chapter 1 entrepreneurship

Chapter 1: Entrepreneurship 1Copyright 2002 Prentice Hall Publishing Company

The Foundations of Entrepreneurship

The Foundations of Entrepreneurship

Entrepreneurial Activity Across the GlobeEntrepreneurial Activity Across the Globe

1.4%

1.6%

1.8%

2.0%

2.2%

3.3%

3.4%

5.4%

6.8%

8.5%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

Percent

Finland

J apan

France

Denmark

Germany

Great Britain

Italy

Israel

Canada

United States

Co

un

try

Percentage of Adult Population Working to Start a New Business


INTRODUCTIONINTRODUCTIONThe word Entrepreneurship is derived The word Entrepreneurship is derived

from the French verb from the French verb “ENTERPRENDRE”.“ENTERPRENDRE”.

The French men who organized and led The French men who organized and led military expeditions in the early 16military expeditions in the early 16th th

Century were referred to as Century were referred to as Entrepreneurs.Entrepreneurs.

Around 1700A.D. the term Entrepreneur Around 1700A.D. the term Entrepreneur was used for architects and contractors was used for architects and contractors of public work.of public work.


What is an Entrepreneur?What is an Entrepreneur?

One who creates a new business in the face One who creates a new business in the face of risk and uncertainty for the purpose of of risk and uncertainty for the purpose of achieving profit and growth by achieving profit and growth by identifying opportunities and assembling identifying opportunities and assembling the necessary resources to capitalize on the necessary resources to capitalize on them. them.


BASICS OF ENTREPRENEUR:-BASICS OF ENTREPRENEUR:-

ORGANISATION

URGE

SKILL

VISION

GROWTH

MANAGEMENT

INNOVATION

RISK

ENTERPRISE


Motto for EntrepreneursMotto for Entrepreneurs

Conceive itConceive it Believe itBelieve it Achieve it!Achieve it!


Characteristics of EntrepreneursCharacteristics of Entrepreneurs

Desire for responsibilityDesire for responsibility Preference for moderate riskPreference for moderate risk Confidence in their ability to succeedConfidence in their ability to succeed Desire for immediate feedbackDesire for immediate feedback High level of energyHigh level of energy Future orientationFuture orientation Skilled at organizingSkilled at organizing Value achievement over moneyValue achievement over money


The “Type E” PersonalityThe “Type E” Personality

Common Traits of Entrepreneurs:Common Traits of Entrepreneurs:

Aggressively pursues goals; pushes self and othersAggressively pursues goals; pushes self and others

Seeks autonomy, independence and freedom from boundariesSeeks autonomy, independence and freedom from boundaries

Sends consistent messages; very focusedSends consistent messages; very focused

Acts quickly, often without deliberatingActs quickly, often without deliberating

Keeps distance and maintains objectivityKeeps distance and maintains objectivity

Pursues simple, practical solutionsPursues simple, practical solutions

Willing to take risks; comfortable with uncertaintyWilling to take risks; comfortable with uncertainty

Exhibits clear opinions and values; has high expectationsExhibits clear opinions and values; has high expectations

Impatient; “just do it” mentalityImpatient; “just do it” mentality

Positive, upbeat, optimistic; communicates confidencePositive, upbeat, optimistic; communicates confidence


DEFINITIONS:- DEFINITIONS:- ENTREPRENEURENTREPRENEUR

18th Century

Richard Cantillon: Coins term

entrepreneur

(“go-between” or “between taker”)

Beaudeau:

Entrepreneur bears risks and plans,

supervises, organizes, and owns factors of

production


Continued…Continued…

19th Century

Jean Baptiste Say:

Proposed that profits from entrepreneurship

were separate from profits of capital

ownership

Francis Walker:

Distinction made between those who supplied funds and earned interest and

those who profited from managerial abilities


20th Century

Joseph Schumpeter:

Described the entrepreneur as

someone who is an innovator and someone

who “creatively destructs”

David McClelland:

Entrepreneur is an energetic risk taker.

