ENTERPRENEURSHIP

INTRODUCTION
Prawan Dahal
MPharm/MBA
 INTRODUCTION

STORY OF SAMOSAWALA & A MANAGER

CONCEPT OF ENTERPRENEURSHIP
• It refers to a process of action an entrepreneur
takes to establish an enterprise.
• It is one of the four mainstream economic
factors
– Land
– Labour
– Capital and
– entrepreneurship
 CONCEPT OF ENTERPRENEURSHIP
• Entrepreneurship is the ability to create, manage
and operate a new business and bears all of its risk
with a view to earn profits.
• Entrepreneurship is the process of designing and
running.
• A person who develops new business and
undertakes all risks and challenges associated with
it is termed as Entrepreneur.
• An entrepreneur is a person who organizes and
operates a business taking on financial risk to do
business.
• It is true that entrepreneurship is both a science and an
art.
• The science lies in the proven process of planning and
managing business.
• The art lies in the innovative thought, implementation
and growth of a business.
 CONCEPT OF ENTERPRENEURSHIP
• To an economist, an entrepreneur is one who brings
resources, labor, materials, and other assets into
combinations that make their value greater than before, and
one who introduces changes, innovations, and a new order.
• To a psychologist, certain forces- typically drive such a
person the need to obtain something, to experiment, to
accomplish or perhaps to escape the authority of others.
• In almost all definitions, there is an agreement that they are
talking about a kind of behavior that includes:
– Initiative taking.
– The organizing and reorganizing or social or economic
mechanisms to turn resources and situations to practical account.
– The acceptance of risk or failure.
CONCEPT OF ENTERPRENEURSHIP
• Entrepreneurship is the dynamic process of creating
incremental wealth. The definition of entrepreneurship
involves four aspects:
– Entrepreneurship involves the creation process.
– It requires the devotion of the necessary time and effort.
– It involves assuming the necessary risks.
– The rewards of being an entrepreneur are independence,
personal satisfaction, and monetary reward.
• Bill Gates and Steve Jobs were once entrepreneurs, and
the progression of their careers provides great examples
of how entrepreneurs develop into successful
businessmen.
 DEVELOPMENT OF ENTERPRENEURSHIP
• The word entrepreneur originates from the french word,
entreprendre, which means “to undertake” or “someone
who takes between or goes between”.
• In the middle ages the entrepreneur was the person who
managed large projects on behalf of the church or a
landowner, such as the building of a castle or cathedral. By
the seventeenth century the theory was expanded to
include some element of risk and profit.
• In 1734 Richard Cantillon introduced economic literature to
the world by three types of agents in the economy:
– The Landowner
– The Entrepreneur
– The Hirelings
 DEVELOPMENT OF ENTERPRENEURSHIP

