Chapter 1

ENTREPRENEURSHIP:
CONCEPT AND IMPORTANCE

OUTCOMES
After studying this chapter, you should be able to:
understand theconcept and characteristics of an entrepreneur
classify entrepreneurs in different categories
define entrepreneurship and its core elements
identify determinants of entrepreneurship
highlight the significance of entrepreneurship and underline major challenges
differentiate between an entrepreneur and a manager

businesses
Entrepreneurial revolutions from time to time have been redefining our lives,
of an economy by devising
and processes involved. They have contributed towards growth
new products and services, identifying opportunities
newer ways of doing things, offering
been various facets of the term
and developing businesses around them. There have
one who perceives a need and then brings
"entrepreneur" from one who runs business to
that need(Entrepreneur is one
together manpower, material and capital required satisfy
to
it
to change,respond tothe need and exploits
who understands the market dynamics, yearns
as an opportunity. The word "entrepreneur"
is derived from the French verb "enterprendre"
ever since. Initially,
of the evolving
term has been
which implies "to undertake". The meaning referred to as "entrepreneurs".
Frenchmen whoorganized and led military expeditions
were

who starts his own new business.

term entrepreneur to a person
Many countries assign the all other self employed vocation in
the
Business includes manufacturing, transport, trade and
service sector.
is the one who always searches for change,
Drucker (2006)1 defines that "An entrepreneur of entrepreneurs,
Innovation is the specific tool
esponds to it and exploits it as an opportunity. for a different business or
different
changes as an opportunity
eans by which they exploit of entrepreneurship (innovation,
growth,
This definition covers characteristics
ervice"
uniqueness).
Elsevier Linacre House, 2006
Drucker Peter F, Innovation and Entrepreneurship, UK,
4 Entrepreneurship

The recognition of entrepreneurs dates back to eighteenth-century France when economis

Richard Cantillon associated the "risk-bearing' activity in the economy with theentrepreneu,
In England during the same period, the Industrial Revolution was evolving, with the
entrepreneur playing a visible role in risk taking and the transformation of resources.
Entrepreneurship consists in doing things that are not generally done in the ordinary
course of business routine; it is essentially a phenomenon that comes under the wider aspect
of leadership.3
This term has travelled through the centuries and has been extensively used to connote
"change agents" who chart their own course of action as a response to environmental
dynamics. However, it is still evolving with researchers adding newer dimensions to the term
itself
1,1 CONCEPT OF ENTREPRENEUR
An entrepreneur can be regarded as an individual who acts as a catalyst of change and
works towards social good. He plays a vital role in economic development because of his risk
taking attitude. He acknowledges "change" as the only constant thing in this world. He has
an
aptitude to question the established way of doing things, finding newer way of addressing
issues and improving societal benefit through innovation and creativity.
Entrepreneurís) is an individual or group of individuals, who study environmental
dynamics, identify opportunities, analyze feasibility of various options, shape and reshape
proposals and contribute by offering new products or services or processes. They are willing
to chart novel ways despite the risk of
loosing. Albert Einstein famously remarked, "Anyone
who has never made a mistake has never tried
anything new." This statement sheds light on
the true spirit of an entrepreneur.
He has to assume different roles
during his journey towards success. He has to be the
thinker, planner, organizer, worker, manager and a learner at the same time. This
embarks on his multi-faceted role. clearly

1.2 CHARACTERISTICS/ QUALITIES OF AN ENTREPRENEUR

M.M.P. Akhouri, former Executive Director, National
Institute for Entrepreneurship
and Small Business Development
(NIESBUD), New Delhi, describes entrepreneur "as a |
character who combines innovativeness, readiness to take
risk, sensing opportunities,
identifying and mobilizing potential resources, concerns for excellence and who is
persistent in achieving the goal."* To be successful, an
following characteristic features: entrepreneur must possess the

2. Israel M. Kirzner, Perception, Opportunity, and Profit: Studies the Theory of Entrepre
in
neurship (Chicago: University of Chicago Press,
3. 1979).p.38-39.
Joseph Schumpeter, "Change and the Entrepreneur," in
ard V. Clemence (Reading, MA: Essays of I. A. Schumpeter, ed. Rich
Manual of Entrepreneurship
Addison-Wesley, 1951),p.255.
Development, p9
uate- Entrepreneurship: Concept and Importance 5
Need to achieve: Entrepreneurs strongly yearnto achieve higher goals. Their inner
self motivates them to work towards high achievement. Entrepreneurs with high
n-Ach factor act continuously to achieve the goal and make their dreams come true
per David McClelland.
as