1961


1964 1985

Peter drucker:Entrepreneur maximizes Opportunities throughSystematic innovations.

Robert hisrich:Entrepreneur creates Something different With value by devotingNecessary time andEffort, assuming various Kinds of risks.


CONCEPT OF CONCEPT OF ENTREPRENEURSHIP:-ENTREPRENEURSHIP:-

ENTREPRENUR ENTREPRENEUR-SHIP

ENTERPRISE

PERSON PROCESS OBJECT


Common Themes in Definitions Common Themes in Definitions of Entrepreneurshipof Entrepreneurship

DefiningEntrepreneurship

TheEntrepreneur

Innovation

Organization Creation

CreatingValue

Profit orNonprofit

Growth

Uniqueness

Process


Myths About Myths About EntrepreneurshipEntrepreneurship

1. Successful entrepreneurship takes only a great idea.1. Successful entrepreneurship takes only a great idea.

2. Entrepreneurship is easy.2. Entrepreneurship is easy.

3. Entrepreneurship is a risky gamble.3. Entrepreneurship is a risky gamble.

4. Entrepreneurship is found only in small businesses.4. Entrepreneurship is found only in small businesses.

5. 5. Entrepreneurial ventures and small businesses are identical.Entrepreneurial ventures and small businesses are identical.


The Entrepreneurial The Entrepreneurial ProcessProcess

Exploring the Entrepreneurial

Context

IdentifyingOpportunities/PossibleCompetitive Advantage

Starting the Venture:Starting the Venture:

Researching FeasibilityResearching Feasibility

Planning the VenturePlanning the Venture

Organizing the VentureOrganizing the Venture

Launching the VentureLaunching the Venture

Managing the Venture:Managing the Venture:

Managing ProcessesManaging Processes

Managing PeopleManaging People

Managing GrowthManaging Growth

Special IssuesSpecial Issues


ENTREPRENURIAL ENTREPRENURIAL STRUCTURESTRUCTURE

STRUCTURE

TECHNOLOGY

PEOPLE

EXTERNALENVIRONMENT

SKILLS

VALUES


Rewards of Being an Rewards of Being an EntrepreneurEntrepreneur

High degree of independence—freedom from constraints

Get to use a variety of skills and talents

Freedom to make decisions

Accountable to only yourself

Opportunity to tackle challenges

Feeling of achievement and pride

Potential for greater financial rewards


Feeding the Feeding the Entrepreneurial FireEntrepreneurial Fire

Entrepreneurs as heroesEntrepreneurs as heroes Entrepreneurial educationEntrepreneurial education Demographic and economic factorsDemographic and economic factors Shift to a service economyShift to a service economy Technological advancementsTechnological advancements Independent lifestylesIndependent lifestyles E-Commerce and the World Wide E-Commerce and the World Wide

WebWeb International opportunitiesInternational opportunities


Challenges of Challenges of Being an EntrepreneurBeing an Entrepreneur

Must be comfortable with change and uncertainty

Must make a bewildering number of decisions

May face tough economic choices

Must be comfortable with taking risks

Need many different skills and talents

Must be comfortable with the potential for failure


Nine Deadly Mistakes of Nine Deadly Mistakes of EntrepreneurshipEntrepreneurship

1.1. Management incompetenceManagement incompetence

2.2. Lack of experienceLack of experience

3.3. Poor financial controlPoor financial control

4.4. Failure to develop a strategic planFailure to develop a strategic plan

5.5. Uncontrolled growthUncontrolled growth


Nine Deadly Mistakes of Nine Deadly Mistakes of EntrepreneurshipEntrepreneurship

(continued)(continued)

