Unit I

Prof. K.Shanthi
Entrepreneurship
The entrepreneur is defined as someone who has the
ability and desire to establish, administer and succeed
in a startup venture along with risk entitled to it, to
make profits.
The best example of entrepreneurship is the starting
of a new business venture.
The entrepreneurs are often known as a source of
new ideas or innovators, and bring new ideas in the
market by replacing old with a new invention.
Significance of Entrepreneurship
for Indian Economy
Entrepreneurship plays a major role in economic
condition of a nation, developing countries like India
has to give more importance for entrepreneurship.
Entrepreneur is a person who leads and implements
good ideas which is highly useful for the society that
leads to the economic development of a nation
Entrepreneurship is not a word that describes the
struggle of a common person who puts all his efforts
to build something of his/her own, it is also
something that reflects the growth of the country.
When it comes to entrepreneurship, several things
come to the mind like the day-to-day functioning of
an organization, gathering funds, manpower,
resources and much more. 
Another Side of Entrepreneurs
Entrepreneurs really strive to be motivated towards
their work, they work hard for the growth of an
organization that directly improves the Indian
economy.
Entrepreneurship drives business
creation
People who are entrepreneurs are constantly
innovating, finding new market opportunities and
products that can serve them.
Anyone who is creating a new business is attempting to
do something innovative, pushing both technical and
human capabilities.
Businesses creation drives value
addition
Businesses create products and services that add a lot of
economic value.
They solve problems for businesses or consumers, and
the activities they engage in add value.
This value is captured in the GDP and is reflected in the
market value - for e.g. venture capital backed
companies account for 4.3 trillion of US market cap.
Value addition
For a country with more drives job
than 50% of its  creation
population below the age of 25, generating
employment is critical. India has a troubling issue
where more than 30% of the youth is unemployed -
creating jobs is the only solution to this problem
which can be destabilizing.
Companies that are able to generate value will hire
more people to generate even more value.
Job creation drives consumption
Once people find employment and have jobs, they have
a steady stream of income.
With income comes the ability to purchase and
consume - a country that has more employed people
is also able to spend and consume more.
Consumption drives
entrepreneurship:
As people begin to consume more, a larger market is
created.
Higher consumption also means varied consumption,
people have more evolved needs and wants.
Who serves these more complex, large, new needs?
Entrepreneurs.
Contribution to the GDP
In a fast-growing economy like India, the
entrepreneurs play a vital role in producing the
optimum amount of products and services in
response to the demand by the people.
If there were no entrepreneurs, the country would be
solely dependent on the imports and multinational
companies and the GDP would be adversely affected
or collapse.
Therefore, the economy is hugely dependent on the
entrepreneurs for its GDP generation.
Foreign Exchange Earnings

Industries like the handloom and many other industries

produce goods not only to meet the domestic
requirements but also export these goods and earn
valuable foreign exchange for the country.
This adds to the economic growth of the country
Tax Generation

More employment to the people also results in more

taxable income for the government.
This helps the government increase their tax
revenues that which they use for the development of
the country and improve the standard of living of the
people
Eradicating Poverty

India is a labor intensive economy because of the vast

population in the country.
And since entrepreneurs help in generating
employment, they directly help the government in
eradicating unemployment and poverty in the
economy.
 More income means that people are able to afford
more and better things.
Entrepreneurs Introduce New
Technology

Since a long time, entrepreneurs have been introducing

new technologies in the economy. For example, Steve
jobs introduced the MAC software.
Such technological advancements help to develop the
economy as a whole.
This is one of the reasons that the government supports
and promotes the entrepreneurs
Entrepreneurs help other
Industries in the Economy

A lot of industries use the products of other industries

as a raw material for their finished products, thus
generating even more goods and services as well as
more revenue.
For example, while flour is a finished product for a
person who owns a flour mill, it is a raw material for
the factory producing biscuits.
In this way, it goes on and on. One idea or product
leads to the development of another or
complementary product or service.
Specific Tax Revenue

Entrepreneurs pay various direct and corporate taxes to

the state governments without which they cannot
function in the states.
Therefore, the entrepreneurs help in additional tax
revenue generated in the country.
Bringing in FDI