2. Independence: Most of the entrepreneurs start alone or lead from the forefront.
They seldom like to work for others. They willingly take the onus of their actions.
Risk-bearing: Entrepreneursare the individuals who have the aptitude for taking
risks. However, they plan and take calculated risks instead of shooting in the dark.
4. Urge to be in control: Entrepreneurs trust their own ability to control the results of
their actions by influencing socio-economic environment rather than adapting to it.
5Perseverance: Entrepreneurs have a high level of commitment towards their
goals and strong belief in their actions. These traits give them the tenacity to work
consistently towards their objectives despite difficult situations.
6 Optimism: Entrepreneurs always have positive hopes for future as they take
calculated risks. They are aware of their strengths, weaknesses, opportunities and
threats. They utilize their knowledge to pursue their dreams.
JCapturing opportunities: An entrepreneur is always vigilant of opportunities
around him. He displays innovative spirit and transforms the problems into viable
prospects.
8. Flexibility: Most of the entrepreneurs react swiftly to the changing situations. They
are not hesitant to rework. The fluidity of thoughts helps them in moving from one
plan of action to another.
9Efficiency: Their actions are always goal-oriented. They believe in optimum
utilization of resources, time and effort.
10 360° Feedback: Successful entrepreneurs collect feedback of their
performance
and ideas from all the team members. They are not discouraged from unfavorable
feedback or comments. Instead, they conduct root cause analysis and try to improve.
1Interpersonal skills: Entrepreneur needs excellent interpersonal skills to interact
with raw material suppliers, customers, bankers, etc. for different activities.
12. Capacity to influence: Entrepreneurs need to exercise power and personal charisma
to influence others and develop a cohesive team.
13. Timeliness: Entrepreneurs have to rationally follow the timelines while doing their
jobs. Delay in activities can lead to potential loss of opportunities.
14. Innovators: Entrepreneurs are impressive innovators. They constantly channelize
their
energies in introducing new products, new method of production and opening
new markets.
J. Communication: Entrepreneurs must possess good written andverbal
communication skill to manage interpersonal relationships, avoid conflicts and tor
smooth flow of ideas.
9 Visionary: They tend to be forward looking with concrete plan of action. Their
 6 Entrepreneurship

vision and foresight makes them alert to the changing conditions of the time
an
offer and commodities as per the changing requirements o
modity or
goods
new

17. Leadership: Entrepreneurs must lead from the forefront. They need to provide n
necessary push to motivate the group for achievement of goals. They They may
may foll
fole
-diffterent leadership styles or may follow situational leadership.
18. Planners: Planning means deciding in advance about where we are and where
where We
w
want to reach. Entrepreneurs need to plan skillfully and aim at capturing attach
risks and alternative routes available.
Ability to mobilize resources: Entrepreneurs musthave the ability to marshal al
the inputs to obtain the end product. They have to mobilize 6Ms, i.e. Man, Mone
Material, Machinery, Market and Method effectively to realize thefinal product, as
as
entrepreneurship is a function of gap filling and input completing
B Self-confidence: Entrepreneur dares to chart new paths. Their selt-confidence adds
credibility to their plans.
The list cannot be
exhaustive but researches across the globe study commonalities
of
entrepreneurs. These characteristics can be looked upon as
entrepreneur. pre-requisites of a
successful

1.3 CLASSIFICATION OF ENTREPRENEURS

Entrepreneurs may be classified on different basis. It may be on the basis of their
operations, degree of newress/ creativity in their scale of
product or socio cultural backgrounds.
1.3.1 Classification on the Basis of Clarence
American Agriculture Danhof's Study of
(a) Innovative: These
entrepreneurs are the green shoots of a
Theysense the need for change, think out progressive economy.
of the box,
launching products services. They provide plan and take the risk of
new
thescope of an economy and in terms of new venues of work; broaden
alternative
increased variety of products and services. businesses, simplified processes and
(b) Imitativel Adoptive: These
classified as followers of entrepreneurs are not the first movers.
innovation and creativitysuccessthul
They be
entrepreneurs. They do not contribute in terms of
but they do
can

increase supply of new

products.y
providemore employment opportunities and
hey are
where tried and tested
technologies suitable tor under developed
minimal customizations instead of of developed nations be
economies
can emploved with
Fabian: They are shy and cautious reinventing
the wheel.
(c)
launched technologies or products.movers. Ihey are skeptical about following newly
other way-out. They are Tisk Ihey enter such markets only
averseand when there is no
n
However, they eventually adopt changeshence avOid experimenting'
instead of with nroco.
getting extinct. rocesses.
5. Manual of Entrepreneurship Development, p 9
 JINcept ana
lmportance 7
hese
(d) Drone: The entrepreneurs are orthodox and unyieldin Their laggard
Awards change
towards does not let them
adopt changes. They do not attitude
believe in responding
to environmental nanges and prefer to offer age-old products and services
he risk of loosing out. They struggle to survive and despite
have reduced returns due to
resistance to change.

