Chapter-1

Entrepreneur

Entrepreneur
The term entrepreneur was used for army leaders in the early
16th century France.
Schumpeter(1961) believed that an entrepreneur was a dynamic
agent of change, that an entrepreneur was a catalyst who
transformed increasingly physical, natural and human resources
into correspondingly production possibilities.
Entrepreneurship can be described as a creative and innovative
response to the environment. Doing new things that are already
being done in a new way is therefore, a simple definition of
entrepreneurship.
It connotes innovativeness of seeing things in a new way which
afterwards proves to be true.
The importance of entrepreneurial resource as a critical input in
the process of economic development

Concept Of Entrepreneur
An entrepreneur is a person who establishes and manages his
own enterprise or business. The process of establishment and
management is called entrepreneurship.

Entrepreneur are people who have the ability to see and

evaluate business opportunities to gather necessary resources to
take advantage of them and to initiate appropriate action to
ensure success.

 Entrepreneurs are action- oriented, highly motivated individuals

who take risks to achieve goals.
An entrepreneur initiates and establishes an economic activity or
enterprise for the development of wealth for the society.
He is certainly different from other persons in terms of his
psychological and social disposition.
Entrepreneurs by and large, have been found to be people with a
high drive and high activity level, constantly struggling to achieve
something which they would call as their own accomplishment.
Once an entrepreneur starts his entreprize,to be successful, he
would have a high need for influencing others, a low need to
establish emotional relationship and a high capacity to discipline
ones own self.
He is inclined to speak about his past achievements and narrate
them with a sense of pride.

 He has clear goals for the future and tends to live in the present with the
involvement.
He studies the market situation, explores profitability in alternative lines
of business, products , machinery , technology and process, finances and
compares before making his final decision.
A successful entrepreneur continuously modifies his goals on the basis of
the feedback he receives from his environment.
Entrepreneurs set high goals for themselves as well as their workers and
drive them hard to achieve the same. While they are certainly competitive
in their own orientations, they collaborate with other parties when they
see such collaborations to their advantage.
Entrepreneur is a self - centred but pushing type of person. He possesses
a sense of pride in dignity of labour and exhibits readiness to put in
manual work.
An entrepreneur need not have all the above characteristics together.
These traits can be developed in the people through psychological
education.

NEED FOR ENTREPRENEURSHIP DEVELOPMENT

National Need:- Realising the role of small scale industries in
creating larger employment opportunities, distribution of
ownership, diversification of management and development of
rural and backward areas , the Government of India gave
major thrust to the development of small scale industries and
entrepreneurship in India.
It was also felt that proper industrial growth and development
and export of goods and services could be achieved only by
improving the industrial culture in the country.
The Small Industries Service Institutes, National Institute of
Entrepreneurship and Small Business Development at Noida
and Entrepreneurship Development Institute of India at
Ahmedabad.

Need for Technical Entrepreneurs

A technically qualified and experienced person can make a
more competent entrepreneur as he acquires special knowledge
of science ,engineering materials and machines, production
planning and control, manufacturing technologies and
management techniques for successful launching and smooth
running of an industrial unit.
A technical entrepreneur develops characteristics of quality
consciousness adoption of modern technology and management
techniques and realization of the importance of research and
innovation for productivity improvement the absence of which
can lead to industrial sickness.

Scope Of Entrepreneurship
An entrepreneur initiates and establishes an enterprise. He has
to take a number of decisions to set up and run a new enterprize.
1. Decision to become an entrepreneur
It is a major step which is dictated by motivational factors. The
inner urge of the person depends upon the following needs.
i. To prove oneself
ii. To be independent
iii. To do something unique
iv. To utilize skills
v. To acquire greater economic reward
vi. To excel

Identification and selection of an opportunity

The entrepreneur starts searching for an opportunity to meet his
needs. He looks around for different possibilities of business
,reads about them , meets people who could give ideas and
inspiration, and collects information on several opportunities.
Business plan formation and its implementation
He studies the feasibility and profitability of the project . After
establishment of the enterprise, he must mobilize capital and
human resources and translate problems into opportunities.
Entrepreneurial continuum
A series of entrepreneurial decisions and actions have to be taken
which require sight attitude and requisite knowledge and skills for
entrepreneurial continuum. Diagram???

