Fundamentals of Entrepreneurship and Entrepreneurship Development

Subject Code: - MGTENT10T

UNIT-I
Foundations of Entrepreneurship Development: Concept and Need of Entrepreneurship Development
Definition of Entrepreneur, Entrepreneurship, Innovation, Invention, Creativity, Business Idea,
Opportunities through change.

Foundations of Entrepreneurship Development

Basically, entrepreneurship development is basically the process of improving the skill set as well as the
knowledge of the entrepreneurs. This can be done through various methods such as classroom sessions or
training programmes specially designed to increase the entrepreneurial acumen.

Another definition of this term could be the process of enhancing the capacity to develop, manage and
organize a business venture while keeping in mind the risks associated with it.

But instead of complicating things with big words and sophisticated terminologies, let us understand it
simply. The process of entrepreneurship development is nothing but helping the entrepreneurs develop their
skills through training and application of that training. It instils in them the quality of making better
decisions in the day to day business activities.

Process of Entrepreneurship Development.

Now that we understand the meaning of entrepreneurship development, let’s discuss the process of
entrepreneurship development.

Clear View of the Objective of the Program

Before you get into training the prospective entrepreneurs, it is very important to have a clear objective and plan in
mind about what the program is going to encompass.

Without a proper plan and direction, the training would not yield the desired results. This would lead to a loss of time,
money, effort and most of all, valuable potential.

Selecting the Potential Targets

It is important to select the potential targets who are willing to enhance their skills and who can be identified as the
people who have some amount of business acumen. These can be further divided into two categories- the educated
target audience and the uneducated target audience.

Educated audience refers to the target people who have a decent educational background and want to be entrepreneurs.
These people have the motivation to put their education to use by starting a venture and working for themselves.

Uneducated audience refers to the people who are not as privileged as others in terms of education about the market
and have the potential to become entrepreneurs. These people are constantly looking for alternative ways to earn
money and support their families. Therefore they are highly motivated and, given the right training and direction, can
prove to be exceptional entrepreneurs.
Identifying Local Talents and Markets

The process of entrepreneurship development program can be seen as most effective and efficient when it is applied in
the local markets and on the local entrepreneurs who know about it. These people understand and absorb the
knowledge way more quickly and can apply it in the current scenario because of which the results of the program can
be seen more quickly and effectively.

Choosing the Right Location

In India unfortunately, these programs can only be launched where support institutions and resources are available, but
ideally, these programmes should be planned and launched in the areas where most people are interested and willing
to take advantages of these programmes so that this opportunity can be used most effectively and there is no loss of
resources.

Need for Entrepreneurship Development (Entrepreneurship Development Programme)

Importance of entrepreneurship development programme (EDP) is to enable entrepreneurs initiating and

sustaining the process of economic development in the following ways:

1. Creation of Employment Opportunities

Unemployment is one of the most important problems confronting developing and underdevelopment
countries, EDP’s enable prospective entrepreneurs in the setting up of their own units, thus enabling them to
get self employment. With the setting up of more and more units by entrepreneurs, both on small and large
scale, numerous job opportunities are created for the others.

Entrepreneur in this way get an opportunity to lead an independent and honorable life and at the same time
they enable others in getting gainful employment. Several schemes like Nehru Rozgar Yojna, National Rural
Employment Programme (NREP), Integrated Rural Development Programme (IRDP) etc. have been
initiated by the government, of India in this direction. The thrust of all these schemes is to eliminate poverty
and generate gainful employment opportunities for the unemployed. Thus entrepreneur can play an effective
role in reducing the problem of unemployment.

2. Capital Formation

It is not possible to set up an enterprise without adequate funds. Entrepreneur as an organizer of factors of
production employs his own as well as borrowed resources for the setting up of his enterprise. Entrepreneur
mobilizes idle savings of the public and put them to productive use. In this way he helps in capital
formation, which is so essential for the industrial and economic development of a country. Various
development banks like ICICI, IFCI, IDBI; SFCs, SIDCs take initiative in promoting entrepreneurship
through assistance to various agencies involved in EDP and by providing financial assistance to new
entrepreneurs.