6.6. Poor locationPoor location

7.7. Improper inventory controlImproper inventory control

8.8. Incorrect pricingIncorrect pricing

9.9. Inability to make the “entrepreneurial Inability to make the “entrepreneurial transition”transition”


BARRIERS TO BARRIERS TO ENTREPRENEURSHIP:-ENTREPRENEURSHIP:-

KARL H VESPER has identified the KARL H VESPER has identified the following entrepreneurship barriers:following entrepreneurship barriers:

Lack of viable concept.Lack of viable concept. Lack of market knowledge.Lack of market knowledge. Lack of seed capital.Lack of seed capital. Lack of technical skills.Lack of technical skills. Lack of business know how.Lack of business know how. Complacency- lack of motivation.Complacency- lack of motivation. Social stigma.Social stigma. Monopoly and protectionism.Monopoly and protectionism.


TEN STEPS TO BREAK THE TEN STEPS TO BREAK THE BARRIERS:-BARRIERS:-

START AT THE TOP. LEAD THE ENTERPRISESTART AT THE TOP. LEAD THE ENTERPRISE.. ATTUNE TO A CULTURE OF INNOVATION.ATTUNE TO A CULTURE OF INNOVATION. REMOVE THE HIDDEN OBSTACLES.REMOVE THE HIDDEN OBSTACLES. CREATE AN INTEGRATED ENTERPISE CULTURE.CREATE AN INTEGRATED ENTERPISE CULTURE. CREATE A MARKETING CULTURE.CREATE A MARKETING CULTURE. CREATE A LISTENING ENVIRONMENT.CREATE A LISTENING ENVIRONMENT. ABSORB COMPETING TECHNOLOGIES AND INVOLVE ABSORB COMPETING TECHNOLOGIES AND INVOLVE

PEOPLE.PEOPLE. DON’T LET PRODUCT INNOVATIONS FOOL YOU.DON’T LET PRODUCT INNOVATIONS FOOL YOU. BE FLEXIBLE AND OPE FOR DIVERSIFICATION AND NEW BE FLEXIBLE AND OPE FOR DIVERSIFICATION AND NEW

IDEAS.IDEAS. ALWAYS BE READY TO CHANGE THE CULTURES.ALWAYS BE READY TO CHANGE THE CULTURES.


DIFFERENT VIEWS ON DIFFERENT VIEWS ON ENTREPRENEURS:-ENTREPRENEURS:-

ECONOMISTS VIEW:- ECONOMISTS VIEW:-

According to the economist entrepreneurship and According to the economist entrepreneurship and economic growth will take place in those situation economic growth will take place in those situation where particular economic conditions are most where particular economic conditions are most favorable.favorable.

According to J.S Mill:- he has listed 3 basics functions According to J.S Mill:- he has listed 3 basics functions of an entrepreneur-of an entrepreneur-

SuperintendenceSuperintendence

ControlControl

DirectionDirection


CONTINUED…CONTINUED…

According to Harvey leibenstein:- “ entrepreneur is an According to Harvey leibenstein:- “ entrepreneur is an individual or group of individuals with 4 major individual or group of individuals with 4 major characteristics-characteristics-

Connects different markets.Connects different markets.

Capable of filling the market gaps.Capable of filling the market gaps.

Input completer.Input completer.

Time manager.Time manager. According to J.B.Say rationally combining the forces of According to J.B.Say rationally combining the forces of

production into a new producing organization is the function production into a new producing organization is the function of an entrepreneur.of an entrepreneur.



According to B.C Tondon:- he has discussed According to B.C Tondon:- he has discussed entrepreneur in context to developing nation entrepreneur in context to developing nation and kind of environment he has to face during and kind of environment he has to face during his business. In his words an entrepreneur must his business. In his words an entrepreneur must b of “ideal type” rather than “social type”.b of “ideal type” rather than “social type”.

According to Knight:- identified According to Knight:- identified entrepreneurship with control and social entrepreneurship with control and social responsibility.responsibility.