Classification of Entrepreneurs Based on Socio-Cultural Varlables

1.3.2
First-Generation Entrepreneurs: These are the original go-getters, the one who
(a)
are thefirst movers. They don't belong to any existing business group and do not
have business experience. This league of entrepreneurs dreams big and works
h
Dassionately towards achieving the same. They learn by their own mistakes and
at times success strikes them after series of failed attempts. Some ofthe prominent
first-generation entrepreneurs from India are Dhirubhai Ambani, Narayan Murthy,
Vijay Shekhar Sharma, Karsanbhai Patel, Mahashay Chuni Lal (MDH fame).
b)Entrepreneurs from Business Families: Prevalence and dominance of family
and all. Traditionally, there
businesses in Indian business scenario is known to one
Sindhi
have been a few socio-ethnic groups including Marwadi, Gujarati, Parsee,
in India. The Tatas, Birlas, Burmans, Wadias,
etc. who have led the business scene
and Singhanias are all such business groups.
to take the first
It isdefinitely easier for people from business family background
structure to help. However, it only provides an
step as they've a pre-built support more than that.
success needs much just
easy start and entrepreneurial
There are many small ethnicgroups that have traditionally
(c) Minority Entrepreneurs:
not ventured into business. However it has turned important
för them to venture
their cultural and ethnic heritage
out and create lasting enterprises by showcasing
founded Maukaa Art Foundation in September
to the world. For instance, Prerna forms
to safeguard traditional Indian art
2016 with a team of five members,
into the organised sector. They are developing
from extinction by bringing them
traditional artists to present the art forms
collaborations between young artists and
foundation wants to create a complete 360-degree
in a contemporary manner. The
about a sustainable, visible change.
ecosystem, which will bring
Arunachal Pradesh) turned Ziro's
An agricultural engineer, Rita Tages (from
in India. Rita Tage is the
abundant Kiwi fruit into one of the finest wines
locally and her company
and Managing Director of Lambu-Subu Food,
Chairperson launched in October 2017.
the country's first organic kiwi wine, and was
produced is completely
Naara Aaba. The Kiwi fruit used
The commercial wine was branded follows
is done without any chemical fertilizers. The factory
organic; the farming The Naara
control and manufacturing/production systems.
all norms of pollution to lab
a clean certificate of composition, according
Aaba wine has been given
analyses.
https://www.womensweb.in/2019/05/7-women-entrepreneurs-of-north-east-india-who-are-doing-

6.
big-business/
 8 Entrepreneurship

In her words, "It was just the most logical thing to do-the fruit does extremely w
n this climate. The abundant sunshine of Ziro contributes to Opimum growtha
taste of thefruit". The barren and rolling hill slopes of the Ziro Valley are now ill.
with clusters of kiwi.

a Women Entrepreneurs: A woman as entrepreneurs is an ever-evolving phenomen

in India.
Mahila Grih Udyog started the production of Lizzat Papad in 1959.
1959. It w
w
d group ofseven women. The number kept on increasing and theypay
neir way through struggles to success. Progressive laws and other incentivd
have also boosted the presence of women in entrepreneurial acuvity n divery
e r b a l heritage of Shahnaj Hussain, paradigm shift in Indian television b
Ekta Kapoor or contribution of Simone Tata in Lakme are all exampies or grit an
ermination of Indian women entrepreneurs. Kiran Majumdar Shaw founde
Biocon, which is now the leading biotech firm in India, and she is an inspiration
many other Indian women wanting to start their own business
t
Another classification
by Arthur H. Cole is as follows:
a)
Empirical: These entrepreneurs follow standardized and do not
processes yeam
make changes or improvements. They follow rule of thumb instead of radica
changes.
(6) Rational:
They are well aware of the changing needs and are also willing to
However introduce those change
changes that seem to be more revolutionary.
c) Cognitive: These
entrepreneurs keep themselves abreast with dynamics of
environment and consult
experts to devise newer ways. They take a lead in breaking
away from the customs and walking on the
self-charted paths.
1.4 CONCEPT OF ENTREPRENEURSHIP
Entrepreneurship is an
ever-evolving and
wealth. Itinvolves doing things in a better and dynamic concept of creating progressive
involves foreseeing improved manner. It is a mental process which
upcoming challengesand
planned way. It involves breaking away fromresponding environmental uncertainties in
a
to

