UNIT-1

Meaning
Entrepreneurship is a process of actions of an entrepreneur who is always in search of something new
and exploits such ideas into gainful opportunities by accepting the risk and uncertainty with the
enterprise. It is the process of starting a business, a startup company or other organization.
The entrepreneur develops a business plan, acquires the human and other required resources, and is
fully responsible for its success or failure.

Definitions
According to J.A. Timmons

Entrepreneurship is the ability to create and build something from practically nothing.

Characteristics of Entrepreneurship

Entrepreneurship is characterized by the following features:

1. Economic and dynamic activity

Entrepreneurship is an economic activity because it involves the creation and operation of an

enterprise with a view of creating value or wealth by ensuring optimum utilization of scarce resources.
Since this value creation activity is performed continuously in the midst of uncertain business
environment, therefore, entrepreneurship is regarded as a dynamic force.

2. Related to innovation

Entrepreneurship involves a continuous search for new ideas. Entrepreneurship compels an individual
to continuously evaluate the existing modes of business operations so that more efficient and effective
systems can be evolved and adopted. In other words, entrepreneurship is a continuous effort for
synergy (optimization of performance) in organizations.

3. Profit potential

“Profit potential is the likely level of return or compensation to the entrepreneur for taking on the risk of
developing an idea into an actual business venture.” Without profit potential, the efforts of
entrepreneurs would remain only an abstract and a theoretical leisure activity.

4. Risk bearing

The essence of entrepreneurship is the ‘willingness to assume risk’ arising out of the creation and
implementation of new ideas. New ideas are always tentative and their results may not be
instantaneous and positive. An entrepreneur has to have patience to see his efforts bear fruit. In the
intervening period (time gap between the conception and implementation of an idea and its results), an
entrepreneur has to assume risk. If an entrepreneur does not have the willingness to assume risk,
entrepreneurship would never succeed.

5. Skillful management

Entrepreneurship involves skillful management. The basic managerial skill is the most important
characteristic feature of entrepreneurship. For effective management of an enterprise, the role of an
entrepreneur is to initiate and supervise design  of organization improvement projects in relation to
upcoming  opportunities is very much important.
6. Accepting challenges

Entrepreneurship means accepting challenges amidst risk and uncertainty.While accepting

entrepreneurship as a career the entrepreneur accepts the challenges of all odds and puts his efforts
to convert the odds into viable business opportunities by pooling together the resources of building and
running the enterprise.

7. Goal-oriented Activity

The entrepreneur who creates and operates enterprises seeks to earn profits through satisfaction of
needs of consumers; hence, entrepreneurship is a goal-oriented activity. Entrepreneurship
emphasizes results, achievements and targets achieved. It is work done not imaginary plans or paper
decisions. Hence entrepreneurship is a goal-oriented activity.

8. Value Creation

Next, we find that the process of creating value is a characteristic in describing entrepreneurship.
Through entrepreneurship, new products, services, transactions, approaches, resources, technologies,
and markets are created that contribute some value to a community or marketplace. We can also see
value created when, through entrepreneurship; resources are transformed into outputs such as
products or services. During this transformation process, value is created because the entrepreneur is
fashioning something worthwhile and useful. Drucker says, “Until entrepreneurial act, every plant is a
seed and every mineral just another rock.

9. Dynamic Process

Entrepreneurship is a dynamic function. Entrepreneur thrives on changes in the environment, which

bring useful opportunities for business. An entrepreneur deals proactively with changing markets and
environment. He looks at the changes as the source of market advantages, not as a problem.
Uncertainties are market opportunities for him. He capitalizes on fleeting market anomalies.

10. Uniqueness

Other characteristic found in entrepreneurship is that of uniqueness. Entrepreneurship involves new

combinations and new approaches with which entrepreneurs are willing to experiment. Through
Entrepreneurship unique products are created and unique approaches are tried. Entrepreneurship isn’t
merely imitating what others have done. It’s doing something new, something untested and untried –
something unique.

11. Interest and Vision

The first factor for entrepreneurial success is interest. Since entrepreneurship pays off according to
performance rather than time spent on a particular effort, an entrepreneur must work in an area that
interests her. Otherwise, she will not be able to maintain a high level of work ethic, and she will most
likely fail. This interest must also translate into a vision for the company’s growth. Even if the day-to-
day activities of a business are interesting to an entrepreneur, this is not enough for success unless
she can turn this interest into a vision of growth and expansion. This vision must be strong enough that
she can communicate it to investors and employees.

12. Risk and Rewards

Entrepreneurship requires risk. The measurement of this risk equates to the amount of time and
money you invest into your business. However, this risk also tends to relate directly to the rewards
involved. An entrepreneur who invests in a franchise pays for someone else’s business plan and
receives a respectable income, while an entrepreneur who undertakes ground breaking innovations
risks everything on an assumption that something revolutionary will work in the market. If such a
 revolutionary is wrong, he can lose everything. However, if he is right, he can suddenly become
extremely wealthy.

Entrepreneurship and
Economic Development
The entrepreneurship has been identified by many economists as a vital force in the process of
industrialization in particular and economic development in general. Economic development essentially
means a change. But, at the same time, it is very difficult to define precisely the phrase economic
development’. One should realize that the term economic development does not convey the idea of
total development of the society. It only focuses itself on one aspect and one dimension of general
development. Economic development can be defined as a move towards even more efficient and
differentiated methods of supplying people with the requirements for survival and improvement.

Many a time economic development is interpreted as synonymous with industrialization because it is

viewed by the poor regions as a superior way of life. But economic development cannot be equated
with industrialization. When economic development is analyzed with the yard stick of extent of
industrialization, it implicitly undermines the importance of primary sector like agriculture. The high
dependency ratio of people on the primary sector is not the cause of underdevelopment but the
consequence of it. These two sectors are complementary to each other in the development process.
Moreover, economic development is much more than industrialization, it is an upward movement of
the’ entire social system.

Economic development includes increase in productivity, social and economic equalization, improved
institutions, and attitudes, and a rationally coordinated system of policy measures and removal of
undesirable conditions and systems that perpetuated a state of underdevelopment.

It appears that economic development involves something more than economic growth and it includes
both growth and change. Moreover, economic development is not only a quantitative phenomenon but
has qualitative dimensions too.

The criterion of per capita income can be considered as a good indicator of regional variations in
economic development. As the economic development is essentially a process the increase in per
capita income should not appear as a temporary or short sustained phenomenon. Of course, the
increase in per capita income can be considered as the primary criterion for measuring the extent of
development in an area. There are other sub-criteria which have to be considered along with the
primary criterion. The nature of distribution of income in the society is an integral part of the
development. The secondary objectives like level of consumption, level of employment, diversification
against concentration of the economy are also important.

Economic development is not to be considered as an end in itself, but is a means to an end. Economic
development is concerned, ultimately, with the achievement of better nourishment, better education,
better health, better living conditions and an expanded range of opportunities in work and leisure for
the people. Therefore, a rise in real per capita income is a relevant criterion to judge the extent of
development in a region as it is a means for the attainment of desired standards in nourishment,
education, health, and living conditions.

The entrepreneur is the key to the creation of new enterprises that energize the economy and
rejuvenate the established enterprises that make up the economic structure. Entrepreneurs initiate and
sustain the process of economic development in the following ways:

1. Capital formation: Entrepreneurs mobilize the idle savings of the public through the issues of
industrial securities. Investment of public savings in industry results in productive utilization of national
 resources. Rate of capital formation increases which is essential for rapid economic growth. Thus, an
entrepreneur is the creator of wealth.
2. Improvement in per capita income: Entrepreneurs locate and exploit opportunities. They
convert the talent and idle resources like land, labour and capital into national income and wealth in
the form of goods and services. They help to increase net national product and per capita income in
the country, which are important yardsticks for measuring economic growth.
3. Improvement in living standards: Entrepreneurs set up industries which remove scarcity of
essential commodities and introduce new products. Production of goods on mass scale and
manufacture of handicrafts, etc., in the small scale sector help to improve the standard of life of a
common man. These offer goods at lower costs and increase variety in consumption.
4. Economic independence: Entrepreneurship is essential for national self-reliance. Industrialists
help to manufacture indigenous substitutes of hitherto imported products thereby reducing
dependence on foreign countries. Businessmen also export goods and services on a large scale and
thereby earn the scarce foreign exchange for the country. Such import substitution and export
promotion help to ensure the economic independence of the country without which political
independence has little meaning.
5. Backward and forward linkages: An entrepreneur initiates change which has a chain
reaction. Setting up of an enterprise has several backward and forward linkages. For example, the
establishment of a steel plant generates several ancillary units and expands the demand for iron ore,
coal, etc. These are backward linkages. By increasing the supply of steel, the plant facilitates the
growth of machine building, tube making, utensil manufacturing and such other units. Entrepreneurs
create an atmosphere of enthusiasm and convey a sense of purpose. They give an organization its
momentum. Entrepreneurial behavior is critical to the long term vitality of every economy. The practice
of entrepreneurship is an important to established firms as it is to new ones.
6. Generation of Employment: At the beginning of seventh five year plan the backlog of
unemployment was estimated to be around 44 million persons. At present, the number of unemployed
in the country is far greater than what it was during 1985. Emphasis on modernization which usually
results in automation, use of high technology, and technology up gradation initiated during 1980s and
structural changes introduced by the Government during 1990’s are likely to give much rise to capital-
intensive rather than labour intensive industry. It is feared that there will be very little additional job
opportunities within the fold of organized public and private sectors. Most of the job opportunities in
future are likely to be emerging from informal and unorganized sectors of economy. Entrepreneurship
development training which helps in strengthening informal and unorganized sector is expected to
motivate enterprising people to opt for self employment and entrepreneurial career. It will therefore,
help in solving the problem of increasing unemployment to some extent.
7. Harnessing Locally Available Resources and Entrepreneurship: India is considered to be
very rich in natural resources. In spite of about five decades of planned development a large number of
states have remained economically backward. A few large scale industries started by entrepreneurs
from outside the state in economically backward areas may help as model of pioneering efforts, but
ultimately the real strength of industrialization in backward areas depends upon the involvement of
local entrepreneurship in such activities: Increased activities of local entrepreneurs will also result in
making. use of abundantly available local resources.