SOCIOLOGISTS’ VIEW:-SOCIOLOGISTS’ VIEW:-

They consider the entrepneur as a role performer They consider the entrepneur as a role performer corresponding to the role expected by the society.corresponding to the role expected by the society.

It emerges under a specific social culture.It emerges under a specific social culture. According to sociologist’s social sanctions, cultural According to sociologist’s social sanctions, cultural

values and role expectations are responsible for the values and role expectations are responsible for the emergence of entrepreneurship.emergence of entrepreneurship.

Society values are most important determinants of Society values are most important determinants of attitudes and role expectation.attitudes and role expectation.

• According to Flavia ,the function of an entrepreneur is According to Flavia ,the function of an entrepreneur is to co-ordinate at every stage i.e. beginning, to co-ordinate at every stage i.e. beginning, maintenance and expansion.maintenance and expansion.



• Every entrepreneur needs two qualities they are Every entrepreneur needs two qualities they are Optimistic outlook and Dynamism.Optimistic outlook and Dynamism.

e.g.e.g.

Protestant ethic from west emerge as new class of Protestant ethic from west emerge as new class of industrialist .industrialist .

Samurai from Japan ,Samurai from Japan ,

Christians from Lebanon,Christians from Lebanon,

Halai Memon Industrialist in Pakistan ,Halai Memon Industrialist in Pakistan ,

Marwaris & Parsis in India Marwaris & Parsis in India


The Psychologist’s view:-The Psychologist’s view:- It is most likely to emerge when a society has It is most likely to emerge when a society has

sufficient supply of individuals possessing sufficient supply of individuals possessing particular psychological characteristics.particular psychological characteristics.

It’s the high need for achievement which It’s the high need for achievement which drives people towards entrepreneurial drives people towards entrepreneurial activities .activities .

Individual with high achievement motive tend Individual with high achievement motive tend to take keen interest in situation of high to take keen interest in situation of high risk ,desire for responsibility and desire for risk ,desire for responsibility and desire for task performance.task performance.



• Entrepreneur possesses three things i.e. an Entrepreneur possesses three things i.e. an institutional capacity to see things in a way institutional capacity to see things in a way which later proves to be true, a kind of effort which later proves to be true, a kind of effort of will and mind to overcome fixed habits of of will and mind to overcome fixed habits of thinking, lastly the capacity to overcome thinking, lastly the capacity to overcome social opposition against doing something social opposition against doing something new.new.

• Frank Young describes an entrepreneur as a Frank Young describes an entrepreneur as a change agentchange agent

• T.V. Rao describes entrepreneurship as a T.V. Rao describes entrepreneurship as a creative and innovative response to creative and innovative response to environment.environment.


Managerial Views:-Managerial Views:-

• This view gives more importance to the This view gives more importance to the managerial aspects like perception of market managerial aspects like perception of market opportunities and operational skills as opportunities and operational skills as qualities required to carry out an enterprise.qualities required to carry out an enterprise.

• Entrepreneurship is the out come of complex Entrepreneurship is the out come of complex and varying combination of socio economic, and varying combination of socio economic, psychological and other factors.psychological and other factors.


FACTORS AFFECTING FACTORS AFFECTING ENTREPRENEURIAL ENTREPRENEURIAL

GROWTHGROWTH1.1. ECONOMIC FACTORSECONOMIC FACTORS

a)a) Lack of adequate overhead facilities:Lack of adequate overhead facilities:

Profitable innovations require basic Profitable innovations require basic facilities like transportation, facilities like transportation, communication power supply etc. They communication power supply etc. They reduce cost of production and increase reduce cost of production and increase profit.profit.


b)b) Non availability of capital Non availability of capital Inventions are capital oriented. In less Inventions are capital oriented. In less

developed countries most capital equipment developed countries most capital equipment have to be imported which involves foreign have to be imported which involves foreign exchange which acts as a difficult problem.exchange which acts as a difficult problem.

c)c) Great riskGreat risk Risk is high in case of less developed countries Risk is high in case of less developed countries

as there is lack of reliable information, as there is lack of reliable information, markets for good and services is small etc.markets for good and services is small etc.


d) Non availability of labor and skills Though there is abundant labor supply there is generally

scarcity of skills at all levels.