and revising set standards. It is a traditional methods, trying new approaches

function of gap filling
between
entrepreneurial process includes all the functions, activities, actual and
desired state. "The
and actions that are
perceiving opportunities and creating organizations to pursue them."7 part of
Entrepreneurship is required in every society to address the concerns, for
basic concepts and for
management of new problems and new opportunities. application of
contexts this term implies starting one's own new
business, it does not
Though in many
every new business started is entrepreneurial in nature. For necessarily mean that
another grocery store may not be instance, an
individual opening
to entrepreneurship addin8
the existing store would be. In the
Dut
"Organic Only" section even
irst case, ne/sne may just add to the supply of
but in the second case there would be addition or new
Customers, new materials
increased variety of products offered. satisfaction levels and
Bygrave William and Zacharakis, A., "Entrepreneurshipecond Edition, Jogn Wiley and Sone
49
 Entrepreneurship: Concept and Importance 9

4.1 Features of Entrepreneurship

.4.1
It is always aimed at achievement of pre-defined goals.
(a) Goal-oriented:
address customers needs through new
(b)Innovative and creative: It attempts to
been offered so tar.
products and services that have not to take the initiative of
individuals or groups who are ready
Initiative: Displayed by
(
moving in a new direction.
actions are well thought out, planned and
(d) Well-organized: Entrepreneurial
organized to yield desired results.
forces, the process
As entrepreneurs deal with dynamic environmental
(e) Dynamic:
oughtto dynamic to adapt and respond to the changes.
work on the basis of open-systems concept
( Open system: Entrepreneurial entities deliver products
feedback from environment and in return
where they take inputs,
and services to the same.

1.4.2 Entrepreneurial Process

of stages and
words of William Bygrave, "The entrepreneurial process is a set
In the are: the idea or
follow one another. These entrepreneurial process stages
events that implementation and
of the business, the event that triggers the operations,
conception of the business at each stage
as
A critical factor that drive the development
growth. traits are shaped by personal
attributes and
with most human behavior, entrepreneurial
environment."
ludy
eie
Innovation aLa q enena
process, which in itself
is a collection of
This is typically the first step of the entrepreneurial studies.
various sub-steps like idea generation,identification of market opportunity, feasibility
of
from it and how to generate the development
It also encompasses the ability to get value as ideas
that there are many people at this stage keep
the product or service. It is quite possible
encounter problems. But a majority of individuals do not movve

crossing our minds when we

further to cross all stages.

Triggering event
motivated to start
This event is the gestation time of the project. The entrepreneur stays
a business and reaches 'eureka' moment. He must
ensure that his passion coincides with his
and tough times.
business ideas otherwise it will be very difficult to sustain the hardships
and initiate identification of resources required,
Theentrepreneurmay create business plan use them. Writing a
business
theproject risk, the source of the funds and how they wouldtoo
plan serves as a guide for future tasks however one cannot be rigid about written path. A
majority of the enterprises bring changes in their plan when they actually start working8
 10 Bntrepreneurship

PERSONAL
PERSONAL SOCIOLOGICAL PERSONAL
Achievement
Locus of control
Risk taking
Job dissatistaction
Networks
Teams
Entrepreneur
Leader
ORGANIZATo
Team
Ambiguity tolerance Job loss Parents Manager Strategy
Risk taking
Education Family Commitment
Structure
Personal values Cuture
Age Role models Vision
Education
Gender Advisors
Products m
Experience Commitment M
Opportunity recognition Resources