Rewards and Penalties for an Entrepreneur

1.
2.
3.
4.
5.
.
1.
2.
3.
4.
5.

Rewards
Freedom to work
Satisfaction of being own boss
Power to do things as he likes
Rewards of ownership and retirement assurance
Respect of family and friends.
Penalties
Constraints of finances, labourers, customers, suppliers and debtors
control his freedom.
Frustration due to availability of limited capital and other
resources.
Social and family life is affected due to hard long hours of
working.
Frustration due to non- achievement of full objectives.
Risk of failure.

ROLE OF AN ENTREPRENEUR IN SOCIO- ECONOMIC

DEVELOPMENT
Employment Generation :- An entrepreneur provides employment to himself
as well as is an agent for direct and indirect employment to others. He is ,
therefore, instrumental in solving unemployment problem of the country.
Entrepreneurial Culture:- Proper industrial development and growth is
possible only by improving the industrial culture in the society. A qualified
entrepreneur is instrumental in creating industrial culture based on high
technology , innovation ,productivity and quality of goods and services.
Foreign Exchange:- High quality goods and services are exported to other
countries thereby earning foreign exchange for the nation.
Alternate Profession:- An entrepreneur plays the role model for other people
to start their business and shows the way for alternate profession and means
of earning.
Competitive Price:- An entrepreneur starts small business or small scale
industry and can provide goods and services at competitive price, nearest to
place of consumption and in time.

 Competitive Price:- An entrepreneur starts small business or small

scale industry and can provide goods and services at competitive
price, nearest to place of consumption and in time.
Exploitation of Consumers:- An entrepreneur is able to supply
goods and services at affordable prices thereby restricting the
monopoly of big business houses.
Ancillary Industries:- An entrepreneur sets up ancillary industry
and supplies parts, components , assemblies and tooling to other
industries manufacturing useful products.
Development of Rural and Backward Areas:-An entrepreneur sets
up industry in his own locality and there is distribution of
ownership of business and dilution in the concentration of wealth.
Diversification of Ownership of Business:- An entrepreneur helps
in the proper utilisation of the local materials, skills ,labour ,
capital and knowledge and therefore there is better utilisation of
national resources.

 Utilisation of local skills and materials:- An entrepreneur help in

reducing pollution due to concentrated discharges of affluent by large
industries and therefore there is better utilisation of national resources.
Environment Control:- Scattering of small scale industries help in
reducing pollution due to concentrated discharging of affluent by large
industries and therefore there is better utilisation of national resources.
Infrastructure Development:- Facilities like roads, electricity
,telephones ,hospitals ,post offices, schools , markets, housing
colonies ,transportation and other infrastructural development is
always accompanied with the selling up of Industries. Therefore, an
entrepreneur contributes directly or indirectly with the overall
development of a locality and region.
Local Employment:- An entrepreneur sets up an industry and provides
employment to local people. These people therefore, do not migrate to
big cities thereby reducing overcrowding and overstressing of
infrastructure of big cities.

QUALITIES OF AN ENTREPRENEUR
Need to Achieve :- Entrepreneur has a strong desire to achieve a
higher goal and fulfil his dreams. Winning is achievement.
Perseverance:-An entrepreneur is fully absorbed in his goal and
course of action. He works hard to complete his project successfully.
He is not deterred by difficulties and problems.
Moderate Risk Taking:- An entrepreneur loves moderate risk
situation which is exciting but has fair chance of success. He is not a
gambler or high risk taker. He selects a moderate risk and does not
play wild speculative game.
Ability to Find and Explore Opportunity:- Entrepreneur is quick to
see and seize opportunities. He has innovative mind and converts
difficulties into opportunities. He is also realistic. He plans and
anticipates carefully to achieve his goals and converts opportunities
to his advantages.

