ENTREPRENEUR

• An entrepreneur is a person who starts an enterprise.

• The economists view him as a fourth factor of production along with land labour
and capital
• The sociologists feel that certain communities and cultures promote
entrepreneurship
– Example In India we say that Gujaratis, Parsis and Sindhis are very
enterprising
• entrepreneurs are innovators who come up with new ideas for products, markets
or techniques.

• an entrepreneur is someone who perceives opportunity, organizes resources

needed for exploiting that opportunity and exploits it

• Computers, mobile phones, washing machines, ATMs, Credit Cards, Courier

Service, and Ready to eat Foods are all examples of entrepreneurial ideas that got
converted into products or services
DEFINITIONS OF AN ENTREPRENEUR
• Stems from the French word `entrependre'
– meaning one who undertakes or
– one who is a `go-between‘

An entrepreneur is a person who pays a certain price for a product to resell it at an

uncertain price, thereby making decisions about obtaining and using the resources while
consequently admitting the risk of enterprise.
Richard Cantillon (1725)
• An entrepreneur is an economic agent who unites all means of production
• Land of one, the labour of another and the capital of yet another and thus
produces a product.
• By selling the product in the market he pays
– rent of land,
– wages to labour,
– interest on capital and
– what remains is his profit.
• He shifts economic resources out of an area of lower and into an area of higher
productivity and greater yield
– J. B. SAY(1803)

• entrepreneurs are innovators who use a process of shattering the status quo of the
existing products and services, to set up new products, new services (1961)

Schumpeter
(1934)
 • An entrepreneur is a person with a high need for achievement [N-Ach]. He is
energetic and a moderate risk taker
David McClleland
An entrepreneur searches for change, responds to it and exploits opportunities.
Innovation is a specific tool of an entrepreneur hence an effective entrepreneur converts a
source into a resource.
Peter Drucker
(1964)
Emphasizes the role of an imitator entrepreneur who does not innovate but imitates
technologies innovated by others. Are very important in developing economies.
Kilby
(1971
Entrepreneurs take initiative, accept risk of failure and have an internal locus of control
Albert Shapero
(1975)

Intrapreneur is an entrepreneur within an already established organization.

(1983
G. Pinchot
ENTREPRENEURSHIP

• Entrepreneurship can be described as a process of action an entrepreneur

undertakes to establish his enterprise.
• Entrepreneurship is a creative activity. It is the ability to create and build
something from practically nothing.
• It is a knack of sensing opportunity where others see chaos, contradiction and
confusion.
• Entrepreneurship is the attitude of mind to seek opportunities, take calculated
risks and derive benefits by setting up a venture.
• It comprises of numerous activities involved in conception, creation and running
an enterprise.
ENTERPRISE
• Entrepreneur is a person who starts an enterprise.
• The process of creation is called entrepreneurship.
• The entrepreneur is the actor and entrepreneurship is the act.
• The outcome of the actor and the act is called the enterprise.
• An enterprise is the business organization that is formed and which provides
goods and services, creates jobs, contributes to national income, exports and over
all economic development
DIFFERENCE BETWEEN ENTREPRENEUR & ENTREPRENEURSHIP
• The term entrepreneur is used to describe men and women who establish and
manage their own business. The process involved is called entrepreneurship.

• Entrepreneurship is an abstraction whereas entrepreneurs are tangible people.

 • Entrepreneurship is a process and an entrepreneur is a person.
ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT .
• The industrial health of a society depends on the level of entrepreneurship
existing in it.
• A country might remain backward not because of lack of natural resources or
dearth of capital but because of lack of entrepreneurial talents or it inability to tap
the latent entrepreneurial talents existing in that society.

• Entrepreneurs historically have altered the direction of national economies,

industry or markets
- Japan, Singapore, Korea, Taiwan to name a few
• Entrepreneurship is basically concerned with creating wealth through production
of goods and services.
• This results in a process of upward change whereby the real per capita income of
a country rises overtime or in other words economic development takes place.
• Thus entrepreneurial development is the key to economic development
• it is one of the most critical inputs in the economic development of a region.
• It speeds up the process of activating factors of production leading to a higher rate
of economic growth, dispersal of economic activities and development of
backward regions.
• If a region is unable to throw up a sufficient number of entrepreneurs then alien
entrepreneurs usually step in to provide goods and services needed by the people.

• However the profits earned by these entrepreneurs are usually not ploughed back
but repatriated to their place of origin.
• As a result development in that region cannot take place.

