CHAPTER-1

ENTREPRENEURSHIP

INTRODUCTION:

An entrepreneurship is one of the important segments of economic growth. The word entrepreneur is
derived from the French word “ENTREPRENDRE” which means to undertake i.e., the person who undertakes to
organize, manage and assume the risk of business. The simple meaning of an entrepreneur is “a person who is
responsible for setting up a business or an enterprise.”

MEANING OF AN ENTREPRENEUR:

An entrepreneur is one in whose mind the idea of doing business of a particular type first takes shape. He is
prepared to take risk and face challenges.

“Entrepreneur is one who creates something new, something different.” Centillion was the first to use the
term “ENTREPRENEUR”.

DEFINATION OF AN ENTREPRENEUR:

According to Albert Shapero, “Entrepreneur takes initiative, accept risk of failure and have an
internal focus of control.”

According to French tradition, “Entrepreneur is a person who translates a profitable idea into a
productive activity.”

MEANING OF ENTREPRENEURSHIP:

It is a process of an action an entrepreneur undertakes to establish his or her enterprise.

(OR)

Entrepreneurship can be described as a process of action an entrepreneur undertakes to establish his

enterprise.

DEFINITION OD ENTREPRENEURSHIP:

According to Peter 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.”

MEANING OF AN ENTERPRISE:

It is a project or an activity that involves many people and that is often difficult.

(OR)

It is nothing but a business or a company.

DIFFERENCE BETWEEN ENTREPRENEUR AND ENTREPRENEURSHIP

SL.NO ENTREPRENEUR ENTREPRENEURSHIP

1. He is a person. It is a process.
2. He acts as an organizer. It is an organization.
3. He acts as an innovator. It is an innovation.
4. He is a motivator. It is a motivation.

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5. He is a creator. It is a creation.
6. He is a visualiser. It is a vision.
7. He is a leader. It is a leadership.
8. He is an imitator. It is an imitation.
9. He acts as risk bearer. It is a risk bearing process.

BASIS OF AN ENTREPRENEUR.

ORGANISATION.

URGE. INNOVATION.

SKILL RISK.
ENTREPRENEUR

ENTERPRISE
VISION. .

MANAGEM
GROWTH.
ENT.

NEED FOR ENTREPRENEURSHIP (OR) FUNCTIONS OF AN ENTREPRENEUR.

1. INNOVATIVE FUNCTION:

The basic function an entrepreneur performs is to innovate new products, services, ideas
and information for the enterprise. As an innovator, the entrepreneur foresees the potentially profitable opportunity
and tries to exploit it.

2. RISK BEARING FUNCTION:

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 The function of an entrepreneur as a risk bearer is specific in nature. The entrepreneur
assumes all possible risks of business which emerges due to the possibility of changes in the tastes of consumers,
modern techniques of production and new inventions. Such risks are not insurable and incalculable. In simple terms
such risks are known as uncertainty concerning loss.

3. MANAGERIAL FUNCTION:

Entrepreneur also performs variety of managerial functions like determination of business

objectives, formulation of production plans, product analysis and market research, organization of sales procuring
machine and material, recruitment of men and undertaking of business operations.

4. DECISION MAKING FUNCTION:

The most vital function an entrepreneur discharges refers to decision making in various
fields of the business enterprise. He is the decision maker of all activities of the enterprise. He determines the
business objectives suitable for the enterprise.

NEW CONCEPT OF ENTREPRENEUR:

 Perceives opportunities for profitable investments.

 Explores the prospects of starting such a manufacturing enterprise.
 Obtain necessary industrial licenses.
 Arrange initial capital.
 Provides personal guarantees to the financial institutions.
 Promises to meet the shortfalls in the capital, and
 Supplier technical know-how.

ROLE / IMROTANCE OF ENTREPRENEUR IN ECONOMIC GROWTH:

Creative new entrepreneur assure a strong economy and raising national income. Initiate, increase
and sustain the economic growth in the following ways.

