INTRODUCTION TO

ENTREPRENEURSHIP
CHAPTER I
 Lesson 5: THE
ENTREPRENEUR
 An entrepreneur is an individual who,
rather than working as an employee,
runs a small business and assumes all
the risks and rewards of a given
business venture, idea, or good or
service offered for sale.
 The entrepreneur is commonly seen as
a business leader and innovator of new
ideas and business processes.
 An entrepreneur is . . .
 Entrepreneurs play a key role in any
economy. These are the people who
have the skills and initiative necessary
to take good new ideas to market and
to make the right decisions that lead to
profitability.
 The reward for taking the risk is the
potential economic profits the
entrepreneur could earn.
 An entrepreneur is . . .
 Entrepreneur is an Economic Agent who plays
a vital role in the economic development of a
country.
 Economic development of a country refers to
steady growth in the income levels. This
growth mainly depends on its entrepreneurs.
 An entrepreneur is an individual with
knowledge, skills, initiative, drive, and spirit of
innovation who aims at achieving goals.
 An entrepreneur identifies opportunities and
seizes opportunities for economic benefits.
 Entrepreneurship is . . .
 Entrepreneurship is a dynamic activity
which helps the entrepreneur to bring
changes in the process of production,
innovation in production, new usage of
materials, creator of market etc.
 It is a material attitude to foresee risk
and uncertainty with a view to achiever
certain strong motive.
 It also means doing something in a new
and effective manner.
 CONCEPT OF ENTREPRENEUR

 The word ―entrepreneur‖ is derived

from the French word
―entreprendre”. It means to
undertake.
 Entrepreneur is the person who
undertakes the risk of new enterprise.
 CONCEPT OF ENTREPRENEUR

 Early Period: The earliest definition of the

entrepreneur as a go-between is Marco
Polo. He tried to establish trade route to
the Far East. He used to sign contract with
a venture capitalist to sell his goods. The
capitalist was the risk bearer. The
merchant adventurer took the role of
trading. After his successful selling of
goods and completing his trips, the profits
were shared by the capitalist and the
merchant.
 CONCEPT OF ENTREPRENEUR

 Middle Ages: The term entrepreneur

was referred to a person who was
managing large projects. He was not
taking any risk but was managing the
projects using the resources provided.
An example is the cleric who is in
charge of great architectural works
such as castles, public buildings,
cathedrals, etc.
 CONCEPT OF ENTREPRENEUR

 17th Century: An entrepreneur was

a person who entered into a
contractual arrangement with the
government to perform a service of
to supply some goods. The profits
was taken (or loss was borne) by the
entrepreneur.
 CONCEPT OF ENTREPRENEUR

 18th Century: It was Richard

Cantillon, French Economist, who
applied the term entrepreneur to
business for the first time. He is
regarded by some as the founder of
the term. He defined an entrepreneur
as a person who buys factor services at
certain prices with a view to sell them
at uncertain prices in the future.
 CONCEPT OF ENTREPRENEUR

 19th Century: The entrepreneurs

were not distinguished from
managers. They were viewed mostly
from economic perspective. He takes
risk, contributes his own initiative
and skills. He plans, organizes, and
leads his enterprise.
 CONCEPT OF ENTREPRENEUR

 20th Century: During the early 20th

century, Dewing equated the
entrepreneur with business promoter
and viewed the promoter s one who
transformed ides unto a profitable
business. It as Joseph Schumpeter who
descried an entrepreneur as an
innovator. According to him an
entrepreneur is an innovator who
develops untried technology.
 CONCEPT OF ENTREPRENEUR