2. SOCIAL FACTORS A society that is rational in decision making would be

favorable for decision making. Education, research and training is given less importance in less developed countries therefore there is very little vertical mobility of labor.

3. CULTURAL FACTORS if the culture is economically or monetarily oriented

entrepreneurship would be applauded and praised. In less developed countries people are not economically motivated. People have ample opportunities of attaining social distinction by non economic pursuits.


4. PERSONALITY FACTORS In less developed countries the entrepreneur is looked

upon with suspicion. Public opinion in the less developed nations sees in the entrepreneur only a profit maker and exploited.


MOTIVATION:-MOTIVATION:-

“ “ Motivation refers to the way in which Motivation refers to the way in which urges ,drives, desires,aspirations,strivings urges ,drives, desires,aspirations,strivings or needs direct, control or explain the or needs direct, control or explain the behaviour of human beings”.behaviour of human beings”.

If the entrepreneur feels motivated his If the entrepreneur feels motivated his behaviour will bring about the desired behaviour will bring about the desired action.action.


MOTIVATING FACTORS MOTIVATING FACTORS P.N Sharma identified nine motivating P.N Sharma identified nine motivating

factors which are as follows:factors which are as follows: Education backgroundEducation background Occupational experienceOccupational experience Family background Family background Desire to branch out to manufacturing.Desire to branch out to manufacturing. Desire to work independently in manufacturing lineDesire to work independently in manufacturing line Assistance from government.Assistance from government. Assistance from financial institutionAssistance from financial institution Availability of technology/raw materialsAvailability of technology/raw materials Other factors- like demand for particular Other factors- like demand for particular

product,utilisation of excess money earned, foreign product,utilisation of excess money earned, foreign policy of government etc.policy of government etc.


Continued…Continued…

First five factors termed as internal First five factors termed as internal because all these make the personality of because all these make the personality of the entrepreneur, and generate an the entrepreneur, and generate an inclination to adopt entrepreneurial inclination to adopt entrepreneurial activity.activity.

Last four are termed as external because Last four are termed as external because all these serve as a spark in the lightening all these serve as a spark in the lightening of the entrepreneurial idea.of the entrepreneurial idea.


other classified factors are:-other classified factors are:- R.A Sharma has classified the factors which prompted R.A Sharma has classified the factors which prompted

to the new entrepreneurs to enter the industry as:-to the new entrepreneurs to enter the industry as:-

A.A. INTERNAL FACTORS:-INTERNAL FACTORS:- Strong desire to do something independently in life.Strong desire to do something independently in life. Technical knowledge.Technical knowledge. Business experience in the related field.Business experience in the related field.

B. EXTERNAL FACTORS:-B. EXTERNAL FACTORS:- Financial assistance from institutional sources.Financial assistance from institutional sources. Accommodation in industrial estates.Accommodation in industrial estates. Machinery on hire purchase.Machinery on hire purchase. Attitude of the government to help the units.Attitude of the government to help the units. Heavy demand.Heavy demand. Profit margin.Profit margin. Unsound units available at cheap price.Unsound units available at cheap price.


ENTREPRENEURIAL ENTREPRENEURIAL CULTURE:-CULTURE:-

MEANING:- Implies a set of values, MEANING:- Implies a set of values, norms and traits that are conducive to norms and traits that are conducive to the growth of entrepreneurship.the growth of entrepreneurship.

Entrepreneurial culture is different from Entrepreneurial culture is different from administrative culture.administrative culture.

Administrative culture is the corporate Administrative culture is the corporate culture which focus on existing culture which focus on existing oppurtunities,organisational structures oppurtunities,organisational structures and control procedures.and control procedures.