INNOVATION TRIGGERING EVENT IMPLEMENTATION

GROWTH
GROWT
ENVIRONMENTAL
Opportunities ENVIRONMENTAL
Role models Economy ENVIRONMENTAL
Competitors
Creativity Competition
Customers
Resources
Incubator Suppliers
Government policy Investors
Bankers
Lawyers
Resources
Government policy
Economy
Fig. 1.1: A Model of the
Source: Bygrave William
Moore, Carol. and Zacharakis, Entreprensurial Process
A.,
Understanding Entrepreneurial "Entrepreneurship",
agement Best Paper Behavior." In J. A. Second Edition, Jogn
Proceedings. Forty-sixth Annual Pearce l and R. Wiley and Sons, pg 50
Meeting of the Academy of B. Robinson, Jr., eds., (Based on
Academy of Man-
Management, Chicago, 1986.)
Implementation hOAL lov
Finally the
and set up entrepreneur raises funds, takes
a
infrastructure requisite
very humble scale. The needed give the big push. approvals, and acquires
to
Sometimes, the business mavresources
strategy and business planproject toto launch their new business
towards a bright future. begin develop day by day to the start at
day, and the use ofmarket is initiated The
Growth resources are invested
inves
ested
The previous
stage will give a first hand feedback
starts gathering this to the
or there is feedback to
analyze hether the business. Now the
positive project has
see their
or
negative deviation from planned
company constantly growing. The activities of The received
path. exXpected
ideal scena
entrepreneur
business to a stage of he
the
maturity
keep up the pace of the business
to maximize previous
previous event, wo ald be to
profitability better
for ideally
to
ideall.be
ideas and self-development. growth, the entrepreneur mus ust
benefits. At thily lead
lead the
the
continue to time, to
embrace ne
poA
 Entrepreneurship: Concept and Importance 11
1.8 ELEMENTS OF ENTREPRENEURSHIP
In the hot summer of Delhi, 20 years old Zainbuys 200 mineral water bottles from wholesale
market ? 10 each and sells them to tired, thirsty and sun-parched tourists outside Qutub
Minar at 20 per bottle. He's able to meet his study expenses with this money by working
in
4 hours a day. Is he an entrepreneur or acting like an entrepreneur? Some commonalities
entrepreneurs irrespective of the size and scale of their business ventures are innovation, risk
bearing, decision-making, resources, passion and the ability to venture into new areas.

Context

Elements of
People EntrepreneurshipOPportunit

Deal

Fig. 1.2: Elements of Entrepreneurship

William Sahlmans, Professor at Harvard Business School, talks about the four key
elements of an entrepreneurial venture: 1) People, 2) Opportunity, 3) Context and 4) Deal.
1. People: They'rea set of people including the entrepreneur and the whole team that
has worked together. The team may include managers, lawyers, designers, finance
managers, marketing managers etc.
2. Opportunity: The specific opportunity that is being targeted is the second element
of entrepreneurship. For instance, launch of smart phones, auto temperature control
air conditioners etc. there are specific characteristics of every opportunity including
the target audience, size of market, investment size, potential to grow and customer
need.
3. Context: It encompasses things that are beyond the control of an enterprise. For
in smart firm not have control over competitors or
example, phone market, the does
how competition takes place. Legalities are also pre-defined and revised by the state
from time to time.
4. Deal: It implies the contracts and agreements of the enterprise with vendors,
distribution channels, partners and employees
3. William Sahlman, Endeavor's Entrepreneurs' Summit, Stanford Technology Ventures Program, May
2007
12 Entreprcncurship

FIVE CORE ELEMENTS OF

ENTREPRENEURSH
From various definitions referred to in previous pagesit emerges that entrepreneurship primarily
consists of five main elements:
that no one noticed. Such
has earlier
entrepreneurship is to identify opportunitiessmall ones.
u n i e s need not be large: these can even be Creativity and innovation
to entirely new ways of
e Core of entrepreneurshio that enables the entrepreneur think
wOIKIng.Creative people are receptive to new ideas generated by otner.
to business problems. They understand
repreneurs have an ability to applythe creativity material resources for the same.
people and environment around them., They can effectively
successful entrepreneurship demands that
Snot enough to think creatively to think creatively,need an ability of getting thing done.
be translated into action and result. They
ghis evaluating rise for cutting acroSS accepted
crepreneur always takes rise. Their main task is
breakingfocus
ruleson doing things
andcreating in a different manner.
Tn Doundaries,
u s entrepreneur value by doing things in a cheaper, better and faster

manner.
the way the things are being
in their ability to change the status quo-
done presently. Withbelief
.They have a sound
their drive and passion to achieve success they change tne way things are

being performed.
Fig. 1.3: Five Core Elements of Entrepreneurship
Manual of Entrepreneurship Development, p 16, CCS Haryana Agricultural University, Hisar
ue

16 DETERMINANTS OF ENTREPRENEURSHIP
Undoubtedly, entrepreneurship is evident in all spheres of our lives. As and whe
we encounter problems, our mind consciously or unconsciously ponders over possibl
-

resolutions. However, all the ideas are not tested formally in markets. It is an essentia
tool of economic growth and a catalyst in developing a self-sustainable society. OECD ha
prepared a comprehensive list of indicators of entrepreneurial determinants. The listdra
from the reports "Quality Assessment of Entrepreneurship Indicators", prepared by FOR
(Denmark). Indicators are classified into the six categories of determinants set by the OECD
Eurostat Entrepreneurship Indicators Programme (EIP). Various factors
impacting the rate
entrepreneurial activities in an
economy have been classified into the following categories
(a) Entrepreneurial Capabilities: These factors relate to the life of an individual, trai
of his personality, culture and
family. Age, quality of education, ethnicity, experien
initiative, awareness about problems, risk
bearing
define the overall personality of the individual.aptitude
and willingness to char
For example, young indivau
generally have higher appetite to take risks than their older
(b) Regulatory framework: Government policies affect the counterparts. ntur
in every
economy. Conducive business environment if
growth of new ven stricti
policies. For the same reason, Indian preferred over reu rovi