 21st Century: Research Scientist

live De Bone pointed out that it is
not always important that an
individual comes up with an entirely
new idea to be called an
entrepreneur, but if he is adding
incremental value to the current
product or service, he can rigidly be
called entrepreneur.
 According to J.B.
“An entrepreneur is the economic agent
who unites all means of production; land of
one, the labor of another and the capital of
yet another and thus produces a product. By
selling the product in the market, the pays
rent of land, wages to labor, and interest on
capital and what remains in his profit‖. Thus
an entrepreneur is an organizer who
combines various factors of production to
produce a socially viable product”.
 An entrepreneur is . . .
 An entrepreneur can be regarded as a person
who has the initiative skill and motivation to
set up a business or enterprise of his own and
who always looks for high achievements.
 He is the catalyst for social change and works
for the common good. They look for
opportunities, identify them and seize them
mainly for economic gains.
 An action oriented entrepreneur is a highly
calculative individual who is always willing to
undertake risks in order to achieve their goals.
 According to Joseph
Schumpeter
“An entrepreneur in an advanced
economy is an individual who introduces
something new in the economy, a
method of production not yet tested by
experience in the branch of manufacture
concerned, a product with consumers are
not yet familiar, a new source of raw
material or of new market and the like”.
 According to Cantillon

“An entrepreneur is the agent who buys

factors of production at certain prices in
order to combine them into a product
with a view to selling it at uncertain
prices in future. To conclude an
entrepreneur is the person who bears
risk, unites various factors of production,
to exploit the perceived opportunities in
order to evoke demand, create wealth
and employment”.
Classification/Types of
Entrepreneurs
 Clarence Danhof Classification

 Innovative:
› Innovative entrepreneur is one who
assembles and synthesis information and
introduces new combinations of factors of
production. They are characterized by the
smell of innovativeness. These entrepreneurs
sense the opportunities for introduction new
ideas, new technology, new markets, and
creating new organizations. Innovative
entrepreneurs are very much helpful for their
country because they bring about a
transformation in life style.
 Clarence Danhof Classification

 Imitative / Adoptive:
› Imitative entrepreneur is also known as
adoptive entrepreneur. He simply adopts
successful innovation introduced by other
innovators. These entrepreneurs imitate
the existing entrepreneurs and setup their
enterprise in the same manner. Instead of
innovating, they just imitate the
technology and methods innovated by
others.
 Clarence Danhof Classification

 Imitative / Adoptive:
› These entrepreneurs are very helpful in
less developed countries as they
contribute significantly in the growth of
enterprise and entrepreneurial culture
in these countries. Further by adopting
the technology, which is already tested,
they generate ample employment
avenues for the youth and therefore as
agent of economic development.
 Clarence Danhof Classification

 Fabian:
› The Fabian entrepreneur is timid and cautious. He
imitates other innovations only if he is certain
that failure to do so may damage his business.
They are very much skeptical in their approach in
adopting or innovating new technology in their
enterprise. They are not adaptable to the
changing environment. They love to remain in the
existing business with the age-old techniques of
production. They only adopt the new technology
when they realize that failure to adopt will lead to
loss or collapse of the enterprise.
 Clarence Danhof Classification

 Drone:
› These entrepreneurs are conservative or
orthodox in outlook. They never like to get
rid of their traditional business and
traditional machinery or systems of the
business. They always feel comfortable
with their old fashioned technology of
production even though the environment
as well as the society have undergone
considerable changes. Thus, done
entrepreneurs refuse to adopt the changes.
 Clarence Danhof Classification

 Drone:
› They are laggards as they continue to
operate in their traditional way and
resist changes. His entrepreneurial
activity may be restricted to just one or
two innovations. They refuse to adopt
changes in production even at the risk
of reduced returns.
 Arthur H. Cole Classification
Arthur H. Cole classifies entrepreneurs as:
 Empirical: He is an entrepreneur hardly introduces
anything revolutionary and follows the principle of
rule of thumb.
 Rational: The rational entrepreneur is well-
informed about the general economic conditions
and introduces changes which look more
revolutionary.
 Cognitive: Cognitive entrepreneur is well-informed,
draws upon the advice and services of experts and
introduces changes that reflect complete break from
the existing scheme of enterprise.
 Classification on the Basis of Ownership