 Analytical Ability:- Entrepreneur approaches problems realistically

without personal likes and dislikes. He has practical approach to business.
He will select experts and not friends or relatives to help him when
required. He does not take emotional attitude towards his problems.
Independence:- An entrepreneur likes to be his own master and wants to
be responsible for his own decisions. He does not want to work for others
and therefore sets up his own enterprise.
Using Feedback:- An entrepreneur likes to have immediate feedback of
his performance. He likes quick and accurate data and information. He is
stimulated by unfavourable news and applies more energy to attain his
objectives.
Facing Uncertainty:- Entrepreneur is an achievement oriented person and
is optimistic even in unfamiliar situations. He is not discouraged and
makes the best of opportunities. He can assess the success rate closely
and understand his environment. He will win by applying his special
insights and skill.

 Flexibility:- An entrepreneur has open mind. He does not

hesitate in revising his decisions if situations so demands. He
will evaluate his decision carefully.
Planning:- An entrepreneur thinks in future, plans and works
to make his plans successful. He will set his goals and plan to
achieve within time limits.
Interpersonal Skills:- An entrepreneur likes to work with
different types of people and has the skill to deal with them.
He has to make people work for him, with him and help to
obtain his objectives.
Motivator:- An entrepreneur motivates people to act. He can
influence people to think his way and act accordingly.

 Stress Taking:- An entrepreneur has the capacity to work for

long hours and tackle difficult problems at the same time.
There will always be adverse situations in business. An
entrepreneur can keep his cool under a lot of tension and make
right decisions against physical and emotional stress.
Positive Self Concept:- An entrepreneur is always positive in
thinking. He is aware of his goals and sets standards of
excellence of his works.
Orientation of Future:- An entrepreneur shows high level of
future orientation and tends to think ahead. He lives in present
and does not allow the past to obsess him.

Working Profile of an Entrepreneur

1. Self - confidence

-Confidence
-Independence,individuality
-Optimism

2. Task-result oriented

-Need for achievement

-Profit-oriented
-Persistence,perseverence,determ
ination
-Hardwork,drive,energy
-Initiative

3.Risk-taker

-Risk-taking ability
-Likes challenges

4. Leadership

-Leadership behaviour
-Gets along with others
-Responsive to suggestion,
criticism

5. Originality

-Innovative, creative
-Flexible(openness of mind)
-Resourceful
-Versatile, Knowledgeable

6.Future-Oriented

-Foresight
-Perceptive

Types of Entrepreneurs

According to Clarence Danhof

Innovative entrepreneurs
Adaptive or imitative entrepreneurs
Fabian Entrepreneurs
Drone entrepreneurs

Innovative Entrepreneurs
Innovative entrepreneurs introduces new goods, inaugurates new
method of production, discovers new markets and reorganizes the
enterprise.
He experiments and converts attractive possibilities into practice.
Such entrepreneurs can work and flourish only in developed
economies where certain level of development has already been
achieved, there are people who look forward to change and
improvement.
Such entrepreneurs have played important role in the rise of
modern capitalism in certain developed countries.
There is a death of innovative entrepreneurs in the underdeveloped
countries due to lack of resources for experimentation and
innovation

Adaptive or Imitative Entrepreneurs

These entrepreneurs adopt successful innovations of others
from developed countries. Imitative entrepreneurs do not
innovate but make certain modifications to suit the needs of
underdeveloped countries.
Required in the developing countries who can imitate the
technology, skill, etc already available in the advanced
countries, make certain modifications and introduce in their
developing countries.
These entrepreneurs face less risks of failures.

Functions of Imitative Entrepreneurs

Perception of market opportunities

Gaining command over scarce resources
Purchasing the products
Marketing the products
Dealing with bureaucrats
Managing human relations within enterprise
Managing customer and supplier relations
Managing finance
Managing production
Acquiring and supervising setting of factory
Managing finance
Managing production
Acquiring and supervising setting of factory
Industrial Engineering
Upgrading process and product
Introducing new production techniques and products

Qualities and Importance of Adaptive or Imitative Entrepreneurs

Imitative entrepreneurs may not be creative but they are adaptive.
They are also revolutionary and important and their qualities
should not be underestimated.
They are objective innovators and have the ability to do things
which have not been done in the present enterprise.
Although he may not be true innovator but he is an organiser of
factors of production.
He is catalyst in industrialisation which is very important for
developing country.
His actions can lead to impressive economic progress in a
developing country

