ENTREPRENEURSHIP

Introduction
Entrepreneurial activity is increasing throughout the world. In India too, there has been a
significant change in the mindset of the society. There is no doubt that entrepreneurs and
entrepreneurship are playing important roles in today’s global business environment.
The concept of entrepreneurship is a complex phenomenon. Broadly, it relates to the
entrepreneur, his vision and its implementation. Entrepreneurship refers to a process of action an
entrepreneur (person) and it is a creative and innovative response to the business environment. It
promotes capital formation and creates wealth, and it has the thrill of risk, change, challenge and
growth. Entrepreneurship extends beyond a conventional business and economic perspective.
Entrepreneurship is a composite skill, which include imagination, readiness to take risks, ability
to bring together and put to user other factors of production, capital, labour, land, as also
intangible factors such as the ability to mobilize scientific and technologic advances. One of the
qualities of entrepreneurship is the ability to discover an investment opportunity and to organize
an enterprise, thereby contributing to real economic growth. It involves taking of risks and
making the necessary investments under conditions of uncertainty and innovating, planning and
taking decisions.
The positive impact of entrepreneurial firms is seen throughout the economy and the society.
Entrepreneurial firms create jobs, contribute to economic growth they reshape the business
ecosystem, create an environment where they play a major role in introducing innovations,
commercializing new technologies, opening new market, and creating value by combining
resources in exciting new ways.
In India various social changes are taking place like, increase in literacy levels, greater consumer
awareness, enhanced media penetration, and basic changes in family structure. These changes
are bound to result in a higher level of entrepreneurial activity in future. So whether you want to
be the next Michael Dell, Bill Gates, or Ambani brothers, or whether you just want to achieve
your own personal dreams, understanding entrepreneurship is an important first step!
Origin of the word “Entrepreneur”
The word “entrepreneur” is derived from the French verb entreprendre. It means “to undertake”.
In the early 16th century, the Frenchmen who organized and led military expeditions were
referred to as “entrepreneurs.”
The team “entrepreneur” was applied to business initially by the French economist, Cantillon, in
the 18th century, to designate a dealer who purchases the means of production for combining
them into marketable products.
Meaning of Entrepreneur
An entrepreneur is a person who has possession of a new enterprise, venture or idea and assumes
significant accountability for the inherent risks and the outcome. He or she is an ambitions leader
who combines land, labor, and capital to often create and market new goods or services.
An entrepreneur is a person who starts an enterprise and converts a situation into opportunity.
He/she searches for change and responds to it.
Definition of an Entrepreneur
Richard Cantillion considered all persons engaged in economic activity as entrepreneurs.
Joseph A. Schumpeter recognized a person one who introduces innovative changes in an
entrepreneur. He treated entrepreneur as an integral part of economic growth. The fundamental
source of disequilibrium was the entrepreneur.
Francis A. Walker observes that the true entrepreneur is one who is endowed with more than
average capacities in the risk of organizing and coordinating the various other factors of
production.
Peter F. Drucker defines an entrepreneur as one who always searches for change, responds to it
and exploits it as an opportunity. Innovation is the specific tool of entrepreneurs, the means by
which they exploit change as an opportunity for a different business or service.
ENTREPRENEUR is a person who:
 Develops and owns his own enterprise.
 Is a moderate risk taker and works under uncertainty for achieving the goal.
 Is innovative.
 Is a persuader of deviant pursuits.
 Reflects a strong urge to be independent.
 Persistently tries to do something better.
 Is dissatisfied with routine activities.
 Is prepared to withstand the hard life.
 Is determined, but patient.
 Exhibits a sense of leadership.
 Exhibits a sense of competitiveness.
 Takes personal responsibility.
 Is oriented towards the future.
 Tends to persist in the face of adversity
Characteristics of Entrepreneur
Vision – He is able to visualize market demand, socio-economic environment and the
future of business venture.
Knowledge – He has sound conceptual knowledge about all the technicalities of his
business.
Desire to succeed – He has multiple goals and a seeks opportunities to be productive.
Independence – He is independent in work and decision making
Optimism – He knows how to exploit opportunities.
Value addition – He does not follow the conventional rule of thumb, they have a desire to
create, innovate and add value.
Initiative – He takes the initiative to make an action plan from limited resources.
Goal setting – He sets realistic goals.
Problem solver – He is creative in problem solving.
Good human relations – He is a good leader, motivator and team builder.
Communication skills – He has the ability to persuade others.
Functions of Entrepreneurs
A successful entrepreneur has a high capacity for taking calculated risks and has faith own
capabilities.
The functions of an entrepreneur are co-ordination of the business management of the enterprise,
risk- taking, controlling the enterprise, innovation for change, motivation and other related
activities. In reality, an entrepreneur has to carry out a combination of these in keeping with time
and environment.
1) Assumption of Risk: A business risk also involves thee risk due to the possibility of changes
in the tasks of consumers, techniques of production and new inventions. Such risks are not
insurable.
2) Business Decisions: The entrepreneur has to decide the nature and type of goods to be
produced. He effects suitable changes in the size of the business, its location, techniques of
production and does everything that is needed for the development of his business.
3) Managerial Functions: The entrepreneur formulates production plans, arranges finance,
purchases raw materials, provides production facilities, organizes sales and assumes the task of
personal management. In a large establishment, these management functions are delegated to
thee paid managerial personnel.
4) Function of Innovation: An important function of an entrepreneur is “innovation”. He
conceives that idea for the improvement in the quality of production line. He considers the
economic viability and technological feasibility in bringing about improved quality. The
introduction of different kinds of electronic gadgets is an example of such an innovation of new
products.
An entrepreneur performs many useful functions. He undertakes a venture, assumes risk and
earns profit. He is the man having a strong motivation to achieve success. He is self -confident in
his entrepreneurial abilities. He exploits opportunities whenever and whenever they arise.