 Private:
› Private entrepreneur is motivated by
profit and it would not enter those
sectors of the economy in which
prospects of monetary rewards are not
very bright.
 Public:
› In the underdeveloped countries
government will take initiative to share
enterprises.
 Classification Based on the Scale of Enterprise

 Small scale: This classification is especially

popular in the underdeveloped countries. Small
entrepreneurs do not possess the necessary
talents and resources to initiate large scale
production and introduce revolutionary
technological changes.
 Large scale: In the developed countries most
entrepreneurs deal with large scale enterprises.
They possess the financial and necessary
enterprise to initiate and introduce new technical
changes. The result is the developed countries
are able to sustain and develop a high level of
technical progress.
 Some new classifications:

 Solo operators
 Active Partners
 Investors
 Challengers
 Buyers
 Life Timer
 Functions of an
Entrepreneur
 Innovation
 Assumption of Risk
 Research
 Development Management Skills
 Overcoming Resistance to Change
 Catalyst of Economic Development
 The Role of the
Entrepreneur
 Entrepreneurs occupy a central position in a
market economy.
 Entrepreneurs encourages entrepreneurial
activities.
 Entrepreneurs seek disequilibrium.
 Entrepreneurs are unique.
 Entrepreneurs are optimistic and future-
oriented.
 Entrepreneurs are skilled at selling against the
competition.
 Entrepreneurs are a national treasure.
QUALITIES AND
CHARACTERISTICS OF AN
ENTREPRENEUR
 Self-confidence  Technical Skill
 Risk-taking ability  Managerial Skill
 Decision-making  Conflict Resolution
ability Skill
 Competitive  Organizing Skill
 Intelligent  High Motivation
 Visualization  Creative
 Patience  Reality-Oriented
 Emotional Tolerance
 Leadership Quality
 Characteristics of an
Entrepreneur
 An entrepreneur brings about the
change in the society. He is a catalyst of
change.
 Entrepreneur is action-oriented, highly
motivated individual who takes risk to
achieve goals.
 Entrepreneur accepts responsibilities
with enthusiasm and endurance.
 Entrepreneur is thinker and doer,
planner and worker.
 Characteristics of an
Entrepreneur
 Entrepreneur can foresee the future,
seize market with the salesman’s
persuasiveness, manipulate funds with
financial talent and smell error, frauds
and deficiencies with an auditor’s
precisions.
 Entrepreneur undertakes venture not
for his personal gain alone but for the
benefit of consumers, government and
the society as well.
 Characteristics of an
Entrepreneur
 Entrepreneur builds enterprises. He possesses
intense level of determination and a desire to
overcome hurdles and solves the problem and
completes the job.
 Entrepreneur finds the resources required to
exploit opportunities.
 Entrepreneur does extraordinary things as a
function of vision, hard work, and passion. He
challenges assumptions and breaks rules.
 Although many people come up with great
business ideas, most of them never act on their
ideas.
 Skills of an Entrepreneur
 Confidence to Delegate Tasks
 Effective Time Management
 Visualizing Aim and Success
 Proper Listening and
Communicating
 Understanding the Importance of
Time
 Seeking Help When Needed
 Giving Back
 The Top Skills Every
Entrepreneur Needs
 Resiliency
 Focus
 Invest for the long-term:
 Find and manage people
 Sell
 Learn
 Self-reflection
 Self-reliance
  New entrepreneurs prefer money over mind as
they want to settle.
 It transforms ideas into reality
Money  It affects the economic activities whereas mind
affects the activities of the firm.
 Money affects the economic activities whereas
mind affects the activities of the firm.
Mind vs. Money

 It shows the way to achieve that mission and

vision
 Established entrepreneurs, mind is more
important than money as they have already
invested as well as earned, and now they are in a
stage of expansion.
Mind

 Ideas comes from the mind. Without mind, money

may not be properly distributed and utilized.
 It is the route of creative idea, idea leads to
innovation.
 It shows the mission and vision
 Determinants of Entrepreneurial
Success or Failure