• J.B. Say defined an entrepreneur “as someone who

consciously moves economic resources from an area of
lower, into an area of higher, productivity and greater
yield’. (economist in the 1800’s)
• Peter Drucker (1986) suggests that we need
entrepreneurship and entrepreneurs to help encourage
and establish change into our lives so that new and better
goods and services can be created and developed.
• Drucker defined an entrepreneur as someone who ‘always
searches for a change, responds to it an exploits it as an
opportunity’
Development of Entrepreneurship
• The development of entrepreneurship can be
classified into following historical periods
– Earliest periods
– Middle Ages
– 17th Century
– 18th Century
– 19th and 20th Century
– 21st Century
Earliest Period
• In the earliest period, the word Entrepredre (“between
taker” or “go between”) was developed and used by
Marco Polo, who tried to establish trade routes to the Far
East.
• As a go between he would sign a contract with money
person (Today’s Venture capitalist) to sell his goods.
• At that time venture capitalist was passive risk bearer, the
merchant adventurer took the active role in trading,
bearing all the physical and emotional risks.
• Ehen the merchant adventurer successfully sold the
goods and completed the trips, the profits were divided
with the capitalist taking most of them (upto 75%), while
the merchant adventurer settled for the remaining 25%.
Middle Ages
• In the middle ages, the term entrepreneur was used to describe both an
actor and a person who managed large production projects.
• Example Samuel Colt, who produced more than 1000 revolvers when
Texas Rangers ordered 1,000 revolvers during the American war with
Mexico.
• In such large production projects, this individual did not take any risks,
but merely managed the projects using resources provided, usually by
the government of the country.
• A typical entrepreneur in the middle ages was the cleric- the person in
the charge of great architectural works, such as castles and
fortifications, public buildings, abbeys, and cathedrals.
• Example:
• Eli Whitney’s cotton gin (cotton machine) made an extraordinary to
increase in productivity for exported cotton.
• Similarly Samuel Morse’s Telegraph revolutionized communications
technology.
• Samuel Colt, Eli Whitney and Samuel Morse were pioneer in the Middle
17th Century
• One of the noted economists and author in the 17 th Century was
Richard Cantillon who developed the theories of entrepreneur as a risk
taker and regarded by some as the founder of the term Entrepreneur
• As per him, Entrepreneur is a risk taker, observing that merchants,
farmers, craftsmen and other sole proprietors buy products at a certain
price and sell at uncertain price, therefore, operating at a risk.
• The connection of risk with entrepreneurship was developed in this
period.
• In this age, entrepreneur being a person entered into a contractual
arrangement with the government to perform a service or to supply
stipulated products.
• Cantillon gave the concept of entrepreneurship defining its central role
in economic development.
• According to him, entrepreneurs assume the risk of enterprise and
consciously make decisions about resources allocation. He always seeks
the best opportunities for using resources for their highest commercial
yields.
18th Century
• One of the pioneered persons from 18th century was Adam
Smith who spoke about the “enterpriser” in his book
“wealth of nations” in 1776. He viewed entrepreneur as a
person with unusual foresight who could recognize potential
demand for goods and services.
• In Smith view, entrepreneurs reacted to economic changes,
thereby becoming the economic agents who transformed
demand into supply.
• In this century, the person with capital was differentiated
from the one who needed capital. In other words, the
entrepreneur was distinguished from the capital provider
(I.e. venture capitalist).
• In this period, Eli Whitney, Thomas Edison were capital users
(entrepreneurs).
19th and 20th Centuries
• It was 19th century who trust the industrialism. In these
centuries French British and Austrian economists wrote
enthusiastically about entrepreneurs as the “change agents”
of progressive economies. In these centuries entrepreneurs
displayed following features
– Entrepreneurs were frequently not distinguished from managers
– They were viewed mostly from an economic perspective
– They acted as innovators
– The entrepreneur became the fourth factor of economic
endeavour (after land, labour & capital)
– He became the one who transformed resources into useful goods
– He created the circumstances that led to industrial growth
– He was regarded as the “captain of industry”
– He became a force of “creative destruction.” (the incessant
product and process innovation mechanism by which new
production units replace outdated ones.)
21st Century
• Entrepreneurship will bring us the future. It will shape the new
millenium
• As we begin the new millenium, the ideas, talents, skills, and
knowledge that promote the entrepreneurship are evident in
young people all round the world.
• This is a change from previous times when the forces for
economic creativity tended to favour the older and more
established business person.
• The face of the world economy has shifted, however, and the
youth of today seem especially suited for entrepreneurial activity.
• The spirit of entrepreneurship the notation of human progress,
development, achievement and change motivates and energizes
people.
• Pioneer of 21st Century are Elon Musk, Mark Zuckerberg, Steve
Jobs
 Nature of Entrepreneurship
• Entrepreneurship is seen as a fundamentally
important part of modern economic and social life.
• The term “entrepreneur” and “owner-manager” is
often used interchangeably when describing a
person that is engaged in the management of a
small business.
• It is necessary to define how entrepreneurs are
labelled because of the diversity among those
engaged in the managing of small enterprises
(Stokes, Wilson, 2010).
 Nature of Entrepreneurship
Creation of Enterprise
• Entrepreneurship is a process that refers to the creation
and running of a new enterprise. It is an activity under
which a person called an entrepreneur starts a new
venture using a new idea.
Economic Activity
• Entrepreneurship is an economic activity as it involves
creating and running a new business through optimum
utilization of all combined resources. It ensures that all
scarce resources are efficiently used for deriving better
returns in the form of profit.
 Nature of Entrepreneurship
Innovation And Creativity
• It is the process of discovering new ideas and concepts
and implementing them in business ventures.
Entrepreneurship involves bringing innovation in the
market by introducing new products or process that
delivers better service.
Risk Bearing
• It is an activity which involves huge risk which every
entrepreneur needs to undertake for starting a venture.
New ideas developed and implemented by the
entrepreneur are uncertain and may result in losses.
