Entrepreneurship for Engineers

Chapter: 1.

Introduction to Entrepreneurship Development & the Entrepreneur and the

Entrepreneurial Venture
Entrepreneurship: Is a process of designing, launching and running a new business.

It deals with creating something different with value by devoting the necessary time and effort,
assuming the accompanying financial, psychic, social risks and receiving the resulting rewards of
monetary and personal satisfaction and independence.

Entrepreneur is an individual who, rather than working as an employee, runs a small business and
assumes all the risks and rewards of a given business venture, idea, or good or service offered for
sale. The entrepreneur is commonly seen as a business leader and innovator of new ideas and
business processes.

ADVANTAGES OF ENTREPRENEURSHIP
To an Individual
(a) Provides Self Employment for the entrepreneur.
(b) Entrepreneur can provide employment for near & dear one as well.
(c) Entrepreneurship often provides an employment and livelihood for next generations as well.
(d) Freedom to use own ideas, innovation and creativity.
(e) Unlimited income / higher retained income.
(f) Independence
(g) Satisfaction

To the Nation
(a) Provides larger employment – Entrepreneurs provide employment for self as well as other
people and is source of employment creation.
(b) Results in wider distribution of wealth – This is a logical sequel of above issue. Higher the
employment, greater is the distribution of wealth.
(c) Mobilizes local resources, skills and savings.
(d) Accelerates the pace of economic development – Entrepreneurship is the govt’s one of the most
trusted vehicles for economic development
(e) Stimulates innovation & efficiency

FACTORS FAVOURING ENTREPRENEURSHIP

1. Developed Infrastructure Facilities – Availability of infrastructure reduces the cost & efforts
and improves viability of projects through higher profit margins.

2. Financial Assistance – Easy availability of cheap funds is vital for promoting entrepreneurship.

3. Protective and Promotional Policies – Most of the entrepreneurship projects start very small
and have no resilience. They are extremely vulnerable to competitors, market, money markets, etc,
for considerable time. Favourable Govt policies shelter them from such vagaries.

4. Growth of Education – Science, Technology & Management – Growth of education is believed

to be promoting entrepreneurship.

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5. Risk Taking Abilities – Risk taking ability is one of the pillars of entrepreneurial spirits.

6. Hunger for Success (Capitalistic View) – Fire in the belly and dreams of riches is what drives
most entrepreneurs on this risky path.

7. Environment / Culture Impact – Entrepreneurship is contagious. Communities like

Punjabies and Marwaries in India are historically entrepreneurial. They are known for seeking and
exploiting business opportunities in most remote areas. It is a culture that propels them.

8. Social Security – Social security acts as a safety net against failure of enterprise. Social security
guarantees basic ‘food, cloth and shelter’ in case of failure. Entrepreneurial spirit of United States
is born partly out of this security.

9. Technical / Industrial Training Facilities – Industrial Training facilities on one hand generate
skilled manpower so vitally required for setting up enterprises while on the other hand they are also
nursery for future entrepreneurs.

10. Globalization – Globalization has provided another avenue for business. Many dare devils
have taken a head– along plunge into this uncharted water and have written new success stories.

What makes a Successful Entrepreneur?

1. The urge for achievement – Most Important
2. Willingness to take moderate risks.
3. Ability to identify & explore opportunities
4. Analytical ability to take strategic decisions
5. Perseverance (continue trying to do something even though it is difficult)
6. Flexibility
7. Capacity to plan and organize
8. Preparedness to undergo physical and emotional stress
9. Positive self-concept/Self Belief
10. Vision (Future orientation) and Mission (Ethics and Values)

Characteristics you should ideally possess to start and run your own business:

1. Motivation: Entrepreneurs are enthusiastic, optimistic and future-oriented. They believe they’ll
be successful and are willing to risk their resources in pursuit of profit. They have high energy
levels and are sometimes impatient. They are always thinking about their business and how to
increase their market share.