A lot of start-ups are funded by various companies in

foreign countries.
This helps the economy bring in more and more foreign
investments.
In fact, RBI helps these start-ups by relaxing policies on
FDI.
India is incredibly entrepreneurial on a micro scale i.e.
as individuals we are incredibly entrepreneurial.
You will see this in our daily behavior, as well
flourishing tiny businesses (your single corner stores,
grocery guy, dhobhi). 
Where we need to get better is at a macro scale - the
ability to build mammoth businesses and at a faster
pace. 40% of the ten largest businesses by market cap
in India were founded after the 70s (HDFC, Reliance,
Infosys and Suzuki).
On the other hand, 40% of the ten largest businesses in
the US were founded (or had roots) before the
70s (Berkshire, Johnson and Johnson, Exxon and JP
Morgan Chase). 
In light of the above points, it is clear that an
entrepreneur is a huge asset for a country and the
functioning of an economy greatly depends on the
existence of entrepreneurship.
A successful entrepreneur is usually a responsible
person.
He is accountable for the success or the failure of his
venture, and he takes this responsibility very
seriously.
 And since he is the only person in-charge he is
automatically the leader.
 In fact, leadership qualities are one of the main
aspects of an entrepreneur.
A manager, on the other hand, is not an owner of an
enterprise.
Instead, he is the one that is responsible for the
management and administration of a group of people
or a department of the organization.
His day to day job is to manage his employees and
ensure the organization runs smoothly.
Difference between Entrepreneur
and Manager

• The key difference between an entrepreneur and a

manager is their standing in the company.
• An entrepreneur is a visionary that converts an idea into a
business. He is the owner of the business, so he bears all
the financial and other risks.
• A manager, on the other hand, is an employee, he works
for a salary. So he does not have to bear any risks.
• The focus of an entrepreneur lies in starting the business
and later expanding the business.
• A manager will focus on the daily smooth functioning of
the business.
• For an entrepreneur the key motivation is
achievements.
• But for the managers, the motivation comes from the
power that comes with their position.
• The reward for all the efforts of an entrepreneur is the
profit he earns from the enterprise.
• The manager is an employee, so his remuneration is
the salary he draws from the company.
The entrepreneur can be informal and casual in his
role. However, a manager’s approach to every
problem is very formal.
The entrepreneur by nature is a risk taker. His has to
take calculated risks to drive the company further. A
manager, on the other hand, is risk-averse. His job is
to maintain the status quo of the company. So he
cannot afford risks.
Nature of Entrepreneurship
• People with a strong Entrepreneurial Nature have a
natural flair for business.
• They get pleasure from creating financial value and the
ability to sustain and scale operations.
• They are constantly on the move to bring together people,
concepts, and capital in a way that generates wealth.
• Where others see problems, they tend to see
opportunities.
• Those who are entrepreneurially inclined have a knack for
thinking up novel products and services.
• They have an excellent power of persuasion and are able
to sell products, ideas and even themselves to others.
Characteristics of an
Entrepreneurial Nature

Bargain when they go shopping

Negotiate and make good deals for themselves
Budget and spend money carefully
Spot ideas that could make money
Start ventures by bringing together various resources
Traits of an Entrepreneurial
Nature

• Demonstrates ambition
• Prefers working independently
• Is opportunistic
• Demonstrates leadership
• Is perseverant
• Innovates
• Is flexible
• Creates & extracts value
• Resourcefulness
Famous People with a High
Entrepreneurial Nature
Warren Buffet (investor)
Lucy Peng (entrepreneur)
Steve Jobs (CEO of Apple Computers)
Henry Ford (Industrialist)
Thomas Edison (Investor and inventor)
 Warren Buffett—one of the world's richest people,
consistently ranking high on Forbes' list of
billionaires.
 His net worth was listed at $100 billion as of June
2022.
Buffett is known as both a savvy businessman and
generous philanthropist.
Lucy Peng is a Chinese billionaire who co-founded
the Alibaba Group.
As such, she has held a number of important positions
in said company, with an excellent example being
how she is the executive chairwoman of its Ant 
Financial Services.
The entrepreneur who is a business leader looks for
ideas and puts them into effect in fostering economic
growth and development. 
Entrepreneurship is one of the most important inputs
in the economic development of a country.
The entrepreneur acts as a trigger head to give spark
to economic activities by his entrepreneurial
decisions.
Role of Entrepreneurship in
Economic Development