8. Balanced Regional Growth: Medium and large scale industries can only be started with huge
investment which is either available with well established industrial houses or need to be drawn from
public exchequer. Also, promotion of such industries does not help in reducing disparities of income
and wealth. On the other hand, an important advantage of small scale enterprises is that they can be
started with meager financial ‘resources and little or no previous experience or entrepreneurial
background.
9. Reducing Unrest and Social Tension Amongst Youth: Many problems associated with
youth unrest and social tension is rightly considered to be due to youth not being engaged in
productive work. In the changing environment where we are faced with the problem of recession in
wage employment opportunities, alternative to wage career is the only viable option. The country is
required to divert the youth with latent entrepreneurial traits from wage career to self-employment
career. Such alternate path through entrepreneurship could help the country in defusing social tension
and unrest amongst youth.
10. Innovations in Enterprises: Business enterprises need to be innovative for their survival and
better performance. It is believed that smaller firms have relatively higher necessity and capability to
 innovate. The smaller firms do not face the constraints imposed by large investment in existing
technology. Thus they are both free and compelled to innovate: The National Science Foundation, an
organization in USA found that small companies produce four times more innovations per research
dollar than do bigger companies. Entrepreneurship development programmes are aimed at
accelerating the pace of small firms’ growth in India. Increased number of small firms is expected to
result in more innovations and make the Indian industry compete in international market.
11. Initiating change in the structure of business and society: The role of entrepreneurship in
economic development involves initiating change in the Structure of business and society. One theory
of economic growth depicts innovation as the key, not only in developing new products, but also in
stimulating investment interest. The new Capital created expands the capacity for growth (supply side),
and new spending utilizes the new capacity and output (demand side.)

Factor Affecting Entrepreneurship

Growth: Economic and Non
Economic Factor
Factors impacting emergence of entrepreneurship
Various researchers have identified the factors that contribute to the development of entrepreneurship.
Economists agree that the lack of entrepreneurs is not caused by economic conditions alone as was the
earlier feeling. It is also due to the whole set of socio-cultural and institutional environment prevailing in the
less developed countries. Various environmental factors influencing the entrepreneurship are as follows:

(A) Economic Factors:

Economic environment exercises the most direct and immediate influence on entrepreneurship. The
economic factors that affect the growth of entrepreneurship are the following:

1. Capital: Capital is one of the most important perquisites to establish an enterprise. Availability of capital
facilitates for the entrepreneur to bring together the land of one, machine of another and raw material of yet
another to combine them to produce goods. Capital is therefore, regarded as lubricant to the process of production.
Our accumulated experience suggests that with an increase in capital investment, capital-output ratio also tends to
increase. This results in increase in profit which ultimately goes to capital formation. This suggests that as capital
supply increases, entrepreneurship also increases. France and Russia exemplify how the lack of capital for industrial
pursuits impeded the process of entrepreneurship and an adequate supply of capital promoted it.
2. Labour: The quality rather quantity of labour is another factor which influences the emergence of
entrepreneurship. Most less developed countries are labour rich nations owing to a dense and even increasing
population. But entrepreneurship is encouraged if there is a mobile and flexible labour force. And, the potential
advantages of low-cost labour are regulated by the deleterious effects of labour immobility. The considerations of
economic and emotional security inhibit labour mobility. Entrepreneurs, therefore, often find difficulty to secure
sufficient labour. They are forced to make elaborate and costly, arrangements to recruit the necessary labour. The
problem of low-cost immobile labour can be circumvented by plunging ahead with capital-intensive technologies, as
Germany did. It can be dealt by utilizing labour-intensive methods like Japan. By contrast, the disadvantage of high-
cost labour can be modified by introduction of labour-saving innovations as was done in US. Thus, it appears that
labour problems can be solved more easily than capital can be created.
3. Raw Materials: The necessity of raw materials hardly needs any emphasis for establishing any industrial
activity and its influence in the emergence of entrepreneurship. In the absence of raw materials, neither any
enterprise can be established nor can an entrepreneur be emerged. Of course, in some cases, technological
innovations can compensate for raw material inadequacies. The Japanese case, for example, witnesses that lack of
raw material clearly does not prevent entrepreneurship from emerging but influenced the direction of
entrepreneurship. In fact, the supply of raw materials is not influenced by them but becomes influential depending
 upon other opportunity conditions. The more favorable these conditions are, the more likely is the raw material to
have its influence of entrepreneurial emergence.
4. Market: The fact remains that the potential of the market constitutes the major determinant of probable
rewards from entrepreneurial function. Frankly speaking, if the proof of pudding lies in eating, the proof of all
production lies in consumption, i.e., marketing. The size and composition of market both influence entrepreneurship
in their own ways. Practically, monopoly in a particular product in a market becomes more influential for
entrepreneurship than a competitive market. However, the disadvantage of a competitive market can be cancelled
to some extent by improvement in transportation system facilitating the movement of raw material and finished
goods, and increasing the demand for producer goods. D.S. Landes holds the opinion that improvements in
transportation are more beneficial to heavy industry than to light industry because of their effects on the movement
of raw materials. Paul H. Wilken claims that instances of sudden rather than gradual improvement in market
potential provide the clearest evidence of the influence of this factor. He refers to Germany and Japan as the prime
examples where ‘rapid improvement in- market was followed by rapid entrepreneurial appearance. Thus, it appears
that whether or not the market is expanding and the rate at which it is expanding are the most significant
characteristics of the market for entrepreneurial emergence.
5. Infrastructure: Expansion of entrepreneurship presupposes properly developed communication and
transportation facilities. It not only helps to enlarge the market, but expand the horizons of business too. Take for
instance, the establishment of post and telegraph system and construction of roads and highways in India. It helped
considerable entrepreneurial activities which took place in the 1850s. Apart from the above factors, institutions like
trade/ business associations, business schools, libraries, etc. also make valuable contribution towards promoting and
sustaining entrepreneurship’ in the economy. You can gather all the information you want from these bodies. They
also act as a forum for communication and joint action. Of late, the importance of business and industry associations
has increased tremendously. In the fast changing world of business, entrepreneurs have to move-collectively in
order to be more effective and more efficient. They need to constantly check and influence the Government’s
thinking and decision-making.

(B) Social Factors:

Social factors can go a long way in encouraging entrepreneurship. In fact it was the highly helpful society
that made the industrial revolution a glorious success in Europe. The main components of social
environment are as follows:

1. Caste Factor: There are certain cultural practices and values in every society which influence the’ actions of
individuals. These practices and value have evolved over hundreds of years. For instance, consider the caste system
(the Varna system) among the Hindus in India. It has divided the population on the basis of caste into four divisions.
The Brahman (priest), the Kshatriya (warrior), the Vaishya (trade) and the Shudra (artisan): It has also defined limits
to the social mobility of individuals. By social mobility’ we mean the freedom to move from one caste to another.
The caste system does not permit an individual who is born a Shridra to move to a higher caste. Thus, commercial
activities were the monopoly of the Vaishyas. Members of the three other Hindu Varnas did not become interested
in trade and commence, even when India had extensive commercial inter-relations with many foreign countries.
Dominance of certain ethnical groups in entrepreneurship is a global phenomenon. The protestant ethics in the
west, the Sammurai in Japan, the trading classes in US and the family business’ concerns of France have
distinguished themselves as entrepreneurs.
2. Family Background: This factor includes size of family, type of family and economic status of family. In a
study by Hadimani, it has been revealed that Zamindar family helped to gain access to political power and exhibit
higher level of entrepreneurship. Background of a family in manufacturing provided a source of industrial
entrepreneurship. Occupational and social status of the family influenced mobility. There are certain circumstances
where very few people would have to be venturesome. For example in a society where the joint family system is in
vogue, those members of joint family who gain wealth by their hard work denied the opportunity to enjoy the fruits
of their labour because they have to share their wealth with the other members of the family.
3. Education: Education enables one to understand the outside world and equips him with the basic knowledge
and skills to deal with day-to-day problems. In any society, the system of education has a significant role to play in
inculcating entrepreneurial values.