1. EMPLOYMENT GENERATION:

Direct employment by self-employment and indirect employment through establishing small scale
and large scale industry.

2. CAPITAL FORMATION:

Mobilizing the idle savings of the public through issue of industrial securities.

3. INCREASING IN PER CAPITA INCOME;

They convert the latent and idle resources like land, labour and capital into national and wealth in the form
of goods and services. They help to increase net national product and per capita income in the country which is
important yardstick for measuring economic growth.

4. IMPROVEMENT IN PHYSICAL QUALITY OF LIFE:

Increase in the life expectancy and increase in the literacy. Increase employment avenues both directly and
indirectly. Consequently, poverty is alleviated and per capita income grows.

5. IMPROVEMENT IN STANDARD OF LIVING:

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 Innovative products help improve the standard of living of the common man. Innovative and modern
gadgets in variety design and patterns manufactured by the entrepreneur makes the life of individual easier.

6. GROWTH OF INFRASTRUCTURE FACILITIES:

Such as road, bridge, buildings, factories…etc. which is the cornerstone of economic growth.

7. BALANCED REGIONAL DEVELOPMENT:

Establishing private and public sector industry help to remove regional imbalance.

8. ECONOMIC INDEPENDENCE:

Entrepreneurship is essential for national self-reliance industries which help to manufacture indigenous
substitutes of instead of imported products and export goods (or) services for the country’s economic growth.

9. BACKWARD AND FORWARD LINKAGE:

Establishment of unit to generate several auxiliary industries on one hand and other industries which grow
by utilizing the raw material and by-products produced by the mother plant on the other hand (forward linkage).

10. ECONOMIC GROWTH:

11. ABSORPTION OF WORKFORCE IN INDUSTRIES:

Establishment of small scale industries by the entrepreneurs leads to absorption of large number of
workforce at a relatively small capital cost and ensures social stability.

12. ALLEVATION OF POVERTY:

Entrepreneurs help in alleviating poverty by reducing unemployment through creation of large number of
jobs. Thus social stability is maintained.

13. GLORIFICATION OF SELF HELP:

Enterprise creation glorifies the maxim of self-help. Self-help is the best help because it is a binding factor
to unite family, clan, village communities etc., and thus ensure stability.

14. CHECKING EXPANSION OF MONOPOLIES:

Small scale enterprises help to bring about social stability by diffusing prosperity and checking the
expansion of monopolies.

15. CREATION OF SOCIAL INFRASTRUCTURE;

Entrepreneurs facilitate economic development and social stability through creation of social infrastructures
like schools, collages, health care centers, vocational training institutes, banking and insurance facilities,
roads and buildings, etc.

16. EQUITABLE DISTRIBUTION OF INCOME:

Small scale enterprise explores business opportunities in both rural and urban areas, thereby leading to
equitable distribution of income and wealth in the society.

17. EMPOWERMENT OF WOMEN THROUGH ENTERPRISE:

Women entrepreneurs are the prime benefactors of women empowerment leading to equality among men
and women.

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 18. SUPPLY OF QUALITATIVE GOODS AND SERVICES:

Entrepreneurs by manufacturing both consumer’s and producer’s goods can bring about the supply of
quality goods and services to society.

19. BRINGING BALANCED REGIONAL DEVELOPMENT OF INDUSTRIES:

20. EXPORT PROMOTION AND IMPORT SUBSTITUTION:
21. FOREIGN EXCHANGE EARNING:
22. AUGMENTING AND MEETING LOCAL DEMANDS:

FACTORS INFLUENCING ENTREPRENEURSHIP:

FACTORS INFLUENCING
ENTREPRENEURSHIP.

1. ECONOMIC 2. SOCIAL 3. PSYCHOLOGICAL 4. POLITICAL

FACTORS FACTORS FACTORS FACTORS.