Fabian Entrepreneur
These entrepreneurs are very cautious and sceptic in experimenting any
change in their enterprises. They bring change or imitate only when it
becomes perfectly sure that there would be no failure or loss.
The main qualities of such entrepreneur are as follows:
-These entrepreneur are neither innovative nor adaptive.
-They are very cautious people.
-They are rigid and follow fundamental approach.
-They are very cautious and sceptical in adapting any change.
-They are very lazy and shy.
-They lack will to adopt new techniques and methods.
-Their dealings are determined by customs, religion , traditions and past
practices.
-They initiate change only when it becomes clear that they cannot survive
without the change.
-They avoid risks and tend to follow their predecessors.

Drone Entrepreneur
These entrepreneur do not make changes in production
methods even though they may suffer losses.
-They are resistant to adapt and use opportunities to make
changes in their products and methods of production.
-They stick to conventional ideas and products.
-They are laggards and continue to operate in their traditional
way.
-They are pushed out of market when product loses marketability
and operations become uneconomical.
-They are very rigid and close down their business but do not
accept changes.

Individual and Institutional Entrepreneurs

Individual entrepreneurs own small business and small scales
industries. There are large number of individual entrepreneurs
in every country. Such entrepreneurs are flexible ,quick
decision makers and enjoy state patronage.
A single individual can establish, operate and control only
limited size of an enterprise.
A group of entrepreneurs only can handle complex business
and collective decision making is needed to decide line of
business, amount of capital employed.
Corporate sector is the symbol of institutionalised
entrepreneurship.

Entrepreneurs by Inheritance
These entrepreneurs inherit family business by succession.
The business is passed from one generation to another. They
are also called second generation entrepreneurs.
First generation entrepreneurs do not have background of
family business and start and build enterprise on their own
innovative skills

Technical Entrepreneurs
There are technically and professionally qualified persons who
may enter the business to commercially exploit their invention
or discoveries.
They develop new goods and services out of their
specialisation and skills.
They raise the necessary capital and employ experts in the
field of finance, law, marketing and other areas of business.

Forced Entrepreneurs
These are persons who become entrepreneurs due to
circumstances.
- The money lenders have entered into business due to decline
of money lending with growth of banking.
- Educated unemployed seeking self-employment mostly
Indians returning from abroad.
- Newly married bridegroons start business with the financial
support of their in-laws.

Basis of Motive
Entrepreneurs may be classified into following categories:
-Managing entrepreneurs whose chief goal is security.
-Innovating entrepreneurs who want excitement.
-Controlling entrepreneurs who desire power.
Miscellaneous types of Entrepreneurs
-Classified as trading entrepreneurs, agricultural entrepreneurs,
industrial entrepreneurs, women entrepreneurs, rural
entrepreneurs, urban entrepreneur etc.

Functions of an Entrepreneur

Sensing entrepreneurial opportunities

Generation of business idea
Converting idea into reality
Arranging resources
Supply of capital
Establishment of enterprise
Managing the enterprise
Growth and development

Kilby identified 13 functions

Perceiving market opportunities

Gaining command over scarce resources
Purchasing inputs
Marketing of products and responding to competition
Dealing with public bureaucracy (concessions, licences, taxes)
Managing human relations within the firms.
Managing customer and supplier relations
Managing finance
Managing production
Acquiring and overseeing assembly of the factory.
Industrial Engineering
Updating process and product quality
Introducing new production techniques and products

Barriers to Entrepreneur

Lack of viable concept which can be overcome by increased market contacts.

Lack of market knowledge which can be overcome by taking help of local incubator
companies and market contacts, consultants.
Lack of technical skills which can be overcome by recruiting capable local
manpower; technical education , assistance of consultants.
Lack of seed capital which can be arranged from supplier credit, local venture capital
and bankers.
Lack of business Know-how which can be overcome through entrepreneurial
education and study of successful role models.
Complacency and lack of motivation can be overcome by entrepreneurial education
and inspiration from successful role models.
Social stigma against business can be overcome by study of successful role models
Time pressures and distractions
Legal constraints, regulations, red tape.
Monopoly and protectionism
Inhibitions due to patents