 Failure and success of an enterprise

is dependent on two factors:

› Internal Factors
› External Factors
 Internal Factors for Success
 Factors that affect the organization
internally and contribute to the success of
the firm are known as internal factors of
success.
 These factors include efficient
management, good quality product, quality
goods and services, good reputation, low-
cost production, effective marketing,
proper financing, dedicated manpower,
proper technology, and proper time
management.
 External Factors for Success
 Factors that affect the organization
externally and contribute to the
success of the firm are known as
external factors of success.
 These factors include availability of
appropriate raw material, quality
manpower, and high demand in the
market, government policy, low
competition, and new market.
 Internal Factors for Failure
 Factors that affect the organization
internally and contribute to the failure
of the firm are known as internal
factors of failure.
 These factors include ineffective
management, old technology, poor
financing, ineffective marketing
strategies, low quality of raw materials,
low human relations, and poor
leadership.
 External Factors for Failure
 Factors that affect the organization
externally and are responsible for failure of
the firm are known as external factors of
failure.
 These factors include storage of raw
material, shortage of power, and shortage
of manpower, poor finance, change in
technology, high competition, negative
government policies, and increase in
supply and availability of better substitute.
 ENTREPRENEURIAL PROCESS

 Entrepreneurial process can be defined as the

steps taken in order to establish a new enterprise.
 It is a step-by-step method; one has to follow to
set up an enterprise. There are mainly five steps
one needs to follow.
 These steps are:
› Preliminary Steps
› Decision-making Steps
› Planning Steps
› Implementation Steps
› Managerial Steps
 Preliminary Steps
 Preliminary steps are the initial steps one
has to follow for establishing a firm.
 At this stage, the to-be entrepreneur
should be able to make a decision that is
going to affect the company. We can say
that an entrepreneur is born at this stage.
 An entrepreneur searches for business
opportunity and collects information/data
from all sources available.
 Decision-Making Steps
 Decision-making steps can be defined
as those steps or say the lessons learnt
by an entrepreneur to make decisions
efficiently.
 In this step, the entrepreneur is seen
consulting with DIC (District Industrial
Centre) and MSME (Medium, Small, &
Micro Enterprise).
 Decision-Making Steps
 Some of the decisions to be taken are:
› Decision of acquiring fund from banks
or financial institutions.
› Acquisition of permission, recognition,
application.
› Making of PPR (Preliminary Project
Report)
› Decision regarding land, building, plant,
machinery, labor, raw material, fuel,
energy, water supply, filtration, etc.
 Planning Steps
 Planning is an assumption or prediction of
business requirements and outcome in the
future. It provides a space to review the
best strategy to run the business by cutting
expenses and maximizing profit.
 Some of the planning steps include:
› Planning for infrastructure like plant and
building
› Getting permission and recognition from the
government or any other reputed authority.
Planning Steps
› Applying for environmental clearance.
› Purchasing of land and licensing of mines, if
necessary.
› Applying for electric connection and water
supply.
› Planning the final feasibility, technical feasibility,
and operational feasibility.
› Study of PPR and preparation of Detailed Project
Report (DPR).
› Getting loan and/or capital investment.
› Acquisition of machineries and planning for
installation.
 Implementation Steps
 Implementation is the execution of
plan; it is the action taken to
implement the plan so that something
actual happens.
 There are some steps that will help us
get a clear picture of how actions in
planning steps are groomed into
implementation steps:
 Implementation Steps
 Acquisition of land, setting up building, and
purchasing raw materials.
 Installation of plant and machineries, and
arranging human resource.
 Receiving permission and reorganization
letter, and receiving capital investment.
 Starting operation and production.
 Arranging fuel, electricity, and water supply.
 Making infrastructure development, i.e.
road, hospital, school, residence, etc.
 Managerial Steps
 Preparing market policy.
 Managing promotion of product or service.
 Formulating pricing policy.
 Managing wholesalers and retailers.
 Deciding the profit margin.
 Managing marketing strategy, managing
advertisement of product or service,
managing distribution system for efficient
distribution.
 Warehouse management.
 Entrepreneurial Making
Decision Process
 The Entrepreneurial Decision-Making
Cycle is a foundation of the center’s
programming and is a natural, logical
approach used to help individuals
reach an informed decision and
achieved success.
Decision Making Process
 Key Factors for Success
of Entrepreneurs
 Adequate education;
 Relevant experience;
 Deep market knowledge and
professional networks; and
 A marketable idea.
 Key Factors for Success
of Entrepreneurs
 Successful business plan consist of clearly
defined corporate missions, strengths, and
weaknesses, and competitive products.
 During the implementation of business
plans, successful entrepreneurs should
always pay close attention to:
› The trends of the market and customer needs;
› Policy changes, including public spending and
procurement;
› Advancement of technologies; and
› Economic Volatilities
Entrepreneur’s Success
 ENTREPRENEURIAL
ENVIRONMENT
Three major components :
 Culture