1. ECONOMIC FACTORS:

It 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.

a. Capital:
Most important requisites to establish an enterprise, availability of capital facilities, the
entrepreneur to bring the land of one, machine of another and raw materials of yet another combine
them to produce goods.
b. Labour:
Quality of labour is another factor which influences the emergence of entrepreneurship.
The potential advantage of low-cost labour is regulated by the deleterious efforts of labour
immorality. Often find difficult to secure sufficient labour.
c. Raw material:
In absence of raw material any enterprise can be established or an entrepreneur emerge
technological innovations which can compensate raw material inadequacies.
d. Market:
Size and composition of market both influence entrepreneurship in their own way.
Monopoly of product in a market becomes more influential than competitive market.
2. SOCIAL FACTORS.

It encourages entrepreneurship, in fact highly helpful society that made the industrial revolution a
glorious success in Europe.

a. Caste factor:
Cultural factor/practices and values in society, which influences the action of individuals.
b. Family background:

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 Includes size of family, types of family and economic status of family. Occupation and
social status of the family influenced mobility. Example: joint family system.
c. Education:
It enables one to understand the outside world and equip him with basic knowledge and
skills to deal with day-to-day problems.
d. Attitude of the society:
Societies encourage innovations and novelties and thus approve entrepreneur’s actions and
rewards in the form of profits, some societies have an inherent dislike for any money making
activity.
e. Cultural values:
Entrepreneur growth requires proper motives like profit making, acquisition of prestige and
attainment of social status. Ambition and talent depends upon the culture of the society.

3. POLITICAL FACTORS:

Supportive actions of the government, it ensures the availability of required resources for the
entrepreneur and also the accessibility to them. Policies, various economic aspects like prices,
availability of capital, labour, other inputs, demand structure, taxation, and income distribution etc.,
effects growth of entrepreneurship to a large extent.

4. PSYCHOLOGICAL FACTORS:
A. Need achievement:
Entrepreneurship becomes the link between need achievement and
economic growth. It states that people with high need achievement are distinctive in several ways, they like
to take risks and these risks stimulate them to greater efforts to start a new business venture.
B. Withdrawal of status/respect:
Many social groups experience a radical loss of status, which integrates
them to become entrepreneurs. The withdrawal of status gives rise to four possible reactions and creates
four difference personality types, such as:
a. Retreatist:
Who continues to work in the society but remains indifferent to his work position, such
person is a Retreatist.
b. Ritualist:
He is a person who adopts a kind of defensive behavior and acts in the way accepted and
approved in his society. But he doesn’t have any hopes of improving his position.
c. Reformist:
A person who forms a rebellion (armed assistance to a government/ ruler) and attempt to
establish a new society.
d. Innovator:
He is a creative individual and likely to be an entrepreneur.
5. MOTIVES:
Goals of the entrepreneur, security and service to society. Non-monetary like independence,
person’s self-esteem, power and regard of the society.
6. RISK-TAKING PROPENSITY (TENDENCY):
7. JOB SATISFACTION:
8. PREVIOUS WORK EXPERIENCE:
9. ENTREPRENEURIAL PARENTS:
10. AGE:
11. EDUCATION:

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CLASSIFICATION OF ENTREPRENEURS.

The entrepreneurs in the business have been broadly classified as following:

1. TYPES OF BUSINESS.
2. AREA OF BUSINESS.
3. USE OF TECHNOLOGY.
4. MOTIVATION.
5. GROWTH.
6. AGE AND GENDER.
7. STAGES OF DEVELOPMENT.
8. OTHER TYPES.