In India, the system of education prior to the 20th century was based on religion. In this rigid system, critical
and questioning attitudes towards society were discouraged. The caste system and the resultant occupational
 structure were reinforced by such education. It promoted the idea that business is not a respectable
occupation. Later, when the British came to our country, they introduced an education system, just to
produce clerks and accountants for the East India Company, The base of such a system, as you can well see,
is very anti-entrepreneurial. The unfortunate result of it is that young men and women in our country have
developed a taste only for service. Their talents and capabilities have not been made much use of. Rather it
has been wasted in performing routine conventional jobs. Our educational methods have not changed much
even today. The emphasis is till on preparing students for standard jobs, rather than marking them capable
enough to stand on their feet.

4. Attitude of the Society: A related aspect to these is the attitude of the society towards entrepreneurship.
Certain societies encourage innovations and novelties, and thus approve entrepreneurs’ actions and rewards like
profits. Certain others do not tolerate changes and in such circumstances, entrepreneurship cannot take root and
grow. Similarly, some societies have an inherent dislike for any money-making activity. It is said, that in Russia, in the
nineteenth century, the upper classes did not like entrepreneurs. For them, cultivating the land meant a good life.
They believed that rand belongs to God and the produce of the land was nothing but god’s blessing. Russian folk-
tales, proverbs and songs during this period carried the message that making wealth through business was not right.
5. Cultural Value: Motives impel men to action. Entrepreneurial growth requires proper motives like profit-
making, acquisition of prestige and attainment of social status. Ambitious and talented men would take risks and
innovate if these motives are strong. The strength of these motives depends upon the culture of the society. If the
culture is economically or monetarily oriented, entrepreneurship would be applauded and praised; wealth
accumulation as a way of life would be appreciated. In the less developed countries, people are not economically
motivated. Monetary incentives have relatively less attraction. People have ample opportunities of attaining social
distinction by non-economic pursuits. Men with organizational abilities are, therefore, not c dragged into business.
They use their talents for non-economic ends. The absence of proper economic motives is a general characteristic of
agrarian societies in which people do not attach great value to business talents, industrial leadership etc.

(C) Psychological Factors:

Many entrepreneurial theorists have propounded theories of entrepreneurship that concentrate especially
upon psychological factors. These are as follows:

1. Need Achievement: The most important psychological theories of entrepreneurship was put forward in the
early) 960s by David McClelland. According to McClelland ‘need achievement’ is social motive to excel that tends to
characterize successful entrepreneurs, especially when reinforced by cultural factors. He found that certain kinds of
people, especially those who became entrepreneurs, had this characteristic. Moreover, some societies tend to
reproduce a larger percentage of people with high ‘need achievement’ than other societies. McClelland attributed
this to sociological factors. Differences among societies and individuals accounted for ‘need achievement’ being
greater in some societies and less in certain others. Analyzing this phenomenon, Paul Wilken has said,
“entrepreneurship becomes the link between need achievement and economic growth”, the latter being a
specifically social factor.

The theory states that people with high need-achievement are distinctive in several ways. They like to take
risks and these risks stimulate them to greater effort. The theory identifies the factors that produce such
people. Initially McClelland attributed the role of parents, specially the mother, in mustering her son or
daughter to be masterful and self-reliant. Later he put less emphasis on the parent-child relationship and
gave more importance to social and cultural factors. He concluded that the ‘need achievement’ is
conditioned more by social and cultural reinforcement rather than by parental influence and such related
factors.

2. Withdrawal of Status Respect: There are several other researchers who have tried to understand the
psychological roots of entrepreneurship. One such individual is Everett Hagen who stresses the-psychological
consequences of social change. Hagen says, at some point many social groups experience a radical loss of status.
Hagen attributed the withdrawal of status respect of a group to the genesis of entrepreneurship. Giving a brief
sketch of history of Japan, he concludes that it developed sooner than any non-western society except Russia due to
two historical differences. First, Japan had been free from colonial disruption and secondly, the repeated long
continued withdrawal of expected status from important groups (smaurai) in its society drove them to retreatism
 which caused them to emerge alienated from traditional values with increased creativity. This very fact led them to
the technological progress through entrepreneurial roles.

Hage believes that the initial condition leading to eventual entrepreneurial behavior is the loss of status by a
group. He postulates that four types of events can produce status withdrawal:

(a) The group may be displaced by force;

(b) It may have its valued symbols denigrated;

(c) It may drift into a situation of status inconsistency; and

(d) It may not be accepted the expected status on migration in a new society.

He further postulates that withdrawal of status respect would give rise to four possible reactions and create
four difference personality types:

(a) Retreatist: He who continues to work in a society but remains different to his work and position;

(b) Ritualist: He who adopts a kind of defensive behavior and acts in the way accepted and approved       in
his society but no hopes of improving his position;

(c) Reformist: He is a person who foments a rebellion and attempts to establish a new society; and

(d) Innovator: He is a creative individual and is likely to be an entrepreneur.

 Hagen maintains that once status withdrawal has occurred, the sequence of change in personality formation
is set in motion. He refers that status withdrawal takes a long period of time – as much as five or more
generations – to result in the emergence of entrepreneurship.

3. Motives: Other psychological theories of entrepreneurship stress the motives or goals of the entrepreneur.
Cole is of the opinion that besides wealth, entrepreneurs seek power, prestige, security and service to society.
Stepanek points particularly to non-monetary aspects such as independence, persons’ self-esteem, power and
regard of the society.

On the same subject, Evans distinguishes motive by three kinds of entrepreneurs:

(a) Managing entrepreneurs whose chief motive is security.

(b) Innovating entrepreneurs, who are interested only in excitement.

(c) Controlling entrepreneurs, who above all other motives- want power and authority.

Finally, Rostow has examined intergradational changes in the families of entrepreneurs. He believes that the
first generation seeks wealth, the second prestige and the third art and beauty.

4. Others: Thomas Begley and David P. Boyd studied in detail the psychological roots of entrepreneurship in
the mid 1980s. They came to the conclusion that entrepreneurial attitudes based on psychological considerations
have five dimensions:

 First came ‘need-achievement’ as described by McClelland. In all studies of successful entrepreneurs a high
achievement-orientation is invariably present.
 The second dimension that Begley and Boyd call ‘locus of control’ This means that the entrepreneur follows
the idea that he can control his own life and is not influenced by factors like luck, fate and so on. Need-achievement
logically implies that people can control their own lives and are not influenced by external forces.
 The third dimension is the willingness to take risks. These two researchers have come to the conclusion that
entrepreneurs who take moderate risks earn higher returns on their assets than those who take no risks at all or who
take extravagant risks.
 Tolerance is the next dimension of this study. Very few decisions are made with complete information. So all
business executives must, have a certain amount of tolerance for ambiguity.
 Finally, here is what psychologists call ‘Type A’ behavior. This is nothing but “a chronic, incessant struggle to
achieve more and more in less and less of time” Entrepreneurs are characterize by the presence of ‘Type A’ behavior
in all their endeavors.

(D) Political Factors:

A football player might possess exceptional talent. But, his contribution to the nation and the world of sports
would remain negligible, if his performance is restricted to the courtyard of his own house. He needs a
football ground to practice on and resources to buy the accessories. He also requires encouragement and
support from those in authority so that he could freely play with others and prove his talent. In the same
way, an entrepreneur, however creative he/she may be, cannot function without the supportive actions of the
Government. It is for the government/society to ensure the availability of required resources for the
entrepreneurs and also the accessibility to them. This is because the successful entrepreneur contributes to
the well being of the society. Policies relating to various-economic aspects like prices, availability of capital,
labour and other inputs, demand structure, taxation, income distribution, etc. affect growth of
entrepreneurship to a large extent. Promotive government activities such as incentives and subsidies
contribute substantially to entrepreneurial performance. At the same time, Government policies like licenses,
regulations, favouritism, government monopolies, etc. are undesirable for the growth of business enterprises.
Above all, a Government that is politically stable and united can affect entrepreneurial activities in a
significant manner. Is there a business entrepreneur in your neighborhoods? Try to gather information on
his/her views on various government policies, for example, on taxation, finance, labour etc. Also ask
him/her about the opportunities and growth prospects of a business unit. Write down your observations.