3.Balanced Regional Development

Small scale units can be set up in industrially backward and remote areas with limited financial resources.
Successful EDP’s assist in accelerating the pace of industrialization in the backward areas and reduce the
concentration of economic power in the hands of a few, Entrepreneurs feel like taking advantage of the
various concessions and subsidies offered by the state and central government. Success story of
entrepreneurs set right example for others to follow and this accelerates the pace of industrialization in the
backward areas. Setting up of more units leads to more development of backward areas and balanced
regional development.
4. Use of Local Resources

In the absence of any initiative local resources are likely to remain unutilized. Proper use of these resources
can result in the progress or development of the area and that too at lower cost. Alert entrepreneurs seize the
opportunity and exploit it in the best interests of the area and industry. Effective EDPs can help in the proper
use of local resources by providing guidance, assistance, education and training to the prospective
entrepreneurs.

5. Improvement in per Capital Income

Entrepreneurs are always on the look out for opportunities. They explore and exploit the opportunities.
Entrepreneurs take lead in organizing various factors of production by putting them into productive use
through the setting up of enterprises. More enterprises will lead to more production, employment and
generation of wealth in the form of goods and services. It will result in the increase in the overall
productivity and per capita income in the country. EDPs play a positive role in the setting of more units and
thus help in generation of more employment and income.

6. Improvement in the Standard of Living

Entrepreneurs by adopting latest innovations help in the production of wide variety of goods & services. By
making efficient use of the resources, they start producing more of better quality and that too at lower costs.
This enable them to ensure easy availability of better quality products at lower prices to the consumers
which result in the improvement in the standard of living of the people. EDPs provide the necessary support
to entrepreneurs by educating them about the latest innovations and market trends.

7. Economic Independence

Entrepreneurs enable a country to produce wide variety of better quality goods & services and that too at
competitive prices. They develop substitutes of the goods being imported and thus prevent over-dependence
on foreign countries and at the same time help in the saving of precious foreign exchange. Through sale of
their surplus products in foreign market entrepreneurs enable a country to earn foreign exchange, which is so
essential for meeting developmental needs of the economy. Export promotion and import substitution thus
help in promoting economic independence of the economy.

8. Preventing Industrial Slums

Industrially developed areas are faced with problem of industrial slums, which result in over burdening of
civic amenities and adverse impact on the health of people. Dispersal of industries can help in the
overcoming of this grave problem. EDPs can help in preventing spread of industrial slums by providing
various incentives, subsidies and infrastructural support to entrepreneurs for setting up their enterprises in
industrially backward areas. This will also help in reducing pollution and overtaxing of civic amenities.

9. Reducing Social Tension

Unemployment amongst the young and educated people is emerging as the major cause of social unrest.
People are bound to feel frustrated if they fail to get gainful employment after completion of their education.
EDPs can help in channelizing the talent of this section of society in the right direction by providing proper
guidance, training and assistance for setting up their enterprises. This results in generation of self
employment and prevention of social tension, unrest etc.
10. Facilitating Overall Development

An entrepreneur acts as a catalytic agent for change which results in chain reaction. With the setting up of an
enterprise the process of industrialization is set in motion. This unit will generate demand for various types
of inputs required by it and there will be so many other units which will require the output of this unit. This
leads to overall development of an area due to increase in demand and setting up of more and more units
there. Moreover success of one entrepreneur sets the right type of example for others to follow.
Entrepreneurs, thus, create an environment of enthusiasm and convey a sense of purpose. This gives future
impetus to the overall development of that area.

11. Helps in searching and exploiting opportunities

There are many opportunities for entrepreneurs in various fields like-Electronics, medicine, engineering,
agriculture, food technology and packing, communication etc. EDPs help in searching such opportunities
and provide necessary information, guidance and assistance in the search and exploiting these opportunities.

12. Enhancing managerial abilities

Entrepreneur development programmes help the entrepreneurs to enhance their organizing and managerial
abilities so that they can run their enterprise efficiently and successfully.This is done through organizing
educational, management, training and orientation programmes.Various specialized agencies like National
Institute for Entrepreneurship and small Business Development(NIESBUD),New Delhi and
Entrepreneurship Development Institute of India(EDII), Ahmedabad are engaged in entrepreneurship
programmes.

Definition of Entrepreneur, Entrepreneurship, Innovation, Invention, Creativity,

Business Idea, Opportunities through change.