1. ACCORDING TO THE TYPE OF BUSINESS:

a. Business entrepreneurs:
They are the individuals who conceive an idea for new products or services and combine
the resources to setup a big or small business unit to put their idea into reality.
b. Industrial entrepreneurs:
He is a manufacturer who identifies the potential need of the customer and tailors the
product or service to meet the market needs.
c. Trading entrepreneur:
He is one who undertakes trading activities and is not concerned with the manufacturing
work. He identifies potential markets, stimulates demand for his product line and creates
desire and interest among buyers to go in for his product.
d. Corporate entrepreneur:
He is a person who demonstrates his innovative skill in organizing and managing a
corporate undertaking.
e. Agricultural entrepreneurs:
They are those entrepreneurs who undertake such agricultural activities as producing and
marketing of crops, fertilizers and other of agriculture.
2. ACCORDING TO AREA OF BUSINESS:
a. Rural entrepreneur:
b. Urban entrepreneur:
3. ACCORDING TO THE USE OF TECHNOLOGY
a. Technical entrepreneur:
He concentrates more on production than marketing. The greatest strength which
the technical entrepreneur has is his skills in production techniques.
b. Non-technical entrepreneurs:
They do not concentrate with the technical aspect of the product in which they deal.
4. ACCORDING TO MOTIVATION:
a. Pure entrepreneur:
He is an individual who is motivated by psychological and economic rewards.
b. Induced entrepreneur:
He is one who is induced to take up the task due to the policy measures of the
government that provides assistance, incentives, concessions etc.
c. Motivated entrepreneur:
He is motivated by self fulfilment desire.
d. Spontaneous entrepreneur:
They are the persons with initiative, boldness and confidence in their ability which
motivates them to undertake entrepreneurial activity. They start their business out
of their natural talents.

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 5. ACCORDING TO GROWTH:
a. Growth entrepreneur:
They are those who have shown high growth in an industry which has sustained
growth prospects.
b. Super growth entrepreneur:
They are those who have shown enormous growth of performance in their venture.
6. ACCORDING TO AGE AND GENDER:
a. Men entrepreneur.
b. Women entrepreneur.
c. Young entrepreneur.
d. Middle aged entrepreneur.
e. Old-aged entrepreneur.
7. ACCORDING TO STAGES OF DEVELOPMENT:
a. First generation entrepreneur:
He is one who starts an industrial unit by means of an innovative skill.
b. Modern entrepreneur.
He is one who undertakes those ventures which go well along with the changing
demand in market.
c. Classic entrepreneur:
He is one who is concerned with the customers and market needs through the
development of a self-supporting venture.
8. OTHER TYPES:
a. Innovative entrepreneur:
Innovative entrepreneurship is characterized by aggressive assemblage of
information and analysis of results, deriving from a novel combination of factors.
He uses the opportunities for introducing a new technique of production process or
a new commodity or a new market or a new service or even reorganization of an
existing enterprise.

b. Adoptive of initiative entrepreneur:

This kind of entrepreneur is ready to adopt successful innovations created by
innovative entrepreneurs. He is merely an organizer than creator.
c. Fabian entrepreneur:
They are very cautious and doubtful of adopting any changes. They have neither
the will to introduce new changes nor the desire to adopt the new method innovated
by others. They are not interested in taking risk and they try to follow the footsteps
of their predecessors.
d. Drone entrepreneur:
They refuse to adopt the opportunities and use the opportunities to make changes in
production even if they suffer losses.
e. Entrepreneur by inheritance:
At times, people become entrepreneurs when they inherit their family business.
f. Individual and institutional entrepreneurs:
In the small scale sector, individual entrepreneurs are dominant. Such entrepreneurs
have the advantages of flexibility, quick decision making etc. but a simple
individual can establish, operate and control an organization up to a limit.
Therefore it becomes necessary to institutionalize entrepreneurship.

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CHARACTERISTICS OF A SUCCESSFUL ENTREPRENEUR:

1. INITIATIVE:

Seeking personal responsibility for actions and use the available resources for optimization of
objectives.

2. DISCIPLINED:

Successful entrepreneur are disciplined enough to take steps everyday towards the achievement of
their objectives.

3. DESIRE TO EXCEL:

The entrepreneur should always engage in competitions with self-imposed standards with himself
to beat his last best performance.

4. HARD WORK:

Entrepreneurs who successfully build new enterprises possess an intense level of strong
determination and willingness to work hard. Capacity to work for long hours and in several days
with less than normal amount of sleep.