• Dr. M.M. Akhori refers to this practice as

`The Leech Effect'.
• Entrepreneurship begets and also injects entrepreneurship by starting a chain
reaction when the entrepreneur continuously tries to improve the quality of
existing goods and services and add new ones.
• Example
when computers came into the market there was continuous improvement in the models,
their functions etc.

– like first generation computers, personal computers, laptops, palmtops etc.

• This fostered the development of the

– software industry, computer education institutes, computer maintenance
and stationery units etc. and
– other industries like banking, railways, education, travel, films, medical
and legal transcriptions, business process outsourcing [BPOs] etc.
What Entrepreneurs Are Like?
Personality factors
• born/made ratio – 50/50, a synergy of genetic and environmental influence
• motivation and emotion – independence, competitive spirit, challenge, wealth
• behavioral characteristics – perseverance, determination, orientation to clear
goals, need to achieve, opportunity orientation, creativity, persistent problem-
solving, risk-taking, integrity, honesty, internal locus on control
• personality attributes – preferred styles: extrovert/introvert; sensor/intuit;
thinker/feeler; and judger/perceiver
Environmental factors
• family background – entrepreneurial heritage

• age and education – begin entrepreneurial activity early; are not over-educated

• work experience – most entrepreneurs first gain some work experience in the line
of business they later start up
• control the business - pay attention to details and essential ratios; exercise
strategic control over their business
• put the customer first - listen to the customer and respond to the customers'
feedback
• creates capital - financial, social, and aesthetic

ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT

 The role of entrepreneurship in economic development involves initiating and
constituting change in the structure of business and society.
 This change is accompanied by growth and increased output, which allows more
wealth to be divided by the various participants.
What in an area facilitates the needed change and development
 One theory of economic growth depicts innovation as the key
 in developing new products (or services) for the market and also
 in stimulating investment interest in the new ventures being created.
 This new investment works on both the demand and the supply sides of the
growth equation
 In spite of the importance of investment and innovation in the economic
development of an area, there is still a lack of understanding of the product
evolution process.
 This is the process through which innovation develops and commercializes
through entrepreneurial activity, which in turn stimulates economic growth.
 The critical point in the product evolution process is the intersection of knowledge
and a recognized social need, which begins the product development phase.
 This point, called iterative synthesis, often fails to evolve into a marketable
innovation and is where the entrepreneur needs to concentrate his or her efforts.
 The lack of expertise in this area matching the technology with the appropriate
market and making the needed adjustments is an underlying problem in any
technology transfer.
  The innovation can, of course, be of varying degrees of uniqueness. Most
innovations introduced to the market are ordinary innovations, that is, with little
uniqueness or technology. As expected, there are fewer technological innovations
and breakthrough innovations, with the number of actual innovations decreasing
as the technology involved increases.
 Regardless of its level of uniqueness or technology, each innovation (particularly
the latter two types) evolves into and develops toward commercialization through
one of three mechanisms: the government, intrapreneurship, or entrepreneurship.
 Entrepreneurship has assisted in revitalizing areas of the inner city. Individuals in
inner city areas can relate to the concept and see it as a possibility for changing
their present situation, One model project in New York City changed a depressed
area into one having many small entrepreneurial companies.

ENTREPRENEURIAL QUALITIES
• The researchers began looking for personality factors that determine the potential
of a person to be an entrepreneur as early as the 1950’s
• This entrepreneurial trait school of thought has led to the interest in identifying
traits for to successful entrepreneurs.
• McClelland (1961) found that entrepreneurs had a higher need for achievement
than non entrepreneurs.
• A great deal of research on the personality characteristics and socio-cultural
backgrounds of successful entrepreneurs was conducted in the 1980s and 1990s.
The detailed analysis of more than 50 studies done by Timmons (1994) found a
consensus around the following six general characteristics of entrepreneurs:
1. Commitment and determination
2. Leadership
3. Opportunity obsession
4. Tolerance of risk, ambiguity and uncertainty
5. Creativity, self reliance and ability to adapt
6. Motivation to excel
A related stream of research examines how individual demographic and cultural
backgrounds affect the chances that a person will become an entrepreneur and be
successful at the task.
1. Being an offspring of self employed parents
2. Being fired from more than one job
3. Being an immigrant or a child of immigrants
4. Being the eldest child in the family
5. Being a college graduate