2. Creativity and Persuasiveness (Capability of a person): Successful entrepreneurs have the

creative capacity to recognize and pursue opportunities. They possess strong selling skills and are
both persuasive and persistent.

3. Versatility (having many different abilities, flexibility): As an entrepreneur, you’ll typically start
out as a “solopreneur,” meaning you will be on your own for a while. Therefore, you will end up
wearing several different hats, including secretary, bookkeeper and so on.

4. Superb Business Skills: Entrepreneurs are naturally capable of setting up the internal systems,
procedures and processes necessary to operate a business. They are focused on cash flow, sales and
revenue at all times.

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5. Risk Tolerance: Launching any entrepreneurial venture is risky. You can reduce your risk by
thoroughly researching your business concept, industry and market. You can also test your concept
on a small scale.

6. Drive: As an entrepreneur, you are in the driver’s seat, so you must be proactive in your
approaches to everything.

7. Vision: One of your responsibilities as founder and head of your company is deciding where
your business should go.

8. Flexibility and Open-Mindedness: While entrepreneurs need a steadfast vision and direction,
they will face a lot of unknowns. You will need to be ready to tweak any initial plans and strategies.
New and better ways of doing things may come along as well.

9. Decisiveness: Make decisions quickly and seize the moment. As an entrepreneur, you won’t have
room for procrastination (act of postponing, delaying) as this could hinder your progress; also cause
you to miss crucial opportunities that could move you toward success.

SIMILARITIES BETWEEN ENTREPRENEUR AND MANAGER

1. Both managers and entrepreneur are answerable for producing results
2. Both have to produce results through people working with them though they deal with different
sets of people.
3. Both are decision makers but the decisions are different as their tasks vary.
4. Both have to operate under constraints.

DIFFERENCES BETWEEN ENTREPRENEUR AND MANAGER

Managers Entrepreneurs
Short term and medium term results Long term and very long term results
Usually handle people oriented to day-to- Deal with people who can conceptualize
day management with aggregate perspectives- strategists.
Operational and administrative decisions Mostly strategic decisions
The constraints are usually organizational, Constraints are usually environmental
i.e. those within the organization. which lie outside an organization.
The principles are more oriented towards The principles are with reference to macro
internal administration and control like social aspects like social responsibility,
delegation, accountability, responsibility, equal opportunity employment, ethical
planning etc. advertising practices etc.

ENTREPRENEURIAL TRAITS (A quality that makes one person different from another):

1. Mental ability: An entrepreneur must be reasonably intelligent and should have creative
thinking and must be able to engage in the analysis of various problems and situations in order to
deal with them.

2. Clear objectives: An entrepreneur should have a clear objective of the exact nature of the
business, the nature of the goods to be produced and subsidiary activities to be undertaken.

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3. Business secrecy: An entrepreneur must be able to guard business secrets. Leakage of business
secrets to trade competitions is a serious matter which should be carefully guarded against by an
entrepreneur.

4. Human relation ability: An entrepreneur must establish good relation with his customers that
will encourage them to continue on patronize his business. An entrepreneur who maintains good
human relations with customers, employees, suppliers, creditors and the community is more likely
to succeed in business.

5. Communication ability: It is the ability to communicate effectively. Good communication also

means that both the sender and the receiver understand each other and are being understood.

6. Technical knowledge: An entrepreneur must have a reasonable level of technical knowledge. It

is one’s ability that most people are able to acquire if they try hard enough.

CHARACTERISTICS OF SUCCESSFUL ENTREPRENEUR

1. Motivator: An entrepreneur must build a team, keep it motivated, and provide an

environment for industrial growth and career development.
2. Self-confidence: Entrepreneurs must have belief in themselves and the ability to achieve
their goals.
3. Long term commitment: An entrepreneur must be committed to the project with a time
horizon of five to seven years.
4. High energy level: Success of an entrepreneur demands the ability to work long hours for
sustained periods of time.
5. Persistent problem-solver: An entrepreneur must have an intense desire to complete a task
or solve a problem. Creativity is an essential ingredient.
6. Initiative: An entrepreneur must have initiative accepting personal responsibility for
actions, and make good use of resources.
7. Goal setter: An entrepreneur must be able to set challenging but realistic goals.
8. Moderate risk taker: An entrepreneur must be a moderate risk taker and learn from many
failures.