5. Self-confidence:

Entrepreneurs must have confidence and belief in them to achieve their desired objectives. Self-
determined and have little belief in fate. A strong believer in his strengths and abilities.

6. Moderate risk taker:

The successful entrepreneurs are neither high risk takers nor gamblers.

7. Looking for opportunities:

He looks for an opportunity and takes appropriate actions as and when it arises.

8. Information seekers:

Takes individual research and consults experts to get information to reach the goal.

9. Mental ability:

It consists of intelligence, creative thinking and analysis of various problem situations and
anticipating change.

10. Clear objective:

Objectives as to the exact nature of the business, the nature of the goods to be produced and
subsidiary activities to undertake to make profit.

11. Secrecy:

He must able to guard business secrets. He should be able to make a proper selection of his
subordinates.

12. Communication ability:

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 Communicating efficiently with customers, employees, suppliers and creditors will be more likely
to succeed in business than the entrepreneur who cannot.

13. Technical knowledge:

Entrepreneur should have responsible level of technical knowledge.

14. Proper planning:

Formulates realistic and proper plans and then executes minimum cost and time.

15. Committed to work:

Does every sacrifice to get the task completed.

16. Problem solver:

Always tries to find out ways and means to tide over the difficult times.

17. Quality and accuracy:

He has always strong urge to excel to beat the existing standard.

18. Effective strategies:

Introduces the most effective strategies to effect employees to achieve the enterprise goals.

19. Decision making:

It is a fundamental characteristic of an entrepreneur.

20. Long-term involvement:

Time horizon from 5 to 7 years.

21. High energy level:

Ability to work for long hours for sustain period.

22. Goal setter:

Challenging but realistic goals.

A TO Z CHARACTERISTICS OF AN ENTREPRENEUR.

A. ADMINISTRATION.
B. BUDGETING.
C. CREATIVITY, COORDINATION, COMPETENT, COMMITMENT.
D. DECISION, DYNAMIC.
E. EMOTIONAL, ENTHUSIASM.
F. FAITH, FORESIGHTEDNESS.
G. GOAL.
H. HOPEFUL.
I. INNOVATION, IMAGINATION, INITIATIVE.
J. JUDGEMENT.
K. KNOWLEDGE.
L. LEADERSHIP, LAW.

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 M. MOTIVATION.
N. NEGOTIATION.
O. ORGANISATION.
P. PATIENCE, POLITICS.
Q. QUICKNESS.
R. RISK, RELATIONSHIP.
S. SELF-CONFIDENT, SECRECY.
T. TECHNICAL, TACTFULNESS.
U. UNDERSTANDING.
V. VISION.
W. WILL POWER.
X. XENIAL (friendly to strangers/foreigners, hospitality.)
Y. YOUTHFULNESS.
Z. ZEAL.

PROS/ADVANTAGES/MERITS OF AN ENTREPRENEUR:

1. BRIDGE THE GAPE BETWEEN KNOWLEDGE AND APPLICATION:

Knowledge through education. But all are not interested in applying their knowledge for
the benefit of society.
2. CONVERTING AN IDEA INTO MONEY:
Being an entrepreneur one may push up one’s innovative ideas into reality.
3. BE YOUR OWN BOSS:
Many people would like to enjoy their life independently. They possess high capacity to
take risk and to have adventurous life.
4. ORIGINALITY RESPECTED:
The creative and original business ideas of an individual can be used for societal benefit
and with this the originator will be respected in the society.
5. COMPETITION:
By adopting innovative ideas of entrepreneur the product/service can be produced at low
cost.
6. BETTER UTILIZATION OF SKILL AND KNOWLEDGE:
Several people in a society will have entrepreneurial skills, but most of them hesitate to use
their skill and knowledge for the benefit of the society.
7. ALTERNATIVE TO CURRENT CAREER:
Many people with entrepreneur skills will be working for others for reasons
known/unknown to them.
8. BUSINESS OPPURTUNITY:
Business opportunity will be cropping up in different sizes and magnitudes.
9. SELF SATISFACTION:
Entrepreneur will have the personal satisfaction of creating and running a successful
business.
10. GAINING EXPERIENCE:
Variety of discipline.
11. CHOICE OF BUSINESS:
Entrepreneur can choose to entrepreneur their particular business fields where they have an
interest and enjoy the work.
12. SOCIAL OBJECTIVES:
Entrepreneur will have an opportunity to contribute to the society and be recognized for
their effort.