BASIS ENTREPRENURIAL

ADMINISTRATIVE

STRATEGIC ORIENTATION

PERCEPTION OF OPPORTUNITIES.

CONTROLLED RESOURCES.

COMMITMENTTOWARDS OPPORTUNITIES

REVOLUTIONARY,WITHSHORT DURATION.

EVOLUTIONARY,WITH LONG DURATION.

COMMITMENT TO RESOURCES

MANY STAGES WITH MINIMAL EXPOSURE AT EACH STAGE.

A SINGLE STAGE, WITH COMPLETE COMMITMENT OUT OF DECISION.

MANAGEMENTSTRUCTURE

FLAT,WITH MULTIPLE INFORMAL NETWORKS.

HIERARCHY


SUB-CULTURES OF SUB-CULTURES OF ENTREPRENEURSHIP:-ENTREPRENEURSHIP:-

CULTURE OF BUSNIESS.CULTURE OF BUSNIESS. BUSNIESS ETHICS.BUSNIESS ETHICS. PRODUCTIVITY CULTURE.PRODUCTIVITY CULTURE. TOTAL QUALITY CULTURE.TOTAL QUALITY CULTURE. ORGANISATION’S CULTURE.ORGANISATION’S CULTURE.


TYPES OF ENTREPRENEURS:-TYPES OF ENTREPRENEURS:-1.1. ACCORDING TO THE TYPE OF BUSINESS:-ACCORDING TO THE TYPE OF BUSINESS:- Business entrepreneursBusiness entrepreneurs Trading entrepreneursTrading entrepreneurs Industrial entrepreneurs( large, medium and small)Industrial entrepreneurs( large, medium and small) Corporate entrepreneurCorporate entrepreneur Agricultural entrepreneurAgricultural entrepreneur Retail entrepreneurRetail entrepreneur Service entrepreneur.Service entrepreneur.

2.2. ACCORDING TO THE USE OF TECHNOLOGY:-ACCORDING TO THE USE OF TECHNOLOGY:- Technical entrepreneurTechnical entrepreneur Non-technical entrepreneurNon-technical entrepreneur Professional entrepreneurProfessional entrepreneur High tech entrepreneurHigh tech entrepreneur Low-tech entrepreneurLow-tech entrepreneur


CONTINUED…CONTINUED…3.3. ACCORDING TO THE STAGES OF ACCORDING TO THE STAGES OF

DEVELOPMENT:-DEVELOPMENT:- First generation entrepreneurFirst generation entrepreneur Modern entrepreneurModern entrepreneur Classical entrepreneurClassical entrepreneur

4.4. ACCORDING TO THE AREA:-ACCORDING TO THE AREA:- Urban entrepreneurUrban entrepreneur Rural entrepreneurRural entrepreneur

5.5. ACCORDING TO THE GENDER:-ACCORDING TO THE GENDER:- Male entrepreneurMale entrepreneur Women entrepreneurWomen entrepreneur

6.6. ACCORDING TO THE SCALE OF OPERATION:-ACCORDING TO THE SCALE OF OPERATION:- Small scale entrepreneurSmall scale entrepreneur Large scale entrepreneurLarge scale entrepreneur


CONTINUED…CONTINUED…7. OTHERS OR UNCLASSIFIED :-7. OTHERS OR UNCLASSIFIED :- Innovating entrepreneurInnovating entrepreneur Imitating entrepreneurImitating entrepreneur International entrepreneurInternational entrepreneur Bureaucratic entrepreneurBureaucratic entrepreneur Intrapreneur entrepreneurIntrapreneur entrepreneur

chapter 1 entrepreneurship

Documents

entrepreneurship copyright

concept of entrepreneurship

successful entrepreneurship

money chapter

deliberating chapter

entrepreneur growth

basics of entrepreneur

managerial abilities10