India's ranking in "ease of government has been working upor

nation is defined in terms doing business" nations. Regulatory frane
for growth and
of barriers to new, administrative
expansion of existing businesses, various proceauiai
financial
labour laws and other various inana reg
laws of the
country. Environmental concerns oar o
 Entreprencurship: Concept and Importance 1
economy also play a significant role in defining countries policies towards n

businesses. Certain countries protect small businesses by reserving products to be

xclusively offered by small and medium scale industries. India had protectionist
exc.

olicies till late 80s and changes post that clearly depict the increase in rate of
nowth of new ventures. Infrastructural growth is also controlled by state and new
growth
businesses depend a great deal on availability of pre-requisites

Entrepre
Determinants neurtal Impact
Performance

Regulatory
Market Access to R&D and Entrepreneurial Culture Films
Job
framework Conditions finance Technology Capabilities Creation

Access too Training Risk

Administrative
Anti-trust R&D Economic
Burdens for
Debt and Attitude in Employment
Laws Investment Growth
Financing experience of Society
Entry
entrepreneurs Atitudes
Administrative Business University Poverty
Competition Industry Business and Towards Wealth
Burdens for Angels Reduction
Interface ||Entrepreneurship Entrepreneurs
Growth
Access to
Access Technological| Education (SKIlsDesire for Formalising
the
Bankruptcy
Regulationss
the
Domestic
Market
to VC
CooperationEntrepreneurship Ownership
Between Entrepreneurshio

firms Infrastructure
Business informal
Sector
Safety, Health
Access to Entrepre
and
Access to Other Types Technology neurship
of Equity Immigration Education
Environmental Foreign Diffusion
Markets (mind set)
Regulations
Stock
Product Degree Markets Broadband
of Public Access
Regulation
Involvement|
Labour Market Public
Patent
Regulation System;
Procurement Standards

Court&Legal
Framewor

Social and
Health
Security
Incometaxes
Wealth/
|Bequest Taxes
Businessand
Capital Taxes

Fig. 1.4: The OECD/Eurostat Framework for Entrepreneurship Indicators

-

Adding Policy Areas

for Entrepreneurial Determinants

c) Market Condition: Availability of a ready market and high probability of acceptance

towards new products push the spirits of entrepreneurs. Buoyant markets play an
to
important role in promoting new ventures. Current state of competition, access
 domestic and foreign markets, and forces fo
fairness in
competition co narket leadel
are
entrepreneurship. For example, Maruti could maintain the position
f s initial years in India due to lack of competition. However, new enttan
90s posed a
reinvo great challenge and created a need for Maruti to continuously
envent and reengineer to maintain the lead. The size, structure of marK ov

onomy, stage in product life cycle, availability of labour, raw materia and
capital define the market conditions.
Access to finance: New businesses need time to generate profits as sales take time
and initial are not usually sufficient to breakeven start-up costs. Inererore
receipts
Crepreneurs need to carefully estimate funds required, different sources that cannb
Peuana government schemes promoting entrepreneurs in different inaustie
Successful business does not necessarily require huge investments. In themid-