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CONS/DIS-ADVANTAGES/DEMERITS OF AN ENTREPRENEUR:

1. ENTREPRENEUR’S CONFRONTATION WITH RISK:

Starting new business involves risk. Higher the reward higher the risk and vice versa.
Entrepreneur tends to evaluate risk very carefully. Entrepreneur face a number of types of
risk
 Financial risk.
 Career risk.
 Family and social risk.
 Psychological risk.

2. REMUNERATION:
Entrepreneur will not get regular income, suffer loss, the reward for risk-bearing in
entrepreneurship may be positive or negative.
3. BENEFIT:
Entrepreneur not only enjoys the benefit as expected initial stage, startup problems,
competition, various types of risk.
4. TIME MANAGEMENT:
Time is very precious, time is money for him. Managing time becomes critical factor.
5. MANAGEMENT:
Decision making may be critical factor. Decision may be postponed, unknown risk.
6. EXPERIENCE:
Unskilled person with an unskilled staff will have difficult time in running the business.
7. HIGH LEVEL OF STRESS:
As per individual expectation and personality, if a person is unable to fulfill roles and
demands, the stress occurs.
8. UNCERTAINITY:
No guarantee entrepreneur will earn enough money to ensure trouble in meeting financial
obligation.
9. COMPLETE RESPONSIBILITY:
Not really knowledgeable, difficult in finding advisors. Complete responsibility of business
failure.
10. DISCOURAGEMENT:
Entrepreneur will run headlong into many different obstacles, difficulties, discouragement
etc.
11. COST BENEFIT ANALYSIS:
Startup problems are inevitable for an entrepreneur in the initial stage as it takes a long time
to reap benefits.

WOMEN ENTREPRENEUR:

According to Schumpeter, women who innovate, initiate (or) adopt a business activity are called
women entrepreneur.

PROBLEMS OF WOMEN ENTREPRENEUR:

1. ABSENCE OF ENTREPRENEURAL APTITUDE.

2. MARKETING PROBLEMS.
3. FAMILY CONFLICTS.
4. HEAVY COMPITATION.
5. SOCIAL BARRIERS.
6. LACK OF INFORMATION.

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 7. LACK OF ACCESS TO TECHNOLOGY.
8. LACK OF EDUCATION.
9. NEGATIVE ATTITUDE OF BANKS AND FINANCIAL INSTITUTIONS.
10. PROBLEM OF FINANCE.
11. SCARCITY OF RAW MATERIALS.
12. LOW RISK BEARING ABILITY.
13. MALE DOMINATED SOCIETY.

REMEDIAL MEASURES FOR PROBLEMS FACED BY WOMEN ENTREPRENEUR.

1. VOCATIONAL EDUCATION.
2. TECHNICAL EDUCATION.
3. ENTREPRENEURAL MOTIVATION AT SCHOOL.
4. ACCESSIBILITY TO INFORMATION.
5. SEPARATE PUBLICATION.
6. ACCESS TO TECHNOLOGY.
7. SIMPLE FORMALITIES.
8. 100% FINANCE.
9. TRAINING.
10. PROVIDING MARKET ASSISTANCE.
11. SUITABLE GUIDELINES.
12. STRENGTHENING TRADE SUPPORT NETWORK.
13. SUPPLY OF RAW MATERIAL.
14. CONCESSION OF TAX.

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