ENTREPRENEUR’S BACKGROUND & CHARACTERISTICS

1. Family Environment: In most cases, people follow the footstep of father. A businessman’s son
takes up business and a salaried person’s son tries to find a job. So, if a family has had a tradition of
entrepreneurship, later generations also follow the step of their ancestors, like the Gujaraties and
Marwaries in India. Conversely, if a family has had a bad experience with entrepreneurship, it is
unlikely that next generation will be very entrepreneurial.

2. Education: Education has no correlation with entrepreneurial spirit. If at all there is one, it
seems to be inverse. Most of the entrepreneurs come from low education background. Educated
people who get decent job rarely prefer comfort of salaried job. It is only those who are unable to
find a living for themselves eventually try their hands at new business. For long years, due to
problems of licence, quota and inspection, most educated people preferred govt job, for it
symbolized power, comfort, social status and money too. However, trend is slowly changing. With
business environment becoming easier and govt officials’ powers being on the wane, many
educated people are also beginning to venture into entrepreneurship.

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3. Age: There are people who start as early as probably 10 and some others after their retirement.
Harland David Sanders, better known as Colonel Sanders (not an Army Colonel but an honorary
one) started his famous Kentucky Fried Chicken (KFC) business quite late in his varied career. But
commonly, men are often in the age group of 25 –35 and women in the age group of 30–45.

4. Physical Attributes: Have absolutely no correlation with entrepreneurial spirit.

5. Marital Status: No direct correlation but going by the age group, most entrepreneurs are
married.

6. Working History: Entrepreneurs quite often have some working experience as a salaried
employee in the field of their venture. It always helps to learn a little about business before putting
your money in.

7. Family Contacts: Family contacts in business world reduce the risks and help the entrepreneur.

8. Professional Contacts: Professional contacts again help. IIT and IIM graduates venturing into
entrepreneurship often get help from their peer and seniors.

9. Personal values: Are the general expression of what is most important for you.

10. Lifestyle: Most entrepreneurs are fond of good things in life but are willing to wait till they
strike rich. In the interim they are willing to rough it out.

Motivation for starting a business: The reason for small firm formation can be divided between
“pull” and “push” influences.

Pull influences: Some individuals are attracted towards small business ownership by positive
motives such as specific idea which they are convinced with work.

1. Desire for independence: This features in several research studies as the key motivator. The
Bolton report singled out the need to gain and keep independence as a distinguishing feature of
small business owner-managers. A study of female entrepreneurs in Britain found that women were
motivated particularly by the need for autonomy.

2. Desire to exploit an opportunity: Opportunities according to Drucker are of three kinds:

additive, complementary, and breakthrough. Additive opportunities are those opportunities which
enable the decision maker to better utilize the existing resources without in any way involving a
change in the character of business. Complementary opportunities involve the introduction of new
ideas and as such lead to a certain amount of change in the existing structure. Breakthrough
opportunities involve fundamental changes in both the structure and character of business.

3. Turning previous work experience into business: Many new entrepreneurs seek fulfillment by
spending more time involved in a hobby, or part of their work that they particularly enjoy.

4. Financial incentive: The rewards of starting a business can be high, and are well-publicized by
those selling ‘how to’ information to entrepreneurs. The promise of long term financial
independence can be clearly be a motive in starting a new firm.

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Push influences: These factors include;

1. Community attitude: This has proved a considerable push into entrepreneurship particularly
when accompanied by acceptance in a locality where other employment possibilities are low.

2. Unemployment: Job insecurity and employment varies in significance by region, and by

prevailing economic climate. A study reported that 25% of business founders in the late 1970s were
pushed in this way, while later research showed a figure of 50% when unemployment nationally
was much higher.