India, all the above mentioned environmental forces have turned in favor of enterprising men and women.
There is a visible change for the better in the highly inactive entrepreneurial field in the country. The tight
grip of religious and traditional, ideas and practices have begun to loosen. Dogmas (settled opinions) and
superstitions have lost the hold they earlier had. It is encouraging the ‘non-commercial’ classes to consider
economic opportunities more sympathetically. As a result, occupational division based on caste system has
undergone tremendous traditional activities, social approval etc. have become less important. More
important now, are the economic factors such as access to capital and possession of entrepreneurial attitudes
and business I knowledge.

Development of infrastructure, changes in government policies in favor of business and industry and of
course, rise in demand for products manufactured are some of the other factors that have led the Indian
entrepreneurs to look for new business opportunities.

Types of Entrepreneurs
Schumpeter made the entrepreneur the adventurous innovator who acting on his own account, introduces
changes that others do not dare to experiment with. Other writers have, however, identified some other
categories of entrepreneurs.

Arthur H. Cole distinguishes between empirical, rational and cognitive entrepreneurs. The empirical
entrepreneur hardly introduces anything revolutionary and follows the principle of rule of thumb. The
rational entrepreneur is well informed about the general economic conditions and introduces changes that
 look more revolutionary. The 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 things.

In a study of American Agriculture, Clarence Danhof classifies entrepreneurs into four types-innovative,
imitative, Fabian and drone. The innovating entrepreneur is one who assembles and synthesizes information
and introduces novel combinations of factors. He is an aggressive figure and an industrial leader. The
imitative entrepreneur is also known as the adoptive entrepreneur. He simply adopts successful innovations
introduced by other innovators. The Fabians entrepreneurs are timid and cautious. He will imitate other
innovations only if he is certain that failure to do so may damage his business. Finally there is the drone
entrepreneur. His entrepreneurial activity may be restricted to just one or two innovations. He refuses to
adopt changes in production even at the risk of reduced returns.

This classification of Danhof brings into focus two important aspects:

(a) It shows that an economy which is making a lot of technical advancement has in its ranks a large number
of innovating and adoptive entrepreneurs and less number of Fabians and drones.

(b) Technological advancement may not take place even if innovators are present, if the actual control and
ownership of production is in the hands of Fabians or drones.

Another classification of entrepreneurs is between private and public entrepreneurs. Private entrepreneur is
motivated by profit and as such would not enter those sectors of the economy in which prospects of
monetary rewards are not bright. In general, infrastructure industries fall under this category. For example
electricity generation and distribution is Government owned. This forces the Government to take the
initiative to start enterprises in these sectors. Thus, we have the category of public entrepreneurs. In the less
developed countries the entrepreneurial functions of the Government has greatly widened due to the lack of
sufficient private entrepreneurs.

Another classification based on the scale of enterprise is between small scale and large scale enterprises.
This classification is especially relevant in the less developed countries. Private enterprise is usually found
in households, small scale and medium scale industries. The small entrepreneur does not possess the
necessary talents and resources to initiate large scale production and introduce revolutionary technological
changes. In the developed countries most entrepreneurs deal with large scale enterprises. They possess the
financial wherewithal and the necessary expertise to initiate large scale enterprises and introduce novel
technical changes. The result is the developed countries are able to sustain and develop a high level of
technical progress. It is this classification which has led to the wide technological gap between the
developed and the less developed countries.

In the initial stages of economic development, entrepreneurs tend to have less initiative and drive. As
development proceeds, they become more innovating and enthusiastic. Similarly, when entrepreneurs are
shy and humble the environment is underdeveloped. Business environment becomes healthy and developed
when entrepreneurs are innovating.

1. Innovating Entrepreneurs: Innovative entrepreneurship is characterized by aggressive assemblage of

information and the analysis of results derived from sound combination of factors. Persons of this type are generally
aggressive in experimentation and cleverly put attractive possibilities into practice. An innovating entrepreneur sees
the opportunity for introducing a new technique or a new product or a new market. He or she may raise money to
launch an enterprise, assemble the various factors, choose top executives and set the organization going.
Schumpeter’s entrepreneur was of this type. Such an entrepreneur introduces new products and new methods of
production, opens new markets and re-organizes the enterprise.

Among the different types of entrepreneurs, the innovating entrepreneur is the most vigorous type of
entrepreneur. Innovating entrepreneurs are very commonly found in developed countries. There is dearth of
such entrepreneurs in underdeveloped countries. A country with little or no industrial tradition can hardly
 produce innovating entrepreneurs. Such entrepreneurs can emerge and work only when a certain level of
development is already achieved and people look forward to change and progress. Innovating entrepreneurs
played the key role in the rise of modern capitalism through their enterprising spirit, hope of money making,
ability to recognize and exploit opportunities, etc.

2. Adoptive or imitative entrepreneurs: These kinds of entrepreneurs are characterized by readiness to adopt

successful innovations created by innovative entrepreneurs. These type of entrepreneur are revolutionary
entrepreneurs with the different that instead of innovating the changes themselves, they just imitate the technology
and techniques innovated by others. These entrepreneurs are most suitable for developing countries because such
countries prefer to imitate the technology, knowledge and skill already available in more advanced countries. The
Cochin Shipyard is a good example of the result of imitative entrepreneurship. The Shipyard has been constructed
using the innovative technology provided by the Mitsubishi Heavy Industries Ltd. of Japan. Imitative entrepreneurs
are most suitable for the underdeveloped nations because in these nations people prefer to imitate the technology,
knowledge and skill already available in more advanced countries. In highly backward countries there is shortage of
imitative entrepreneurs also. People who can imitate the technologies and products to the particular conditions
prevailing in these countries are needed.

Sometimes, there, is a need to adjust and adopt the new technologies to their special conditions. Imitative
entrepreneurs help to transform the system with the limited resources available. However, these
entrepreneurs face lesser risks and uncertainty than innovative entrepreneurs. While innovative
entrepreneurs are creative, imitative entrepreneurs are adoptive.

Imitative entrepreneurs are also revolutionary and important. The importance of these humbler entrepreneurs
who exploit possibilities as they present themselves and mostly on a small scale must not be under-
estimated. In, the first place, such adaptation requires no mean ability. It often involves what has aptly been
called subjective innovation that is the ability to do things which have not been done before by the particular
industrialist, even though, unknown to him, the problem may have been solved in the same way by others.
By western standards, an imitative entrepreneur may be a pedestrian figure, an adopter and imitator rather
than a true innovator. He is more an organizer of factors of production than a creator. But in a poor country
attempting to industrialized, he is nevertheless a potent change producing figure. He can set in motion the
chain reaction’ which leads to cumulative progress. This humbler type of entrepreneur is important in under
developed countries for another reason. These countries are placing great emphasis in their economic
planning on small scale industries and decentralized industrial structure.

4. Fabian entrepreneurs: Entrepreneurs of this type are very cautious and skeptical while practicing any
change. They have neither the will to introduce new changes nor the desire to adopt new methods innovated by the
most enterprising entrepreneurs. Such entrepreneurs are shy and lazy. Their dealings are determined by custom,
religion, tradition and past practices. They are not much interested in taking risk and they try to follow the footsteps
of their predecessors.

5. Drone entrepreneurs: Drone entrepreneurship is characterized by a refusal to adopt and use opportunities

to make changes in production methods. Such entrepreneurs may even suffer losses but they do not make changes
in production methods. They are laggards as they continue to operate in their traditional way and resist changes.
When their product loses marketability and their operations become uneconomical they are pushed out of the
market. They are conventional in the sense that they stick to conventional products and ideas. The traditional
industries of Kerala are characterized by drone entrepreneurs. The coir and bamboo industries are still in the hands
of laggards who refuse to innovate.
 Entrepreneurial Competencies
Every role has a skill and competency requirement. For a teacher or a performing artist, for example, it is the
skill to communicate that plays a decisive role in their effectiveness besides, of course, their knowledge. For
a craftsman or an artist, it is the creativity and skill in the chosen craft. Talking about entrepreneurship, you
need to have a knack for spotting business opportunities and creativity and innovation in developing and
delivering a product or service.

It is hoped that after reading this chapter you will actually see the potential of a career in entrepreneurship,
and experience a desire to start a venture of your own .At the same time there might be certain inhibitions in
your mind whether such a task is feasible, practical and sustainable. For every task one needs certain
competencies. In this Blog post, we would be talking about the entrepreneurial competencies. Whereas
competencies reinforce a person’s perception of feasibility of a career option, there also has to be the will
and urge, a ‘perception of the desirability.’ Is it not paradoxical that entrepreneurship has a key role to play
in economic development, yet there are very few who ever think of it as a career option? And, it is not that
they may be lacking in skills. What one often finds is the lack of motivation!