Therefore the so called entrepreneurial characteristics can be looked at to determine a set

of skills useful for an entrepreneur to possess.
It is unlikely that all these skills will be present in sufficient measure in all potential
entrepreneurs.
It is prudent for the entrepreneur to take stock of what might be required and acquire
those skills through training.
Sometimes, the entrepreneur may even try to access those skills by attracting partners or
employees who possess those attributes.
The entrepreneurial skills are given below:
1.Creativity and opportunity evaluation
2. Real time strategy and decision making
3. Comfort with change and chaos
4. Teamwork
5. Selling, negotiation and motivation through influence and persuasion
6. Oral and written communication
7. Basics of start up finance, accounting, and law
8. Attitudinal adjustments
TYPES OF ENTREPRENEURS
 Entrepreneurs can be classified on the basis of their
 socio cultural backgrounds
 scale or potential of operations or
 timing of venture creation in relation to their professional lifespan.
Classification Based on the Timing of Venture Creation
 Based on the timing of venture creation, entrepreneurs are classified as
 early starters
 experienced and
 mature.
Early Starters
 An early starter starts the venture with little or no full time work experience.
 Often, early starters are from business families and have participated in the family
business.
 An early starter is generally convinced of the great potential of his/her business
idea and feels that the opportunity may cease to exist if he/she waits too long.
 An extreme case of an early starter would be Suhas Gopinath. He started his
company, Globals Inc., at the age of fourteen. In fact, he had to incorporate it in
the USA as Indian laws do not permit a minor to run a company.
Mature
 A lot of very senior professionals, some at the level of CEO, are quitting their
jobs to start their own ventures.
 This is probably because they have very high confidence in their abilities and
have a desire to do things in a way that may not be totally acceptable to their
erstwhile employers.
 Examples:- Ashok Soota and Subroto Bagchi, who quit Wipro to start Mincitree,
and BVR Subbu, the ex CEO of Hyundai India, who recently started a venture
that bought the plant of Daewoo in India.
Classification Based on Socio cultural Variables
 First Generation Entrepreneurs
 Entrepreneurs from Business Families
 Minority Entrepreneurs
 Women Entrepreneurs
First Generation Entrepreneurs
  This category consists of those entrepreneurs whose parents or family had not
been into business and were into salaried service.
 The booming economy of India has led to a multitude of business opportunities,
and with deregulation, it has become easier to set up businesses.
 Also, with a change in the mindset of the middle class, it is now more acceptable
to become an entrepreneur.
 India has a lot of examples of first generation entrepreneur from Dhirubhai
Ambani to Narayan Murthy.
Minority Entrepreneurs
 There are many small ethnic groups that have traditionally not ventured into
business. It has become important for them to venture out and create lasting
enterprises.
 They will serve as examples for the rest of their community. We must not forget
that the dominant Parsee community started off as a few shiploads of refugees on
the coast of Gujarat.
 Distinctly low levels of entrepreneurial activities are witnessed among the tribes
of Central India, the people of the North East and among some
socio economically backward classes
Women Entrepreneurs
 Women as entrepreneurs have been a recent phenomenon in India.
 The social norms in India had made it difficult for women to have a professional
life. Now this has changed.
 Progressive laws and other incentives have also boosted the presence of women in
entrepreneurial activity in diverse fields.
 Majumdar Shaw founded Blocon, which is now the leading biotech firm in India,
and she is an inspiration to many other Indian women wanting to start their own
businesses.
Classification Based on Entrepreneurial Activity
 Based on entrepreneurial activity, entrepreneurs are classified as
 novice,
 Serial entrepreneur and
 portfolio entrepreneur.
Novice
 A novice is someone who has started his/her first entrepreneurial venture.
 Not to be confused with an early starter, a novice can also be a 50 year old with
over 25 years of experience in the industry.
 Vishambar Saran was the Director, Raw Material for Tata Steel, when he quit
after working in the steel industry for over 35 years.
 He leveraged his vast experience to start his own venture, Visa Steel.
 Starting from scratch ten years back, the turnover of the company currently stands
at over Rs. 400 crore.
Serial Entrepreneur
 A serial entrepreneur is someone who is devoted to one venture at a time and
starts many at a later stage.
 It is the process of starting that excites the starter.
  Once the business is established, the serial entrepreneur may lose interest and
think of selling and moving on.
 Rakesh Mathur, an alumnus of HT Bombay, has started a firm called Webaroo,
which enables easy offline surfing of the net.
 This is his latest venture in a series of successful ventures with great names such
as Armedia, Purple Yogi and Junglee.
 He sells off his ventures before moving on to the next one,his most high profile
sale being that of Junglee, which he sold to Amazon
Portfolio Entrepreneur
 A portfolio entrepreneur starts and runs a number of businesses.
 It may be a people strategy of spreading risk or it may be that the entrepreneur is
simultaneously excited by a variety of opportunities.
 Also, the entrepreneur may see some synergies between the ventures.
 Once a poor immigrant, Li Ka Shing got his start selling plastic flowers in Hong
Kong in the 1950s. He owns the conglomerates Cheung Kong and
 Hutchison Whampoa. Through them, Li is the world's largest operator of
container terminals, a major supplier of electricity, a cell phone provider, a
retailer and a real estate developer. He also has a $10 billion stake in Canadian oil
company Husky Energy.
FUNCTIONS OF AN ENTREPRENEUR
1. Innovation
2. Risk and uncertainty bearing
3. Organization Building
Innovation
• Innovation is one of the most important functions of an entrepreneur
• An entrepreneur uses information, knowledge and intuition to come up with
– new products
– new methods of reducing costs of a product,
– improvement in design or function of a product
– discovering new markets or new ways of organization of industry.
• Through innovation, an entrepreneur converts a material into a resource or
combines existing resources into new and more productive configurations.
• It is the creativity of an entrepreneur that results in invention and innovation
Invention - creation of new knowledge
Innovation - application of knowledge to create new products, services or processes.