Jobs and Steve Wozniak started Apple Computer by selling VoIkswage

a
eve
microbus and a Hewlett-Packard scientific calculator to raise $1,300-enough fo
a makeshift production line. There are business incubators and angel investors
support viable business ideas.
(e) lechnological development: Technology changes at the blink of an eye. Researchen
and technical experts across the world are working on producing better product
offering innovative services and raising customer expectations. With access
global market place, entrepreneurs have to carefully plan their moves and
deliver on time to reap benefits from opportunities. Government initiatives towar
research and developments budgets contribute towards success of new business.
instance, China has virtually captured products market in a number of economiesh
offering products ranging from high-end LED televisions to birthday party suppli
There is also a need to align higher education with industry demands to develo
employable and skilled youth. Intellectual property is a valued for an entreprene
as it consists of intellectual creations by entrepreneurs or their teams that ha
commercial standing and are given legal property rights. Entrepreneurs must follo
dueprocesses tor patents.
()Culture: A society's mindset about risk bearing, new products and change defin
its receptiveness for entrepreneurs. They create new trades, producing jobs t
themselves and prospective workforce. Entrepreneurial activity expands competitio
and increase productivity as well. As Peter Drucker said, "The entrepreneuralwa
searches for change, responds to it, and exploits it as an opportunity"
These factors together build the dynamic environment faced by entreprene
Entrepreneurial performance of our country is largely based upon opportunities availat
skilled people and resources. Various factors including economic, social, political, mari
conditions, state of research and development and culture together define external factors
1,7 ROLE/ IMPORTANCE OF ENTREPRENEURSHIP IN
ECONOMIC DEVELOPMENT
Entrepreneurial initiatives leads to economic growth, open up fresh avenues, creae
increase demand and supply of
products and services and help the economy in moving
 15
Entrepreneurship: Concept and Importance
long-term goals. It is in the interest of all the governments to frame supportive policies
favorable to promote entrepreneurship and reap the benefits of its
and provide environment
activity. Entrepreneurship is significant for an economy in following ways:
ac

(a) Importance for the entrepreneur

(i) Self-contentment: Entrepreneurs have a high commitment towards their goals
and they have the caliber to take charge of the situation. It gives opportunity to
an individual to contribute towards social good by his innovative ways.
(ii) Financial benefits and secured life: There is immense probability of reapingg
financial rewards through better products. Entrepreneurial rewards may
surpass the benefits of some of the best-paid jobs.
ii) Social acceptance and recognition: It gives prestige and status to the individual
and inspires other innovative minds to take initiatives.
(b) Importance for the economy
(i) Improves quality of life: It increases the quantity and quality of products
offered for sale in an economy. This multiplicity in choice enhances the quality
of life by better communications, health sector improvements, new ways or

entertainment and so on.

ii) Job Creation: Increased production activities require additional workforce
at all levels of management and for all different streams. Creation of job is a

strong indicator of sustainable economic growth.

i ) Self-reliant economy: Small businesses help individuals to grow financially
independent. This inturnleads to the development of a resurgent middle class
and a self-reliant economy.
(iv) Achievement of societal goals: Better products, improved infrastructure,
better means of communication, financial securities helps a government to
achieve its societal goals of poverty reduction and balanced growth.
and
(v) Export Promotion: Entrepreneurs can attempt to penetrate new markets
establish themselves as global brands.
base results in
(vi Capital Formation: Increasing revenues due to large customer
positive growth of national income
and per capita income.

1.8 ENTREPRENEURIAL CHALLENGEs

of cutthroat competition.
Entreprerneurs encounter various challenges in present age
those problems than ever
However, entrepreneurs have access to more resources for tackling
before. Significant challenges faced by entrepreneurs are as follows:
There are various
(a) Financing: Money is vital in fulfiling dreams of entrepreneurs.
ventures in multiple ways. However, apart
government schemes that promote new
from start-up, funds are critical to business survival too, yet many entreprerneurs
are delayed
struggle to meet ends in the initial stages. Various associated reasons
invoicing, non-payment, and bad debts, attrition costs especially during gestation
 16 Entrepreneurship

period. Proper budgeting and planning can help in maintaining cash flows. Ad
1S. Advan
payments or attractive discounts for early payments can help in bill colla.
They may even their pool of capital from a business they
use
previously sold lectio
(b) Building a team: This is especially difficult, as need
they to pick the
riph+
(reviewing resumes, sitting through interviews, identifying suitable .

a
startup with whom they can share and materialize their candidato tean
need to consider cost to the goals. Additionall,
business, cultural fit and overall team balance
considerations are exceptionally hard the team has to be
possible. put in place as soonSuc
n
(c) Time management: Time management
entrepreneurs, who
might be the biggest problem facedh
have to be multitaskers.
their time by They need to judiciously balan.
creating time bound goal lists, setting up hce
reviewing their timelines. priorities and periodicall
(d) Focus on core
competency: They need
ultra-specific as to what they need to focusdelegate
to or outsource
routine tasks to be
while handling
multiple tasks and should nurture
upon. They should not get
distracted
(e) creative synergies.
Marketing challenges: They are not necessarily trained in
whether it is print, best marketing
added pressures while
online, mobile, advertising, etc. strategies
finalizing marketing plans. Budget and
completion are
Fear of failure:
Despite best of the plans,
and loneliness.
They are
dealing with
entrepreneurs deal with bouts of self-doubt
the
risk levels are unknown and charting new
high and
probability but
untested. of
sustaining business in long runways
(g) Long-term
are
yet
near future,
sustainability: Though viable opportunities
long-term benefits are questionable. may seem profitable in the
help fighting all odds. Survival is
in Perseverance and intelligence can
expansion is the next logical goal. important new start-ups but
for
growth and
Entrepreneurship
realities brings along a host of
too. Nonetheless,
deal with all these
challenges. Fulfilling challenges, but harsh
becoming entrepreneur
an
challenges. requires one to be mentally
prepared to
1.9
MANAGERIAL CHARACTERISTICS
FOR AN
Managers and ENTREPRENEUR
share similar entrepreneurs both assume a critical
attributes, however a few contrasts part in the business
characteristics. Managers assume a exist with
regards to the
group. They
entrepreneur is dealing with his own totally different role than an entrepreneur fundamental
business. unless, an
-