 Infrastructure

 Entrepreneurial Support Elements

 Role of Family
 Two to three times more business is owned by
the children of industrialists than those
whose parents do not own a business. So it is
pretty clear that, business ownership runs
within the family but the question here, is
does it lead it to success?

 Entrepreneurs working in their family

business before starting a business of their
own, tend to be 10 to 40% more successful
than they would be otherwise.
 Role of Family
 The would-be entrepreneur gains valuable
experience through informal learning and
apprenticeship that occurs while working in a
family business.
 Who can teach us better than our own parents? A
brilliant way of learning the ―name of the game‖ of
running an own business is first working in the
family business.
 Family business is a golden ticket for family
members to hold human capital linked to operating
a business. It is not necessary to gain this
experience in the same industry, probably because
basic business experience is what counts.
 Role of Society
 Business yields and allots products and services to
meet certain public requirements. Business has to
be very flexible and frequent research on consumer
demands should be done to increase profit.
 Entrepreneurs create job opportunities. Income is
ensured through entrepreneurship. It is very
important factor to consider.
 Entrepreneurship has its own contribution in the
national well-being. It ensures it in different ways,
assisting the government to preserve and manage
all kinds of public, social institutions and services,
etc.
 Major Functions of Entrepreneur and
Distinction between an Entrepreneur
and a Manager
 An entrepreneur is an opportunity-seeker.
 He is also the organizer and coordinator of
the agents of production.
 He has to execute many a good functions
while establishing a small scale enterprise.
 He not only perceives the business
opportunities but also mobilizes the other
resources like 5 Ms: man: money, machine,
materials, and methods.
 Functions of Entrepreneur
 Idea Generation
 Determination of Objectives
› The nature of business
› The type of business
 Raising of Funds
 Procurement of Raw Materials
 Procurement of Machinery:
› The details of technology
› Installed capacity of the machine
› Name of the manufacturers and suppliers
› Whether the machines are indigenously made or foreign made
› After-sales service facilities.
› Warranty period of the machineries
 Functions of Entrepreneur
 Market Research
 Determination of Form Enterprises
 Recruitment of Manpower
› Estimating manpower need of the organization
› Laying down of selection procedure
› Devising scheme of compensation
› Laying down the rule of training and development
 Implementation of the Project
› Innovation
› Risk bearing
› Organization
› Management
Distinction between an
Entrepreneur and a
Manager
  He is the person who establishes

Entrepreneur
business unit and utilize the other
factors of production like land, labor,
and capital
Entrepreneur vs.
Manager

 A manager is a person responsible for

planning and directing the work of
Manager

group individuals, monitoring their work,

and taking corrective action when
necessary.
Entrepreneur vs. Manager
Entrepreneur vs. Manager
Entrepreneur vs. Manager
End of Lesson 5