPRENEURIAL FUNCTIONS
1. Innovation: It is the basic function of an entrepreneur. As an innovator, the
entrepreneur has to introduce new combinations of the means of production, new product, new
market for a product and new sources of raw material. They introduce something new in any
branch of economic activity. He/she foresees a potentially profitable opportunity and tries to
exploit it. Example: I-Pod, Smart phones, Induction cook top etc.
2. Risk-taking: It refers to taking responsibility for a loss that may occur due to
unforeseen contingencies in the future. An entrepreneur reduces uncertainty in his/her plan of
investment, diversification of production and expansion of the enterprise. He/she is a self-
confident and highly optimistic person, willing to assume the risks involved in innovations,
new ventures and expansion of an existing venture
3. Organisation Building: Organisation and management are the main functions of an
entrepreneur. They refer to the bringing together of the various factors of production. The
purpose is to allocate the productive resources in order to minimise losses and reduce costs in
production. All decisions relating to an enterprise is taken by the entrepreneur. He/she alone
determines the lines of business to expand and capital to employ. Thus, an entrepreneur is the
final judge in the conduct of his/her business.
B. PROMOTIONAL FUNCTIONS
1. Discovery of an idea: The entrepreneur visualizes that there are opportunities for a
particular type of business and it can be profitably run. The idea may be to exploit new areas
of natural resources, more profitable venture, or an existing line of business. He/she develops
the idea with the experts in the field, and if they are convinced, then he/she will go ahead with
more exhaustive analysis.
2. Detailed Investigation: The entrepreneur will estimate the total demand for the
product. After determining the prospective demand for goods, he/she will think of arranging
finances for the venture, along with the availability of power, labour, raw materials and
machinery. The work of estimation becomes complicated if it is a new line of business. The
estimates should be based on proper analysis of various factors.
3. Assembling the Requirements: After making sure that the proposition is practical and
profitable, the entrepreneur proceeds to assemble the requirements. He persuades some more
people to join him on board. He may also be required to acquire some patent rights if he has
invented something new. The entrepreneur selects the factory site, decides about plant and
machinery and contacts suppliers of raw materials. Preliminary contracts are finalised and
project is set to begin.
4. Financing the Proposition: The entrepreneur decides about the capital structure of the
enterprise. The requirements of finances are estimated first, then the sources from which money
will come up are determined. Long term and short term financial requirements are estimated
and the type of source of funds is also decided- share, debenture, loan etc.
C. MANAGERIAL FUNCTIONS
1. Planning: It is the basic managerial function of an entrepreneur. It helps in determining
the course of action to be followed to achieve various entrepreneurial objectives. Planning is
concerned with the mental state of the entrepreneur. It is decision making in advance: what to
do, when to do, how to do and who will do a particular task.
2. Organizing: Every business enterprise needs the service of a number of persons to look
after its different aspects. The entrepreneur sets up the objectives or goals to be achieved by its
personnel. The function of organising is to arrange guide, co-ordinate, direct and control the
activities of the factors of production.
3. Staffing: The function involves making appointments for the positions created by the
organisational process. It is concerned with the human resources of an enterprise. It consists of
human resources, manpower planning, recruitment, selection and placement of manpower,
human resource development, promotion, transfer, appraisal and determination of employees
remuneration.
4. Directing: It is concerned with carrying out the desired plans. It initiates organised and
planned action, and ensures effective performance by subordinates towards the
accomplishment of group activities. Leadership: It is the process by which an entrepreneur
imaginatively directs/guides and influences the work of others in choosing and attaining
specified goals by mediating between the individual and organisation in such a manner that
both will get the maximum satisfaction.
5. Communication: It constitutes a very important function of the entrepreneur. It is
observed to be the most prevalent problem among entrepreneurs today. It has been established
that entrepreneurs spend 75% to 90% of their working time communicating with others. It
refers to the exchange of ideas, feelings, emotions, knowledge and information between two or
more persons. Nothing happens in management until effective communication takes place.
6. Motivation: It is the psychological process of creating an urge among the subordinates
to do certain things or behave in the desired manner. The importance of motivation can be
realised from the fact that the performance of a worker depends upon his/her ability and the
motivation. A sound motivational system must be productive, competitive, comprehensive and
flexible, and it must consider the psychological, social, safety, ego and economic needs of the
worker. Supervision: After issuing instructions, the entrepreneur has to see that the given
instructions are carried out. Supervision refers to the job of overseeing subordinates at work to
ensure the maximum utilisation of resources, to get the required and directed work done, and
to correct the subordinates whenever they go wrong.
7. Co-ordination: It is one of the most important functions, as, it is essential to channelize
the activities of various individuals in the organisation, for the achievement of common goals.
The entrepreneur has to make sure that the work of different segments is going according to
pre-determined targets and corrective measures have to be initialised if there is any deviation.
8. Controlling: Control is the process which enables the entrepreneur to get his/her
company’s policies implemented and take corrective action if performance is not according to
the pre determined standards. The process begins with establishing standards of performance,
measuring actual performance, comparing the actual performance with the standard, finding
variations and finally, taking corrective action.
D. COMMERCIAL FUNCTIONS
1. Production: It is the key function of an entrepreneur. The activities of production are
independent of the size of the undertaking. In a small concern, one person may be undertaking
this function whereas, in large organisations, this activity may be undertaken by various
individuals or separate teams. It is the creation of goods and services. It consists of
manufacturing, ancillary and advisory activities.
2. Finance: It is the most important aspect in all enterprises. It remains a focus of all
business activities. The need for money is continuous. It starts with the setting up of an
enterprise and remains at all times. The development and expansion of an enterprise rather
needs more commitment for funds. It is the duty of the entrepreneur to look and analyse into
the various sources of finance and appropriately arrange for them as and when required.
3. Marketing: It is primarily concerned with the movement of goods and services from
the producer to the ultimate consumer. It is directed towards the satisfaction of consumer wants.
Marketing plays a significant role in promoting the well-being of the business enterprise. So it
is the role of the entrepreneur to strategically place his company in an advantageous position
to secure the top position in the market.
4. Personnel: This function is concerned with employment, development and
compensation for the personnel, the provisions of working conditions and welfare measures to
maintain a good work force in the organisation.
5. Accounting: It is defined as a systematic recording of entrepreneurial transactions of
an enterprise and the financial position of the enterprises. The entrepreneur should look into
the record keeping of the entries of all transactions which take place in the organisation so that
he/she is aware of his/her financial position.