• Systematic innovation means monitoring the following for innovative

opportunity:
– The unexpected success or failure or any unexpected outside event
– Innovation based on process need
[e.g. plate based cameras, film based cameras, digital cameras]
– Changes in industry and market structure
[e.g. video cassette VCD, DVD, Blue ray disc]
– Demographics changes
(e.g. increasing number of working women and nuclear families in most metropolitan
cities)
 – New knowledge (e.g. Pentium chip)
Risk and uncertainty bearing
• Every decision pertaining to development of new products, adapting new
technologies, opening up new markets involves risk.
• Decision-making in an environment of uncertainty requires anticipation of risk.
• Profit is said to be the reward for anticipating and taking such risks.
• However it is pertinent to mention that the entrepreneur is not a gambler, he only
takes calculated risks.
• An entrepreneur develops the art of decision-making under conditions of
uncertainty as a matter of survival.
Organization building
• An entrepreneur has to organize men, material and other resources.
• He has to perform the functions of planning, co-ordination and control.
• He has to use his leadership qualities to build a team, generate resources and solve
problems.
• With his organizational skills an entrepreneur builds an enterprise from scratch,
nurtures it and makes it grow.
• His vision sows the seeds for a sound and vibrant organization and synergies are
built in the enterprise.
ENTREPRENEURIAL TRAITS
The entrepreneurial common character traits include the following
• Strong leadership qualities Takes charge in an effort to get the job done. Works
tirelessly to
solve problems that confront them. Adapts well to change.
• Self-motivated and able to motivate others Very passionate about their ideas
and driven to produce. Strong sense of ethics, honesty and the ability to inspire
others.
• Innovator and risk taker Always seeks to develop new ideas and improve
processes. Never afraid to take chances, ask questions or make mistakes. Will
admit to any error made and move forward to correct.
• Independence - This is the most common denominator of all entrepreneurs. They
want to seize control of their future; thus they decide to become their own boss
instead of labouring under the gaze of a master.

• Persistence and Determination

• The world of entrepreneurship is fraught with both success and failure.
• An important quality of a successful entrepreneur is the doggedness to
continue pursuing a goal despite some setbacks and obstacles they may
encounter on the road.
• This persistence and determination is fuelled by a burning desire to
achieve the goal of succeeding in the chosen field of business
• Self-Confidence
– Along with independence, an entrepreneur possesses self-confidence.
– They believe in their capabilities and makes sure that they will put in their
best effort into their particular endeavours and likewise expect the best
results from it.
 – Belief in one's capabilities is very important in achieving any goal -
especially in the world of entrepreneurship.
• Organized and goal-oriented - An entrepreneur knows the value of organization
in a business endeavour. A good entrepreneur has the ability to consolidate
resources.
• Visionary - An entrepreneur has a vision for his/her future.
• Risk-taking and Tolerance for Failure
– A good entrepreneur realizes that loss and failure are inherent in any
business endeavour.
– An entrepreneur must always be ready to make calculated risks and face
whatever consequences accompany those risks.
– As in all fields of endeavour, the characteristic of a successful
entrepreneur is in
• never giving up and
• in picking up the pieces and continuing the journey even if failure
momentarily obstructs the way.
• Perseverance and Hard Work - These are perhaps two of the most important
entrepreneurial traits.
• Commitment - An entrepreneur will not achieve success if he/she gives up at the
first sign of trouble.
• Honesty and Honour
– Another very important mark of a good entrepreneur is being honest and
honourable in all business dealings and interpersonal relationships
• whether it is between business partners, employees, peers or
investors
SMALL BUSINESS ENTERPRISE
• SSI fulfills the following objective of developing countries
– Economic
– Socio-Economic
– Socio-Political
Economic objective
• Economic objective includes the following
– Increase in the supply of manufactures goods
– Promotion of capital formation
– Development of indigenous enterprise and skills
– Creation of employment opportunities
Socio-economic Objective
• Socio-economic objective includes the following
– Decentralization of manufacturing activity
– Reducing regional imbalance within the country
Socio-Political Objective
• Socio-Political Objective includes the following
– Wide distribution of socio-economic and political power
– Creation of opportunity for people with initiative ness
– Development of entrepreneur-manager
Small Enterprise in India
THE ROLE OF STATE GOVERNMENT
• takes greater interest in development of small scale industries.
• renders the following assistance to SSI
– Financial & Non-Financial
– Improve their techniques of production
– Provides for common service facilities
• THE ROLE OF CENTRAL GOVERNMENT
• In-order to coordinate the activities the central government has set up a small-
scale industries board
• Appointed a development commissioner for SSI
• Established regional Small industries service institutes and a National Small
Industries Corporation