1. Promotes Capital Formation

2. Creates Large-Scale Employment Opportunities
3. Promotes Balanced Regional Development
4. Reduces Concentration of Economic Power
5. Wealth Creation and Distribution
6. Increasing Gross National Product and Per
Capita Income
7. Improvement in the Standard of Living
8. Promotes Country’s Export Trade
9. Induces Backward and Forward Linkages
10. Facilitates Overall Development
Problems faced by Entrepreneur
1. Financing
2. Lack of Planning
3. Hiring the right talent
4. Effective marketing within a limited budget
5. Self-doubt and uncertainty
6. Dealing with criticism
7. Attractive Customers
8. Making Decisions
9. Time Management
10. Office Infrastructur
Risks in Entrepreneurship
Financial Risk
  Every Entrepreneurial Venture Requires Funds To
Transform An Idea Into Reality.
 Therefore, A Critical Risk Faced By Entrepreneurs Is
Arranging Funds.
 This May Be In The Form Of Loans, Capital Arranged
With The Help Of Family And Friends Or An
Entrepreneur’s Own Savings.
 Adequate Financial Planning Should Be Done By An
Entrepreneur So That They Don’t Become Bankrupt.
Therefore, Calculated Risks Should Be Taken.
Strategic Risk
This Is Another Risk Involved In Entrepreneurship That
Deals With Framing The Right Strategies.
Each Business Requires A Near Flawless Business Plan.
However, Even A Well-Thought-Out Business Plan Can
Sometimes Lead To Failure.
As A Result, The Strategy Becomes Ineffective.
A Company That Manages To Adapt To A Changing
Environment And New Challenges Manages To Sail
Through Difficult Times, Whereas Others Fail.
Technology Risk
In The Digital Era, It’s Imperative To Constantly
Upgrade And Accept New Technologies.
These Disruptive Technologies Can Change The Entire
Game For Entrepreneurs By Easing Out Complex
Processes.
On The Contrary, Those Who Are Reluctant To Change
The Conventional Ways Of Working And Don’t Invest
In New Technologies Can Suffer
A major Entrepreneurial Risk.
Technology Acceptance Is The Need Of The Hour,
Especially If An Entrepreneur Is Working In A Highly
Competitive Industry.
Market Risk
Entrepreneurial Risks Can Emerge From Market-Based
Factors As Well.
For Instance, When The Economy Is Growing And
Blooming, Customers Might Get Attracted To Purchase
Luxurious Goods.
This Leads To An Increase In Demand For Luxury Products.
On The Other Hand, When There’s An Economic
Depression, The Demand For Such Products Can
Significantly Decline, Leading To A Severe Risk Faced By
Entrepreneurs.
In Such A Scenario, Tools Such As Market Research, Survey
And Analysis Can Help Entrepreneurs Undertake
Efficient Entrepreneur Risk Management. 
Compliance Risk
When An Entrepreneur Plans To Start Their Operations
In A Country, They Have To Be Wary Of The Laws Of
The Land.
A Company Has To Abide By Existing Laws And Adapt
To The Changing Legal Environment In The Future
As Well.
This Is One Of The Significant Entrepreneurial
Risks That An Entrepreneur May Face. Any Law
Framed In Favor Of Or Against An Industry Can
Change The Trajectory Of Its Success.
Reputational Risk
A Major Risk Involved In Entrepreneurship Is Related
To A Company’s Reputation.
If A Company’s Reputation Gets Damaged, A Steep
Decline In Revenue Follows.
The Goodwill Of The Company Declines Among
Customers, Which Further Tarnishes Its Image.
Additionally, The Company Is Unable To Find Talented
Employees Who Are Reluctant To Work In A Place
That Has No Reputation.
Operational Risk

This Entrepreneurial Risk Arises When A Company Is

Unable To Carry Out Routine Business Activities
Efficiently.
As A Result, Overall Productivity Of An Enterprise
Declines.
This Could Be Due To People Failure Or Process Failure
As Well.
External Events Like Natural Disasters Can Also Impact
The Operational Efficiency Of A Company.
Competitive Risk
To Become A Successful Entrepreneur, It’s Crucial To
Be Aware Of Competitors.
If There Aren’t Enough Competitors In An Industry, It
May Imply That The Demand For The Concerned
Product Is Not Enough.
Moreover, Entrepreneurs Should Be Able To Make
Prompt Moves To Get An Innovative Idea Or Product
Patented Before Their Competitors Can Take
Advantage Of It.
Intrapreneur
An intrapreneurship creates an entrepreneurial
environment by allowing employees to use their
entrepreneurial skills for the benefit of both the
company and the employee.
It gives employees the freedom to experiment, as well
as the potential for growth within an organization.