ENTREPRENEURIAL MOTIVATION
Entrepreneurial motivation may be defined as the process that activates the entrepreneurs to
exert a high level of effort for the achievement of his/her goals. In other words, the
entrepreneurial motivation refers to the drive or forces within an entrepreneur that affects
his/her direction, intensity and persistence of voluntary behavior.

PROCESS OF MOTIVATION: Motivation is essentially a process. It can be well expressed

in the form of a model. On a careful analysis of the model, it can be understood that every
individual possesses an urge or a need, or a multitude of needs, desires or expectations. The
unsatisfied need leads to tension within the individual and motivates one to search for ways to
relieve one’s own tension. That tension leads one to certain drives and searching alternatives
to achieve one’s goal which will eventually reduce tension.

MOTIVATION THEORIES
There have been various theories of motivation which encourage an entrepreneur to continue
his/her work in spite of all odds.
1. MASLOW’S HIERARCHY OF NEEDS THEORY:
This theory was proposed by Abraham Maslow and is based on the assumption that people are
motivated by a series of five universal needs. These needs are ranked, according to the order
in which they influence human behaviour, in hierarchical fashion.

I. Physiological needs- These are deemed to be the lowest- level needs. These needs
include the needs such as food and water. As long as physiological needs are
unsatisfied, they exist as a driving or motivating force in a person's life. A hungry
person has a felt need. This felt need sets up both psychological and physical tensions
that manifest themselves in overt behaviours directed at reducing those tensions
(getting something to eat). Once the hunger is sated, the tension is reduced, and the
need for food ceases to motivate. At this point (assuming that other physiological
requirements are also satisfied) the next higher order need becomes the motivating
need.
II. Safety needs - the needs for shelter and security -- become the motivators of human
behaviour. Safety needs include a desire for security, stability, dependency,
protection, freedom from fear and anxiety, and a need for structure, order, and law.
In the workplace this needs translates into a need for at least a minimal degree of
employment security; the knowledge that we cannot be fired on a whim and that
appropriate levels of effort and productivity will ensure continued employment.
III. Social needs Or Belongingness needs - These include the need for belongingness
and love. Generally, as gregarious creatures, human have a need to belong. In the
workplace, this need may be satisfied by an ability to interact with one's co-workers
and perhaps to be able to work collaboratively with these colleagues. After social
needs have been satisfied, ego and esteem needs become the motivating needs.
IV. Esteem needs - These include the desire for self-respect, self-esteem, and the
esteem of others. When focused externally, these needs also include the desire for
reputation, prestige, status, fame, glory, dominance, recognition, attention,
importance, and appreciation.
V. Self actualisation needs - The highest need in Maslow's hierarchy is that of self-
actualization; The need for self-realization, continuous self-development, and the
process of becoming all that a person is capable of.

2. MCCLELLAND’S THEORY OF NEEDS: According to David McClelland,

regardless of culture or gender, people are driven by three motives:
Achievement or Affiliation or Power
Since McClelland's first experiments, over 1,000 studies relevant to achievement
motivation have been conducted. These studies strongly support the theory.
Achievement: The need for achievement is characterized by the wish to take responsibility
for finding solutions to problems, master complex tasks, set goals and get feedback on level
of success.
Affiliation: The need for affiliation is characterized by a desire to belong, an enjoyment of
teamwork, a concern about interpersonal relationships, and a need to reduce uncertainty.
Power: The need for power is characterized by a drive to control and influence others, a
need to win arguments, a need to persuade and prevail
According to McClelland, the presence of these motives or drives in an individual indicates
a predisposition to behave in certain ways. Therefore, from a manager's perspective,
recognizing which need is dominant in any particular individual affects the way in which
that person can be motivated. People with achievement motives are motivated by standards
of excellence, delineated roles and responsibilities and concrete, timely feedback. Those
with affiliation motives are motivated when they can accomplish things with people they
know and trust. And the power motive is activated when people are allowed to have an
impact, impress those in power, or beat competitors.