Competencies equip you with the knowledge of how to do (‘know-how’) of entrepreneurial behavior and
motivation provides answers to why to do (‘know-why’) of entrepreneurial behavior. You would also be
learning about why people opt for entrepreneurship. The question of ‘why entrepreneurship’ is also linked to
reward expectations, be these financial, social status or psychological satisfaction. In case of
entrepreneurship, successful performance of the venture itself becomes a reward for the entrepreneur.

As noted in above, every career draws on the competencies of an individual. Some of these competencies
may be general and some peculiar to the chosen career. You may understand competencies to mean abilities
and skills. However, we would desist from calling these as personality traits as such a conceptualization only
reinforces the mistaken belief that entrepreneurs are born rather than made. We believe that recognition of
these competencies as abilities and skills makes entrepreneurship as a teachable and learnable behavior. In
this blog post we would discuss about a set of entrepreneurial competencies developed by the
Entrepreneurship Development Institute of India (EDI) Ahmadabad. These competencies were identified by
a thorough research procedure based on critical analysis of the case studies of the successful entrepreneurs.
We also annex a questionnaire that you can use to evaluate your score on each of these competencies. We
would also suggest how you might improve on your scores.

ENTREPRENEURIAL COMPETENCIES IDENTIFIED BY THE EDI

 Initiative- acting out of choice rather than compulsion, taking the lead rather than waiting for others to start.
 Sees and Acts on Opportunities- A mindset where one is trained to look for business opportunities from
everyday experiences. Recall ‘oranges’ example.
 Persistence- A ‘never say die’ attitude, not giving up easily, striving Information seeking continuously until
success is achieved.
 Knowing- Knowing who knows, consulting experts, reading relevant material and an overall openness to
ideas and information.
 Concern for High Quality of Work- Attention to details and observance of established standards and norms.
 Commitment to Work Contract- Taking personal pains to complete a task as scheduled.
 Efficiency Orientation- Concern for conservation of time, money and effort.
 Systematic Planning- Breaking up the complex whole into parts, close examination of the parts and inferring
about the whole; e.g. simultaneously attending to production, marketing and financial aspects (parts) of the overall
business strategy (the whole).
 Problem solving-Observing the symptoms, diagnosing and curing.
 Self-confidence- Not being afraid of the risks associated with business and relying on one’s capabilities to
successfully manage these.
 Assertiveness- Conveying emphatically one’s vision and convincing others of its value.
 Persuasion- Eliciting support of others in the venture.
 Use of Influence Strategies- Providing leadership.
 Monitoring- Ensuring the progress of the venture as planned.
 Concern for Employee Welfare- Believing in employee well being as the key to competitiveness and success
and initiating programmes of employee welfare.

The self-administered questionnaire in the annexure to this chapter would help you measure where you stand
on these competencies. Given that these competencies matter in entrepreneurial success. EDI estimates that
development of these competencies can substantially (as much as 33%) bring down incidence of business
failures/industrial sickness.

DEVELOPING COMPETENCIES

‘Awareness,’ they say, is the first step towards ‘improvement’ and ‘success.’ Now that you are aware of the
critical competencies for entrepreneurial success and also have a measure of your scores on these, it is
appropriate that you also think in terms of how to improve your scores. Suppose, you find yourself lacking
in the competency- ‘opportunity spotting,’ you may start practicing to think like an entrepreneur (See Box
entitled ‘Thinking like an Entrepreneur’). With just a little change in perspective, the world changes for you.
Similarly you may work on the other competencies as well.

The role of Prior Work Experience

Project work, summer training as well as prior work experience hone the entrepreneurial competencies.
Whichever area you might decide upon to start a venture be it a school, restaurant, garments, courier service,
interior decoration etc. along with the educational qualifications, if any, you need to acquire practical
experience in that field. For it is while you get on the job training/experience that you familiarize your self
with all aspects of the venture. You can learn as to how to handle customers, suppliers, and government
officials, financiers. You will also be able to acquaint yourself with the nitty-gritty’s of the production
process, bottlenecks like power disruptions, delay or non-availability of raw materials and a host of other
things. Day to day dealings of the various facets of business will equip you to handle your own venture
deftly, with confidence and with minimal of costly mistakes.

EDP Programs ,
Entrepreneurial Training
Entrepreneurship Development Programme (EDP) is a programme which helps in developing the
entrepreneurial abilities. The skills that are required to run a business successfully is developed among
the people through this programme. Sometimes, people may have skills but it requires polishing and
incubation. This programme is perfect for them. This programme consists of a structured training
process to develop an individual as an entrepreneur. It helps the person to acquire skills and
necessary capabilities to play the role of an entrepreneur effectively. As per National Institute of Small
Industry Extension Training, Hyderabad, an EDP is an effort of converting a person to an entrepreneur
by passing him through a thoroughly structured training. An entrepreneur is required to respond
appropriately to the market and he/she is also required to understand the business needs. The skills
needed are varied and they need to be taken care in the best possible way. EDP is not just a training
programme but it is a complete process to make the possible transformation of an individual into an
entrepreneur. This programme also guides the individuals on how to start the business and effective
ways to sustain it successfully.

Objectives of EDP
 The objective of this programme is to motivate an individual to choose the entrepreneurship as a
career and to prepare the person to exploit the market opportunities for own business successfully.
These objectives can be set both in the short-term and long-term basis.

 Short-term objectives: These objectives can be achieved immediately.In the short-term, the

individuals are trained to be an entrepreneur and made competent enough to scan existing market
situation and environment. The person, who would be the future entrepreneur, should first set the goal
as an entrepreneur. The information related to the existing rules and regulations is essential at this
stage.
 Long-term objectives: The ultimate objective is that the trained individuals successfully
establish their own business and they should be equipped with all the required skills to run their
business smoothly.

The overall objectives of EDP are mainly to help in rapid industrialisation by supplying skilled
entrepreneurs. At the same time, it also industrialises underdeveloped areas. The performance of
small and medium scale industries are expected to improve by this and therefore providing a huge
scope of employment generation in these sectors. This programme primarily aims at providing self-
employment to the young generation.

An Entrepreneurship Development Programme primarily plays four roles to help an individual

to become an entrepreneur. They are:

Stimulatory Role: It aims at influencing people in large number to be the entrepreneur. This includes:

1. Developing managerial, technical, financial, and marketing skill

2. Inculcating personality traits
3. Promotes and reforms entrepreneurial behaviour and values
4. Identifying potential entrepreneur applying scientific methods
5. Motivational training and building proper attitude
6. Strengthening the motive of a person and giving recognition
7. The valuable know-how of the local products and the processes help in selection of products,
preparation of project reports

Supportive Role: It helps in the following ways:

1. Registration of the business

2. Procurement of fund
3. Arrangement of land, power, water, shed etc.
4. Support in purchase of right kind of machinery and equipment
5. Supply of raw materials and common facilities
6. Providing tax relief, subsidy etc.
7. Guidance in product marketing
8. Support for management consultancy

Sustaining Role: It aims at providing an effective safeguard to businesses to sustain against the cut-
throat market competition. This includes:

1. Help in modernisation, expansion, and diversification

2. Additional financing for further development
3. Deferring interest payment
4. Creating new marketing processes
5. Helping access to improved services and facility centers

Socio-economic Role: It aims at upgrading the socio-economic status of the public and includes:

1. Identifying entrepreneurial qualities in practicality

2. Creating employment opportunities in micro, small, and medium industries on an immediate
basis
3. Arresting concentration of industries by supporting regional development in a balanced manner
4. Focusing on the equal distribution of income and wealth of the nation
5. Channelizing the latent resources for building an enterprise

The Govt. of India has established specialised institutions to boost up the rate of entrepreneurial
development in India like NIESBUD in Noida, MSME-DI for small scale industries, NIMSME in
Yousufguda, Hyderabad, EDI, NSTEDB, IED and CED in different states.

Traits/Qualities of
Entrepreneurs
 THEINTACTFRONT5 JUL 2018 3 COMMENTS

1. Full of determination

To be a successful entrepreneur it is important to set clear goals along the way. Growing business,
increasing sales and hiring new employees require several micro-goals within them to be executed
successfully. This type of workload and challenge is enough to stop many people from pursuing the
entrepreneurial career path. One has to be determined from the beginning to be successful. If one isn’t fully
determined  there is a good chance  to crumble under the pressure.

2. Risk Taking

Some of the most successful entrepreneurs took major risks, and they paid off in a big way. Entrepreneurs
are risk takers ready to dive deep into a future of uncertainty. But not all risk takers are successful
entrepreneurs. Successful entrepreneurs have will to risk time and money on unknowns, but they also keep
resources, plans and bandwidth for dealing with “unknown” in reserve. When evaluating risk, a successful
entrepreneur always thinks that is this risk worth the cost of career, time and money? And, what will he do if
this venture doesn’t pay off?