an
 Entrepreneurship: Concept and Importance 17

Distinction Between an Entrepreneur and a Manager

Basis of Comparison Entrepreneur Manager
Meaning One who exploits an opportu- One who gets the things done
nity, bear the risk to develop through others for achieve-
new products and services ment of organizational objec-
and derive profits. tives

Focus/Emphasis Creating new products and Smoothly running ongoing

services operations
Aim Profits Salary
Risk Bearing High degree of risk Low/moderate degree of risk

Character Innovator Executor

Nature of Business activity Start-up Ongoing business

Rewards Volatile Fixed

Decision making Strategic, Non-recurring Recurring
Culture Entrepreneurial Managerial
Fig. 1.5: Distinction Between an Entrepreneur and a Manager

Entrepreneurial References from Movie for Classroom Discussion/ Screening

The Social Network" (David Flincher, 2010)
Entrepreneur: Mark Zuckerberg
This film is based on the story of Facebook - or as it was called way back in 2004,
Thefacebook." It starts from Zuckerberg and his friends-turned-partners developing the|
his friend|
platform to present-day litigation between Zuckerberg and Eduardo Saverin,
who he partnered with him to found the site and who eventually sued him for diluting his
Facebook shares and removing his name from the company masthead.
The film truly depicts how an idea can change the world and has apt dosage of drama|
of building a business that grows to take over the world, and becomes its own universal
language. "The Social Network" captures the classics of entrepreneurship and the early rise |

of the tech world in Silicon down to the Harvard dorm room, the "coding bros," and
Valley,
thefounder.
Quotable quotes
Mark Zuckerberg: You know, you really don't need a forensics team to get to the
invented
bottom of this. If you guys were the inventors of Facebook, you'd have
Facebook.
Sean Parker: We lived on farms and then we lived in cities and now we are going to
live on the internet!
 Erica Albright: It didn't stop you from writing it. AS if every thought that tumh
your head was so clever it would be a crime for it
not to be
shared The
mbles
tnroughn
Internet's not written in pencil, Mark, it's written in ink.

Concept Review Questions

1. Define "entrepreneur". What are the qualities needed for becoming an entrepreneur?
2. Distinguish between an entrepreneur and manager.
3 What is "entrepreneurship"? Briefly discuss its core elements.
4 Explain the significance of an entrepreneur in a growing economy
5. Promotion of entreneurship is a necessity for developing country like
Inda.
6. Elucidate with examples the meaning of entrepreneurship and explain the features that are
necessary for an entrepreneur.
7.
7.The role of entreprenurship in economic development in a developing economy is highiy
signifcant. Explain briefly in Indian context.
What are the challenges encountered by an entrepreneur? How should an entrepreneur face
these risks?
Discuss the role of
entrepreneurs in the develpment of a region or economy.
10 "Entrepreneurs are self employed. However, all
self-employed are not entrepreneurs." Do
agree? Give reasons and suitable examples. you
11. An entrepreneur is born not made." Comment on the statement and
discuss functions
performed by an entrepreneur.
12. Do you think that in the contemporary business environment
career option? Discuss in the light of rewards and risks of entrepreneurship is a promising
13 What are the macro-level factors that afect new
entrepreneurship.
venture creation?
demographic changes on: lustrate one effect of
.Pizzarestaurant
Manufacture of automobiles
14. Sensitivity to environmental factors is crucial tor an
explain the relevance of the statement. entrepreneur. With an
appropriate example
15. In your opinion are the roles of
entrepreneur and manager
16. Explain the rewards an overlapping? Give reacone
entrepreneur expect from his/ her venture

Asslnment
ldentify an entrepreneur in your City. You may search some
names online to
surroundings. You might noüce a significant
change In the begin with or
and takeover by next generauon may be one of the
may have added a variety of products, changed naci reasons for iha
functioning
of some observe
old shop, Siuccan your