3. Disagreement with the previous employer: Uncomfortable relations at work have also pushed
new entrants into small business. Many people considering an opportunity or having a desire for
independence still need some form of push to help them make their decision.

Success factors for entrepreneurs: Several success factors are apparent from research on
innovation and entrepreneurship.

1. The entrepreneurial team: An entrepreneurial team is headed by an individual who provides

the critical profile of success. This focal entrepreneur typically has an above average education,
with about 35% of technical entrepreneurs holding graduate degrees. Most entrepreneurs started
their business when they were in their 30s, and they had solid job experience. Nearly two-thirds of
those studied in the United States had attempted a new venture before, and fewer Canadians had
made an earlier attempt.
Most technical entrepreneurs tend to start businesses closely related to what they did in
previous career positions. Those in non-technical areas often leverage their experience in
marketing, merchandising, or a professional area such as insurance or finance. They will also have
well-developed social and business relationships, and therefore have a strong formulation for
building a team or support network.

2. Venture products or services: Incremental expansion of products and services also tends to stay
within the bounds of positive cash flow. Products tend to have strong profit potential with high
initial margins rather than small margins that require a substantial volume of sales to meet profit
objectives. Service businesses retain good margins by effective cost controls and well monitored
overheads. Entrepreneurs must assure themselves of a niche for their services. Successful
entrepreneurs should “stick to the knitting” by concentrating initially on one product or services,
making it successful before diversifying.

3. Markets and timings: Successful entrepreneurs tend to have a clear vision of both existing and
potential customers. A crucial aspect of planning is to have a well-documented forecast of sales
based on sensible projections at each of incremental growth. An entrepreneur will not convince
investors that a venture is viable without valid market research.
Market potential is influenced by timings of new products or services. Timing pertains to
when products or services are introduced, how they are priced, how they are distributed, and how
they are promoted.

4. Business ideology: A business ideology is defined as a system of beliefs about how one
conducts an enterprise. These beliefs include a commitment to providing customers with value, the
ability to take calculated risks, the determination to grow and to control the fate of the business, the
propensity to elicit cooperation among team members, and the perspective of creating wealth
realistically.

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Kinds of entrepreneurship
The entrepreneurs in business are broadly classified according to;
1. The types of business
2. Use of professional skill
3. Motivation
4. Growth and
5. Stages of development

1. According to type of business

Entrepreneurs are found in various types of business occupations of varying size. We may
broadly classify them as follows;
a) Business entrepreneurs: Business entrepreneurs are individuals who conceive an idea for a new
product or service and then create a business to materialize their idea into reality. They tap both
production and marketing resources in their search to develop a new business opportunity. They
may set up a big establishment or a small business unit. They are called small business
entrepreneurs when found in small business units such as printing press, textile processing house,
advertising agency, readymade garments, or confectionary.

b) Trading entrepreneur: Trading entrepreneur is one who undertakes trading activities and is not
concerned with the manufacturing work. He identifies potential markets, stimulates demand for his
product line and creates a desire and interest among buyers to go in for his product. He is engaged
in both domestic and overseas trade.

c) Industrial entrepreneur: Industrial entrepreneur is essentially a manufacturer who identifies the

potential needs of customers and tailors product or service to meet the marketing needs. He is
product oriented man who starts in an industrial unit because of the possibility of making some new
product. The entrepreneur has the ability to convert economic resources and technology into a
considerably profitable venture.

d) Corporate entrepreneur: Corporate entrepreneur is a person who demonstrates his innovative

skill in organizing and managing a corporate undertaking. A corporate undertaking is a form of
business organization which is registered under some statute or act which gives it a separate legal
entity.

e) Agricultural entrepreneur: Agricultural entrepreneurs are those entrepreneurs who undertake

such agricultural activities as raising and marketing of crops, fertilizers, and other inputs of
agriculture.