Small Business in India contributes to

• 40% of the gross Industrial value-added
• 45% of the total exports from India and
• second largest employer of human resources after agriculture
• generated employment for around 12 million people.
• has emerged as a dynamic and vibrant sector during the eighties

Small Scale Industrial Unit (SSI) :

An industrial undertaking in which the investment in fixed assets in plane and
machinery, whether held on ownership terms or on lease or by hire purchase, does not
exceed Rs. 100 lakh as on March 31, 2001, is to be treated as small-scale industrial units.

• Small-Scale Industries (SSI) are production units with a capital investment of up

to Rs. One Crore. Small-Scale industries can be categorize into
– Cottage Industries
– Agro-based industries
– Small Industries
Importance of Small Scale Industries
• Provides increased employment through labour-intensive process
• Require lower gestation period
• Easy to set up in rural and backward areas
• Needs small/ local market
• Encourage growth of local entrepreneurship
• Create a decentralized pattern of ownership
• Foster diversification of economic activities
• Introduce new products particularly to cater to the local market
• Influence the standard of living of the local people
• Provides equitable dispersal of industries throughout rural and backward areas
Role of SSI:
• Dynamic and vibrant sector of the economy
• Prominent role in socio-economic transformation of the country
• Accounts for 35 per cent of industrial production, 40 per cent of exports and 60
per cent of employment opportunities
Advantages of Small-Scale Industries
• Labor intensive in nature
• Useless capital per unit of output
• Prevent congestion
• Suitable for people with limited resources
• Prevent concentration of economic power
• Lead to better distribution of incomes
• Help in putting idle resources to productive user
• Suitable for lean production
• Lead to allocate efficiency
Problems of Small-Scale Industries
• Problem of
– finance
– raw material
– power
– marketing
• Export difficulties
• Problem of technical know how
• Problem of industrial relations
• Growing sickness and mortality among these units
SMALL & MEDIUM ENTERPRISES
 SME is defined differently in different countries
 It may be either based on
 Turnover (or)
 No. of employees (or)
 Investments
SME in Indian context
 In India, the definition has al-ways been based on the productive plant and
machinery
 SMEs and large corporate operate in the same business universe and have
considerable interdependence and inter-relationship
 The emphasis today is on cutting costs, maximizing profits and shareholder value
OBJECTIVES OF SME
 High contribution to domestic production
 Significant export earnings
 Low investment requirements
 Operational flexibility
 Location wise mobility
 Low intensive imports
 Capacities to develop appropriate indigenous technology Import substitution
 Contribution towards defense production
 Technology – oriented industries
 Competitiveness in domestic and export markets
LIMITATIONS OF SME's
 Low Capital base
  Concentration of functions in one / two persons
 Inadequate exposure to international environment
 Inability to face impact of WTO regime
 Inadequate contribution towards R & D
 Lack of professionalism

In spite of these limitations, the SME’s have made significant contribution towards
technological development and exports.
SME IN INDIAN INDUSTRIES
 Food Processing
 Agricultural Inputs
 Chemicals & Pharmaceuticals
 Engineering; Electrical; Electronics
 Electro-medical equipment
 Textiles and Garments

THE PRESENT SCENARIO

 As a result of globalization and liberalization, coupled with WTO regime, Indian
SMEs have been passing through a transitional period.
 With slowing down of economy in India and abroad, particularly USA and
European Union and enhanced competition from China and a few low cost centers
of production from abroad many units have been facing a tough time
 SMEs who have strong technological base, international business outlook,
competitive spirit and willingness to restructure themselves shall withstand the
present challenges
 They will be able to come out with shining colors to make their own contribution
to the Indian economy.