 Nature of Entrepreneurship
Profit
• Profit earning is the sole objective of an entrepreneur for undertaking
risk. Entrepreneurs start a new venture with a view to earning profits.
Gap Filling
• Entrepreneurship is a process of recognizing and filling the gap
between customer needs and available products or services. It focuses
on removing the deficiencies from the currently available products to
fulfill the needs of customers.
Organizing Function
• It is an organizing function that brings together different factors of
production like land, labor, and capital. Entrepreneurship is concerned
with coordinating and managing all resources engaged within the
enterprise.
The Entrepreneurial Process
 Entrepreneurial Process
• The entrepreneurial process involves finding,
evaluating, and developing an opportunity by
overcoming the strong forces that resist the
creation of something new.
• Entrepreneurial process involves four phases
– Phase 1: Identifying and Evaluating the Opportunity:
– Phase 2: Develop a Business Plan:
– Phase 3: Determine the Resources Required:
– Phase 4: Manage the Enterprise:
Ethics and responsibilities of entrepreneurs
• There has been a lot of attention paid to ethics in business lately.
Of course, most of that focus has been on the lack of ethics in
business.
• Ethics represent a set of principles prescribing a behavioral code
that explains what is good and right or bad and wrong; ethics may
in addition, outline moral duty and obligation.
• Ethics are a foundation of a good company, and while they can be
fixed, the best companies begin with a solid ethical footing.
• For entrepreneurs, ethical behavior is often overlooked as the
chaos of everyday business obscures the philosophical side of your
company.
• But fear not, it is far easier to reconnect to a solid ethical footing
than it is to attempt an “ethics transplant.”
 Ethics and responsibility of Entrepreneur
• Business enterprise is a social institution. Entrepreneurs are
linked with different groups of society.
• Entrepreneurs must act in a way to uplift community’s well being.
He is required to discharge social responsibilities not only to
society, but also towards other social groups like customers,
employees, government bodies, union bodies, business parties
etc.
• In summary entrepreneur responsibilities can be classified as:
1. Responsibility towards business constituents
2. Responsibility towards the natural environment
3. Responsibility towards the General social welfare
4. Responsibility towards the Global community
 Role of entrepreneurship in economic
development
• Entrepreneurship as a whole contributes to a society’s
social wealth by creating new markets, new industries,
new technology, new institutional forms, new jobs and
net increases in real productivity.
• The jobs created by entrepreneurship in turn lead to
equitable distribution of income, which results in higher
standards of living for the population. In this way, the
resources available to government also increases, the tax
base grows. Additional taxes enable governments to
improve social services, like hospitals and schools, to
enhance infrastructure and to keep law and order.
 Role of entrepreneurship in economic
development
• Benade et al., (2011) describes the benefits that
entrepreneurship can have for society, including
individuals, families and the community as follows.
– Employment Opportunities
– Income generation and fewer social problems
– Personal Challenge
– Improvements in Industry
– Higher productivity and economic growth
– Increases in exports and less dependence on imports
 Role of entrepreneurship in economic
development
Employment opportunities
• Entrepreneurship not only offers self‐employment
opportunities, but also creates employment for others, often
better jobs.
• Self‐employment offers more job satisfaction and flexibility
of the work force. Such job creation initiatives utilise the
human resources of the particular country and helps the
natural talent materialise.
• Many people with disabilities, particularly those in rural
areas where jobs are often scarce, have already created
opportunities for themselves through entrepreneurship.
• We can thus say that entrepreneurship provides self‐
sufficiency.
Income generation and fewer social problems
• Successful entrepreneurship activities increase the income level of
the average person, and also the standard of living in the community.
• Individuals who search for business opportunities usually create
wealth through entrepreneurship.
• This wealth plays a considerable role in the development of a nation.
• If more people are employed more people pay taxes, which means
more income for the government.
• It also means that the crime rate will go down and the country can
become a safer location with more tourists willing to visit the country.
• If tourism increases, more job opportunities will become available
and more people will be employed.
• Entrepreneurship can also attract more foreign investment, which in
return can also create more job opportunities.
• Personal Challenge
• Entrepreneurship is a challenging task, but if
successful the rewards are worth the
• effort. Rewards for an entrepreneur can be
both financial and personal. The
• entrepreneur gains self‐satisfaction and
confidence as he or she succeeds.
Improvements in Industry
• Entrepreneurship leads to the development of
more industries, especially in rural areas or
regions where there are very few economic
activities.
• This does not only mean more goods and
services, but also higher quality products,
because of healthy competition between the
different businesses.
Higher productivity and economic growth
• More industries can create higher production at lower prices.
• Entrepreneurship encourages the use of local materials to
produce finished goods for domestic consumption, as well as
for export.
• Entrepreneurship enables the country to produce more and
more goods locally and thereby build its capacity and
resources.
• If we change our raw materials into consumable goods we
add value to our products, which means that we can now
receive a much higher price and at the same time create
more jobs.
• With the new inventions and development in technology, a
nation can use its resources more effectively.
Increases in exports and less dependence on imports
• Entrepreneurship leads to the development of new markets. If
we produce more, we can export products that are not sold
locally.
• This means that a country’s products can also enter foreign
markets.
• From time to time a country’s government officials sign
agreements with other countries to promote trade.
• These are opportunities that should be taken into account
when we are planning and growing our new business.
• Currently many developing countries (including small states)
rely heavily on imports, especially from the developed nations.
• This means that money flows out of the country.
• Exports must exceed imports in order to create an economic
advantage.
• Earnings from exports inevitably stimulate the economy.
THE END