3. High level of confidence

Entrepreneurs that have a high level of confidence are able to get the job done even under the most stressful
conditions. They understand that big challenges breed big rewards. This is the same mentality that allows
successful entrepreneurs to spot an opportunity when most just see a possible challenge. When most focus
on the challenge, a successful entrepreneur focuses on the finish line and the end reward.

4. Craves learning

Industries constantly change and evolve. Only those that are also growing through constant learning will
stay ahead. There will always be competitors trying to surpass. There will always be someone claiming to be
the next greatest thing. A successful entrepreneur always stays sharp, through constant learning about the
competitors and the industry.

5. Understands failure is part of the game

 Failure is one of the secrets to success, since some of the best ideas arise from the ashes of a shuttered
business. A successful entrepreneur knows  that failure is part of success. He will take those failures and use
them as learning experiences. Real world experience, even failing, will teach  more than what one  would
ever learn in a classroom.

6. Passionate 

Passion fuels the drive and determination required to be successful. If one isn’t fully passionate about what
he/she is  doing the added stress and obstacles will build up on  shoulders and eventually be responsible for
collapse.

7. Adaptability and Flexibility

If entrepreneurs had the ability to see what was hiding around each turn it would make it much easier, but
unfortunately that is not the case. There can be surprises around every corner, even with a well thought out
plan and strategy.A successful entrepreneur is extremely adaptable and has  ability to respond quickly in any
situation. It’s good to be passionate or even stubborn about what you do. But being inflexible about client or
market needs will lead to failure.  Market needs are dynamic: changes are a recurring phenomenon.
Successful entrepreneurs welcome all suggestions for optimization or customization that enhances their
offering and satisfies client and market-needs.

8.Money Management

Successful Entrepreneur must have excellent money management skills. Poor financial decisions, such as
overspending or allocating funds to less important tasks can quickly ruin a business. It takes time to get to
profitability for any entrepreneurial venture. Till then, capital is limited and needs to be utilized wisely.
Successful entrepreneurs realize this mandatory money management requirement and plan for present and
future financial obligations (with some additional buffer). Even after securing funding or going fully
operational, a successful businessman keeps a complete handle on cash flows, as it is the most important
aspect of any business.

9. Networking Abilities

A large collection of business cards and a huge contact list doesn’t make  an expert at networking. Building
value-based relationships that are truly meaningful is what networking is all about — these are the
relationships that lead to business opportunities and long-term relationships that are mutually beneficial.
Constantly networking with people that can not only help my business currently, but also have the potential
to help you in the future as well.

10. Ability to sell and promote

Knowing how to sell is an absolutely essential part of being a successful business owner.If you can’t express
what it is that makes your product or service a solution to a problem, you will be in for a rough ride.

11. Planning (But not Over-planning)

 Entrepreneurship is about building a business from scratch while managing limited resources (including
time, money and personal relationships). It is a long-term commitment, and attempting to plan as much as
possible at the beginning is a noble impulse. In reality, however, planning for everything and having a ready
solution for all possible risks may prevent you from even taking the first step. Successful entrepreneurs have
a mindset and temperament to capable of dealing with unforeseen possibilities.

12.Creativity and Persuasiveness

Successful entrepreneurs have the creative capacity to recognize and pursue opportunities. They possess
 strong selling skills and are both persuasive and persistent. Are you willing to promote your business
tirelessly and look for new ways to get the word out about your product or service?

13. Interpersonal Skills

Entrepreneurs are always comfortable while dealing with people at all levels. During the course of their
action, they come across a cross section of individuals with whom they have to deal. They interact with  raw
material suppliers, customers, bankers etc. for different activities. As successful entrepreneurs, they should
be persons who like working with others possessing the much needed quality of interpersonal skill to deal
with people.

14. Time orientation

Entrepreneurs anticipate future trends basing upon their past experience and exposure.They stick to the time
pragmatically while doing their jobs.

15. Leadership

Entrepreneurs should posses the quality of leadership. Leadership is the ability to exert interpersonal
influence by means of communication towards the achievement of goals. Entrepreneurs as the leaders
should provide the necessary spark to motivation by guiding, inspiring, assisting and directing the members
of the group for achievement of unity of action, efforts and purpose.

16. Internal Locus of Control

Successful entrepreneurs believe in themselves. They do not believe that the success or failure or their
venture will be governed by fate, luck or similar forces. They believe that their accomplishments and
setbacks are within their own control and influence and that they can affect the outcome of their actions.

17. Tolerance for Ambiguity

Star up entrepreneurs face uncertainty compounded by constant changes that introduce ambiguity and stress
into every aspect of the enterprise. Setbacks and surprises are inevitable.A tolerance for ambiguity exists
when the entrepreneur can deal with the various setbacks and changes that constantly confront him or her.

18. Integrity and Reliability

Integrity and reliability are the glue and fiber that bind successful personal and business relationships and
make them strong. Integrity and reliability help build and sustain trust and confidence among investors,
partners, customers and creditors. Small business entrepreneurs in particular find these two characteristics
crucial to success.

19. Tolerance for Failure

Successful Entrepreneurs use failure as a learning experience.In adverse and difficult times they look for
opportunity

Manager vs. Entrepreneur

 THEINTACTFRONT5 JUL 2018 3 COMMENTS
  Entrepreneur Manager

The main motive of But, the main motive of a

an entrepreneur is to manager is to render his
1. Motive start a venture by services in an enterprise
setting up an already set up by someone
enterprise. else i.e., entrepreneur.

An entrepreneur is A manager is the servant in

2. Status the owner of the the enterprise owned by the
enterprise. entrepreneur.

An entrepreneur
being the owner of
the enterprise A manager as a servant
3. Risk Bearing assumes all risks does not bear any risk
and uncertainty involved in the enterprise.
involved in running
the enterprise.

The reward an
A manager gets salary as
entrepreneur gets
reward for the services
for bearing risks
rendered by him in the
4. Rewards involved in the
enterprise. Salary of a
enterprise is profit
manager is certain and
which is highly
fixed.
uncertain.

Entrepreneur
himself thinks over
what and how to
A manager simply executes
produce goods to
the plans prepared by the
meet the changing
entrepreneur. Thus, a
5. Innovation demands of the
manager simply translates
customers. Hence,
the entrepreneur’s ideas
he acts as an
into practice
innovator also
called a ‘change
agent’

6. Qualifications An entrepreneur On the contrary, a manager

needs to possess needs to possess distinct
qualities and qualifications in terms of
qualifications like sound knowledge in
high achievement management theory and
motive, originality practice.
in thinking,
foresight, risk
-bearing ability and
 so on.

A manager is typically
concerned with
An entrepreneur is sustainability, and has to
7. Focus focus on what can be done
someone who is
  concerned primarily within the framework of
with the necessary what he has been given to
components to start work with in an existing
 
up a business enterprise.

An entrepreneur
begins with the idea
A business manager is
of the business from
focused on engendering
its inception and its
growth based on available
8. Growth potential for growth
resources. A manager must
in the long run. An
  get employees to perform
analysis of the
at optimal levels, and must
market and
  make use of non-human
available resources
resources to create
in relation to the
additional growth beyond
original idea plays a
basic sustainability
primary role in his
business decisions.

Entrepreneur’s Manager’s objective is to

objective is to supervise and create
9.Objective innovate and create routines. He implements
and he acts as a the Entrepreneur’s plans
change agent. and ideas.

Entrepreneur vs.
Entrepreneurship
Entrepreneur Entrepreneurship

Entrepreneur is a person. Entrepreneurship is a process.

Entrepreneur is an organizer. Entrepreneurship is an

 organization.

Entrepreneur is an innovator. Entrepreneurship is an innovation.

Entrepreneur is a risk bearer. Entrepreneurship is risk bearing.

Entrepreneur is a motivator. Entrepreneurship is motivation.

Entrepreneur is a creator. Entrepreneurship is a creation.

Entrepreneur is a visualizer. Entrepreneurship is a vision.

Entrepreneur is a leader. Entrepreneurship is leadership.

Entrepreneur is an imitator. Entrepreneurship is an imitation.

Entrepreneur vs.
Administrator
 THEINTACTFRONT5 JUL 2018 3 COMMENTS

The difference between the entrepreneurial style and the managerial style (administrative domain) involves
five business dimensions.

(A) Strategic Orientation

1. The entrepreneur’s strategic orientation depends on his or her perception of the opportunity.
2. When the use of planning systems is the strategic orientation, the administrative domain is operant.

(B) Commitment to Opportunity

1. The entrepreneurial domain is pressured by the need for action and has a short time span in terms of
opportunity commitment.
2. The administrative domain is not only slow to act on an opportunity, but the commitment is usually for a
longer time span.