Entrepreneur
Three pioneers in the field of entrepreneurship

Richard Cantillon

Cantillon described the entrepreneur as a person who purchases a raw material at a known price in order to
sell it at an unknown price (Cantillon, 1755).

Jean-Baptiste Say

entrepreneurs are intermediaries in the production process who combine productive agents such as land,
capital and labor in order to meet the demand of consumers.

Joshep shumpeter

Individual who introduce something new in the market or economy. “entrepreneurs as individuals who
exploit market opportunity through technical and/or organizational innovation”
For Frank H. Knight (1921) and Peter Drucker (1970)

“entrepreneurship is about taking risk”.

Bolton and Thompson (2000)

“a person who habitually creates and innovates to build something of recognized value around perceived
opportunities”

Entrepreneurship
In the words of Stevenson and others, “Entrepreneurship is the process of creating value by
bringing together a unique package of resources to exploit an opportunity.” According to A.H.
Cole, “Entrepreneurship is the purposeful activities of an individual or a group of associated
individuals undertaken to initiate, maintain or organize a profit oriented business unit for the
production or distribution of economic goods and services”.
All activities undertaken by an entrepreneur to bring a business unit into existence are
collectively known as entrepreneurship. It is the process of changing ideas into commercial opportunities
and creating values. In short, entrepreneurship is the process of creating a business
enterprise.

Nature and Characteristics of Entrepreneurship

Features of entrepreneurship are summarized as follows:

1) It is a function of innovation.
2) It is a function of leadership.
3) It is an organization building function.
4) It is a function of high achievement.
5) It involves creation and operation of an enterprise.
6) It is concerned with unique combinations of resources that make existing methods or
products obsolete.
7) It is concerned with employing, managing, and developing the factors of production.
8) It is a process of creating value for customers by exploiting untapped opportunities.
9) It is a strong and positive orientation towards growth in sales, income, assets, and
employment.

Innovation
Innovation is the process of turning a new concept into commercial success or widespread use.

Invention
Invention is the creation of a new idea or concept.

Creativity

Creativity is the act of turning new and imaginative ideas into reality.

Creativity, invention, and innovation are all interrelated and necessary for growth to occur. We can
follow any successful company and see an investment of time and effort into these three concepts.
 Innovation

Innovation ties everything together in business. According to British Standards, Innovation is the successful
exploitation of new ideas.
It involves turning an invention into a commercial success and encouraging its widespread use. This is the
stage where bold ideas, once properly developed, are brought to the public eye.
This is what Uber has achieved, now that its product is in use all over the world and benefits people
everywhere.
Examples of innovation:
 successful products and services like Care of, Amazon Scout, Impossible Food, Google’s self-
driving taxis.
 successful process innovations like Amazon predictive orders, or additive manufacturing processes.

Invention

Invention is the physical creation of a new concept or idea. Also, from Nesta’s innovation policy tookit, it is
defined as The creation of an idea to do or make something without verification that it works, or is
commercially valuable.
Invention cannot occur without creativity, but just creativity is not enough to properly develop an idea.

Examples of invention:

 product designs, business models, or working prototypes.

 Uber channeled invention in creating a solid and working business model, based upon the ideas they
had formed in the creation stage.

Creativity

Creativity is the act of channeling imagination into something concrete. It is the very first stage of
design, where ideas start to actually take form, and a plan can be developed.

Examples of creativity:

 in the case of Uber, creativity was necessary in producing the concept of ride sharing and of
making driving jobs accessible to any individual.
 another example can be the Google Glass, which although were very creative at the time (new,
different in the market), were not necessarily innovative (monetary return over investment made by
the company).

Business Idea
A business idea is a concept which can be used for commercial purposes. It typically centers around a
commodity or service that can be sold for money, according to a unique model. There are several methods
for developing and testing a business idea. The ability to come up with a business idea can be transformed
into a viable business, where ideas supported by feasibility and a business plan can then be sold to interested
investors, firms, and interested parties for a lump sum or a management contract, or as agreed. Business
ideas, if introduced at the right time, when demand for such service or a product introduced by the idea is
expected to surge, can lead to a very profitable business. Business ideas are always available through
different sources; however, it is the application applied on these ideas, and timing makes all the difference in
failure or success.