2. According to the use of technology

The application of new technology in various sectors of the national economy is essential
for the future growth of business.

a) Technical entrepreneur: A technical entrepreneur is essentially an entrepreneur of “craftsman

type”. He develops new and improved quality of goods because of his craftsmanship. He
concentrates more on production than marketing. He demonstrates his innovative capabilities in
production of goods and rendering services.

b) Non-technical entrepreneur: Non-technical entrepreneurs are those who are not concerned
with the technical aspects of the product in which they deal. They are concerned only with
developing alternative marketing and distribution strategies to promote their business.

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c) Professional entrepreneur: Professional entrepreneur is a person who is interested in

establishing a business but does not have interest in managing or operating it once it is established.
A professional entrepreneur sells out the running business and starts another venture with the sales
proceeds.

3. According to motivation
Motivation is the force that influences the efforts of the entrepreneur to achieve his
objectives. An entrepreneur is motivated to achieve or prove his excellence in job performance.

a) Pure entrepreneur: A pure entrepreneur is an individual who is motivated by psychological or

economic rewards. He undertakes an entrepreneurial activity for his personal satisfaction in work,
ego or status.

b) Induced entrepreneur: Induced entrepreneur is one who is induced to take up an

entrepreneurial task due to the policy measure of the government that provides assistance,
incentives, concessions, and necessary overhead facilities to start a venture.

c) Motivated entrepreneur: New entrepreneurs are motivated by the desire for self-fulfillment.
They come into being because of the possibility of making and marketing some new product for the
use of consumers.

d) Spontaneous entrepreneur: These entrepreneurs start their business out of their natural talents.
They are persons with initiative, boldness and confidence in their ability which motivate them to
undertake entrepreneurial activity.

4. According to growth
The development of a new venture has greater chances of success. The entrepreneur enters a
new and open field of business. The customer approval to the new product gives them
psychological satisfaction and enormous profit.

a) Growth entrepreneur: Growth entrepreneurs are those who necessarily take up a high growth
industry. These entrepreneurs choose an industry which has sustained growth prospects.

b) Super growth entrepreneur: Super growth entrepreneurs are those who have shown enormous
growth of performance in their venture. The growth performance is identified by the liquidity of
funds, profitability and gearing.

5. According to the stages of development

a) First generation entrepreneur: A first generation entrepreneur is one who starts an industrial
unit by means of an innovative skill. He is essentially an innovator, combining different techniques
to produce a marketable product or service.

b) Modern entrepreneur: A modern entrepreneur is one who undertakes those ventures which go
well along with the changing demand in the market. They undertake those ventures which suit the
current marketing needs.

c) Classical entrepreneur: A classical entrepreneur is one who is concerned with the customers
and marketing needs through the development of self-supporting ventures.

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In a study of American agriculture, Danhof has classified entrepreneurs in the following categories:

1. Innovative entrepreneurs: Innovative entrepreneurship is characterized by aggressive

assemblage of information and the analysis of results derived from sound combination of factors.

2. Adaptive or imitative entrepreneurs: These kinds of entrepreneurs are ready to adopt

successful innovations created by innovative entrepreneurs. Instead of innovating the changes
themselves, they just imitate the technology and techniques innovated by others.

3. 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.

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

opportunities to make changes in production. Such entrepreneur may even suffer losses but they do
not make changes in production methods.

Functions of an Entrepreneur: Peter Kilby identified thirteen functions of an entrepreneur, and

has classified the functions into 4 groups;

1. Exchange relationship
 Perceiving market opportunities
 Gaining command over scarce resources
 Purchasing inputs
 Marketing of the products and responding to competition.

2. Political administration
 Dealing with the public bureaucracy (concessions, licenses, taxes)
 Managing human relations within the firm
 Managing customer and supplier relations.

3. Management control
 Managing finance
 Managing production (written records, supervision, coordinating input flows, maintenance)

4. Technology
 Acquiring and overseeing assembly of the factory
 Industrial engineering (minimizing inputs with a given production process)
 Upgrading process and product quality, and
 Introducing new production techniques and products.

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