(C) Commitment of Resources

1. An entrepreneur is used to having resources committed at periodic intervals, often based on certain tasks or
objectives being reached.
      2. In acquiring these resources the entrepreneur is forced to maximize resource use.

3. In the administrative domain, the commitment of resources is for the total amount needed.
4. Administrative-oriented individuals receive personal rewards by effectively administering the resources
under their control.

(D) Control of Resources

3. The administrator is rewarded by effective resource administration and has a drive to own or accumulate as
many resources as possible.
4. The entrepreneur, under pressure of limited resources, strives to rent resources on an as-needed basis.

(E) Managerial Structure

1. In the administrative domain, the organizational structure is formalized and hierarchical in nature.
2. The entrepreneur employs a flat organizational structure with informal networks.

  ENTREPRENEUR MANAGER

Entrepreneur refers Manager is an

to a person who individual who takes
creates an enterprise, the responsibility of
Meaning
by taking financial controlling and
risk in order to get administering the
profit. organization.

Focus Business startup Ongoing operations

Primary motivation Achievement Power

Approach to task Informal Formal

Status Owner Employee

Reward Profit Salary

Decision making Intuitive Calculative

Creativity and
Driving force Preserving status quo
Innovation

Risk orientation Risk taker Risk averse

   ENTREPRENEUR MANAGER

UNIT-2
Entrepreneurial Opportunity
Search and Identification
 THEINTACTFRONT5 JUL 2018 3 COMMENTS

Most good business opportunities result from an entrepreneur being alert to possibilities. Some sources are
often fruitful, including consumers and business associates. Channel members of the distribution system-
retailers, wholesalers or manufacturer’s reps-are also helpful. Technically-oriented individuals often identify
business opportunities when working on other projects. Each opportunity must be carefully screened and
evaluated-this is the most critical element of the entrepreneurial process.

The evaluation process involves looking at-

 The creation and length of the opportunity

 Its real and perceived value
 Its risks and return.
 It’s fit with the skills and goals of the entrepreneur
 Its differential advantage in its competitive environment
 It is important to understand the cause of the opportunity, as the resulting opportunity may have a different
market size and time dimension.

The market size and the length of the window of opportunity are the primarily bases for determining risks
and rewards. The risks reflect the market, competition, technology, and amount of capital involved. The
amount of capital forms the basis for the return and rewards. The return and reward of the present
opportunity needs to be viewed in light of any possible subsequent opportunities as well. The opportunity
must fit the personal skills and goals of the entrepreneur. The entrepreneur must be able to put forth the
necessary time and effort required for the venture to succeed. One must believe in the opportunity enough to
make the necessary sacrifices.

Opportunity analysis, or an opportunity assessment plan, should focus on the opportunity and provide the
basis to make the decision, including:

 A description of the product or service

 An assessment of the opportunity
 Assessment of the entrepreneur and the team
 Specifications of all the activities and resources needed
 The source of capital to finance the initial venture

The most difficult aspect of opportunity analysis is the assessment of the opportunity.

Sources of Information
 THEINTACTFRONT5 JUL 2018 3 COMMENTS

1. The Library is a primary resource for information. Government agencies have a variety of publications which
may be useful. Some colleges and universities have reference libraries which may have a circulation section available
to the public. Also research institutes and some large corporations have libraries with sections on specific topics.
Libraries are the storehouse of information which may be useful in operating a small business. Books, periodicals,
reports and newspapers may contain information which can be of help in solving some of the problems in operating
a business.

2. Internet can be used to carry out research and to find useful information and data. Examples of these search
engines are Google, Bing, Ask etc Also E-mail can be used to communicate with providers of information who have
websites on the internet.

3. Subscribing to Trade Papers and Magazines. Desirable entrepreneurs should have time to read articles
especially in understanding new trends and developments relating to business. It is advisable to keep a file of
pertinent articles for future reference. Example of such is the page 4 of punch news papers (Nigerian Newspaper)
which carries articles that are related to entrepreneurship and business.

4. Industrial Data is helpful in comparing a business to other similar businesses. The data is available from
trade associations or government agencies and includes ratios such as; stock turnover, cash discounts percentage
mark-up etc.

5. Membership-Based Organisations can provide services such as conducting research, organizing education

and training programmes, implementing new technology, responding to members’ questions and concerns and
disseminating information through newsletters, magazines and special reports. Example of such membership-based
organization is MAN (Manufacturers Association of Nigeria)

6. Training Programmes can help entrepreneurs to develop formal plans for improving their managerial skills
and ability. Training courses and adult education programmes are designed by many institutions, agencies and
associations. Entrepreneurs should be aware of these personal development possibilities and take full advantage of
them. One of such institution is (CMD) Centre for Management Development at Magodo area in Lagos (Nigeria).

8. Employees. The people who work for a business can provide answers to specific problems in a business. For
example, entrepreneurs might ask employees for their advice and assistance about stock display or customer
attitudes. Employees are in a good position to give valuable advice providing they know that their opinions and
suggestions are valued. Also customers can supply very special information about the products and services they
buy. Customers should be asked about their opinions because they are an excellent source of information about the
relative strength and weaknesses of a business operation.
9. Other Business Owners. Most businesses have common problems and owners are generally willing to
discuss their problems with one another. Occasionally, the competitive nature of business may discourage this frank
exchange, but if business are unrelated and do not compete for the same customers, entrepreneurs may be willing
to share ideas concerning solutions to a common problem. In this way, all business owners can benefit from this
interaction and improve their business operations. Apart from the membership-based organisations and training
programmes, the government of Nigeria, like its counterparts, the world over, has realized the importance of
entrepreneurship development and has over the years formulated various public policies to encourage, support and
fund the promotion and development of entrepreneurship. Development in small and medium enterprise are what
give a developing nation like ours the base for employment creation, solid base for creating a middle class and
encouragement for the use of local raw materials and technology.
 Criteria to Select a Product
 THEINTACTFRONT5 JUL 2018 3 COMMENTS

Idea Generation:

Product ideas or investment opportunities come from different sources such as business/financial
newspapers, research institutes, consulting firms, natural resources, universities, competitors. etc

The starting point for idea generation could be a simple analysis of the business’s strengths and weakness.
Ideas could also be generated through brainstorming, desk research and various types of management
consensus procedures.

Evaluation:
Screening of the product ideas is the first step ill evaluation. Such criteria as potential value of the product,
time money and equipment required, fitting of potential product into the business’s long range sales plan and
availability of qualified people to handle its marketability need be thoroughly considered.

Each identified Product/Investment opportunity needs to be adequately evaluated. A pre-feasibility study

of the product market, technical and financial aspect is necessary at this stage to have a clear picture of the
associated cost and benefits. A pre-feasibility is a preliminary version of a feasibility study. It is similar to a
feasibility study except that it is less detailed. It is usually carried out for large and complex product/project
to determine whether to proceed to the more elaborate feasibility study.

Choice:
A choice is made of product which has been found to be commercially viable, technically feasible and
economically desirable. At this stage, necessary machineries are set in motion.

Causes of Product Failure

A wrong choice when made, often leads to product failure. Product failure may be caused as a result of one
or combination of the following:

 Management oversight during the basic planning stages – initial research may be either inadequately done
or bungled in the interpretation.
 Subtle changes in the market. For instance, competitor may introduce a competing product into the market
unexpectedly.
 Lack of sound market appraisal
 Product problems and defect e.g. the manufacturing of a product that is too costly or too complicated.
 Inadequate marketing support. For Instance, the company may have rated the product so high in the market
that they cut back on promotion.
 Lack of consumer education about the product.

Product Modification
Product selection is one thing; the sustainability of the product in the market is another thing entirely. There
need to at least stabilize the sale of the product. This is where product modification comes in because of the
dynamic nature of the business environment. However, the technique to use to modify a product is
dependent upon the circumstance of the product in relation to the buyer. There are some possible
alternatives of product modification, namely:
Quality improvement – This aims at strengthening the competitive position of the product. The
improvement may be in the appearance or end use.

Feature improvement – This is to increase the number of real or imagined product benefits.

Style improvement – aims at improving the aesthetic appeal of the product rather than its functional
performance.

Service improvement e.g. technical advice, faster supply, breaking bulk, etc. Often used by smaller
companies competing with large ones.

Promotional benefits e.g. giveaways competitions, etc. is used to add value to the product.

Facilities for selected products

Raw materials: for instance, Nigeria is endowed with natural resources. Indeed, all the raw materials
requirements of most industries in Nigeria can be sources locally. Businesses for which Nigeria has
comparative advantage in terms of raw materials availability, viability and market opportunities include:

– Maize starch derivatives production

– Ginger processing

– Rubber product ion

– Sugar production

– OIL seed chemicals production

– Kaolin processing

-Granulated limestone production

– Crude saIt processing etc

Other factors to consider are ;

Choice of technology

Infrastructure facility

Conducting Feasibility
Studies, Marketing,
Technical, Finance, HR etc
 THEINTACTFRONT5 JUL 2018 4 COMMENTS
 Perhaps the most crucial problem you will face after expressing an interest in starting a new business or
capitalizing on an apparent opportunity in your existing business will be determining the feasibility of your
idea. Getting into the right business at the right time is simple advice, but advice that is extremely difficult to
implement. The high failure rate of new businesses and products indicates that very few ideas result in
successful business ventures, even when introduced by well established firm. Too many entrepreneurs strike
out on a business venture so convinced of its merits that they fail to thoroughly evaluate its potential.

This checklist should be useful to you in evaluating a business idea. It is designed to help you screen out
ideas that are likely to fail before you invest extensive time, money, and effort in them.

Preliminary Analysis
A feasibility study involves gathering, analyzing and evaluating information with the purpose of answering
the question: “Should I go into this business?” Answering this question involves first a preliminary
assessment of both personal and project considerations.

General Personal Considerations

The first seven questions ask you to do a little introspection. Are your personality characteristics such that
you can both adapt to and enjoy business ownership/management?

 Do you like to make your own decisions?

 Do you enjoy competition?
 Do you have will power and self-discipline?
 Do you plan ahead?
 Do you get things done on time?
 Can you take advice from others?
 Are you adaptable to changing conditions?

The next series of questions stress the physical, emotional, and financial strains of a new business.

 Do you understand that owning your own business may entail working 12 to 16 hours a day, probably six
days a week, and maybe on holidays?
 Do you have the physical stamina to handle a business?
 Do you have the emotional strength to withstand the strain?
 Are you prepared to lower your standard of living for several months or years?
 Are you prepared to loose your savings?

Specific Personal Considerations

Do you know which skills and areas of expertise are critical to the success of your project?

 Do you have these skills?

 Does your idea effectively utilize your own skills and abilities?
 Can you find personnel that have the expertise you lack?
 Do you know why you are considering this project?
 Will your project effectively meet your career aspirations

The next three questions emphasize the point that very few people can claim expertise in all phases of a
feasibility study. You should realize your personal limitations and seek appropriate assistance where
necessary (i.e. marketing, legal, and financial).

 Do you have the ability to perform the feasibility study?

 Do you have the time to perform the feasibility study?
 Do you have the money to pay for the feasibility study done?
 General Project Description

 Briefly describe the business you want to enter.

 List the products and/or services you want to sell
 Describe who will use your products/services
 Why would someone buy your product/service?
 What kind of location do you need in terms of type of neighborhood, traffic count, nearby firms, etc.?
 List your product/services suppliers.
 List your major competitors – those who sell or provide like products/services.
 List the labor and staff you require to provide your products/services.

Requirements for Success

To determine whether your idea meets the basic requirements for a successful new project, you must be able
to answer at least one of the following questions with a “yes”.

 Does the product/service/business serve a presently unserved need?

 Does the product/service/business serve an existing market in which demand exceeds supply?
 Can the product/service/business successfully compete with an existing competition because of an
“advantageous situation,” such as better price, location, etc.?

Major Flaws
A “Yes” response to questions such as the following would indicate that the idea has little chance for
success.

 Are there any causes (i.e., restrictions, monopolies, shortages) that make any of the required factors of
production unavailable (i.e., unreasonable cost, scare skills, energy, material, equipment, processes, technology, or
personnel)?
 Are capital requirements for entry or continuing operations excessive?
 Is adequate financing hard to obtain?
 Are there potential detrimental environmental effects?
 Are there factors that prevent effective marketing?

Desired Income
The following questions should remind you that you must seek both a return on your investment in your own
business as well as a reasonable salary for the time you spend in operating that business.

 How much income do you desire?

 Are you prepared to earn less income in the first 1-3 years?
 What minimum income do you require?
 What financial investment will be required for your business?
 How much could you earn by investing this money?
 How much could you earn by working for someone else?
 Add the amounts in 5 and 6. If this income is greater that what you can realistically expect from your
business, are you prepared to forego this additional income just to be your own boss with the only prospects of
more substantial profit/income in future years?

What is the average return on investment for a business of your type?

Preliminary Income Statement

Besides return on investment, you need to know the income and expenses for your business. You show
profit or loss and derive operating ratios on the income statement. Dollars are the (actual, estimated, or
 industry average) amounts for income and expense categories. Operating ratios are expressed as percentages
of net sales and show relationships of expenses and net sales.

For instance 50,000 in net sales equals 100% of sales income (revenue). Net profit after taxes equals 3.14%
of net sales. The hypothetical “X” industry average after tax net profit might be 5% in a given year for firms
with 50,000 in net sales. First you estimate or forecast income (revenue) and expense dollars and ratios for
your business. Then compare your estimated or actual performance with your industry average. Analyze
differences to see why you are doing better or worse than the competition or why your venture does or
doesn’t look like it will float.

These basic financial statistics are generally available for most businesses from trade and industry
associations, government agencies, universities and private companies and banks.

Forecast your own income statement. Do not be influenced by industry figures. Your estimates must be as
accurate as possible or else you will have a false impression.

 What is the normal markup in this line of business? i.e., the dollar difference between the cost of goods sold
and sales, expressed as a percentage of sales?
 What is the average cost of goods sold percentage of sales?
 What is the average inventory turnover, i.e., the number of times the average inventory is sold each year?
 What is the average gross profit as a percentage of sales?
 What are the average expenses as a percentage of sales?
 What is the average net profit as a percent of sales?
 Take the preceding figures and work backwards using a standard income statement format and determine
the level of sales necessary to support your desired income level. From an objective, practical standpoint, is this level
of sales, expenses and profit attainable?

Market Analysis
The primary objective of a market analysis is to arrive at a realistic projection of sales. After answering the
following questions you will be in a better position to answer question eight immediately above.

Population

 Define the geographical areas from which you can realistically expect to draw customers.
 What is the population of these areas?
 What do you know about the population growth trend in these areas?
 What is the average family size?
 What is the age distribution?
 What is the per capita income?
 What are the consumers’ attitudes toward business like yours?
 What do you know about consumer shopping and spending patterns relative to your type of business?
 Is the price of your product/service especially important to your target market?
 Can you appeal to the entire market?
 If you appeal to only a market segment, is it large enough to be profitable?

Competition

 Who are your major competitors?

 What are the major strengths of each?
 What are the major weaknesses of each?
 Are you familiar with the following factors concerning your competitors:
 Price structure?
 Product lines (quality, breadth, width)?
 Location?
 Promotional activities?
 Sources of supply?
 Image from a consumer’s viewpoint?
 Do you know of any new competitors?
 Do you know of any competitor’s plans for expansion?
 Have any firms of your type gone out of business lately?
 If so, why?
 Do you know the sales and market share of each competitor?
 Do you know whether the sales and market share of each competitor are increasing, decreasing, or stable?
 Do you know the profit levels of each competitor?
 Are your competitors’ profits increasing, decreasing, or stable?
 Can you compete with your competition?

Sales

 Determine the total sales volume in your market area.

 How accurate do you think your forecast of total sales is?
 Did you base your forecast on concrete data?
 Is the estimated sales figure “normal” for your market area?
 Is the sale per square foot for your competitors above the normal average?
 Are there conditions, or trends, that could change your forecast of total sales?
 Do you expect to carry items in inventory from season to season, or do you plan to mark down products
occasionally to eliminate inventories? If you do not carry over inventory, have you adequately considered the effect
of mark-down in your pricing? (Your gross profits margin may be too low.)
 How do you plan to advertise and promote your product/service/business?
 Forecast the share of the total market that you can realistically expect – as a dollar amount and as a
percentage of your market.
 Are you sure that you can create enough competitive advantages to achieve the market share in your
forecast of the previous question?
 Is your forecast of dollar sales greater than the sales amount needed to guarantee your desired or minimum
income?
 Have you been optimistic or pessimistic in your forecast of sales?
 Do you need to hire an expert to refine the sales forecast?
 Are you willing to hire an expert to refine the sales forecast?

Supply

 Can you make a list of every item of inventory and operating supplies needed?
 Do you know the quantity, quality, technical specifications, and price ranges desired?
 Do you know the name and location of each potential source of supply?
 Do you know the price ranges available for each product from each supplier?
 Do you know about the delivery schedules for each supplier?
 Do you know the sales terms of each supplier?
 Do you know the credit terms of each supplier?
 Do you know the financial condition of each supplier?
 Is there a risk of shortage for any critical materials or merchandise?
 Are you aware of which supplies have an advantage relative to transportation costs?
 Will the price available allow you to achieve an adequate markup?
 Can you obtain the additional data needed?
 Are you aware that there is less than a 50-50 chance that you will be in business two years from now?