Types of Entrepreneurs
1. Innovative Entrepreneur: These are the ones who invent the new ideas, new products, new
production methods or processes, discover potential markets and reorganize the company’s
structure. These are the industry leaders and contributes significantly towards the economic
development of the country. The innovative entrepreneurs have an unusual foresight to
recognize the demand for goods and services. They are always ready to take a risk because
they enjoy the excitement of a challenge, and every challenge has some risk associated with
it. Ratan Tata is said to be an innovative entrepreneur, who launched the Tata Nano car at a
considerably low cost.
2. Imitating Entrepreneurs: The imitating entrepreneurs are those who immediately copy the
new inventions made by the innovative entrepreneurs. These do not make any innovations by
themselves; they just imitate the technology, processes, methods pioneered by others. These
entrepreneurs are found in the places where there is a lack of resources or industrial base due
to which no new innovations could be made. Thus, they are suitable for the underdeveloped
regions where they can imitate the combinations of inventions already well established in the
developed regions, in order to bring a boom in their industry.
3. Fabian Entrepreneurs: These types of entrepreneurs are skeptical about the changes to be
made in the organization. They do not initiate any inventions but follow only after they are
satisfied with its success rate. They wait for some time before the innovation becomes well
tested by others and do not result in a huge loss due to its failure.
4. Drone Entrepreneurs: These entrepreneurs are reluctant to change since they are very
conservative and do not want to make any changes in the organization. They are happy with
their present mode of business and do not want to change even if they are suffering the
losses.

Entrepreneurship meaning

Entrepreneurship refers to an action process of entrepreneur towards establishing an enterprise.

“Entrepreneurship is the act of being an entrepreneur, which can be defined as “one who
undertakes innovations, finance and business acumen in an effort to transform innovations into
economic goods.”
The most obvious form of entrepreneurship is that of starting a new business also called as
“startup Company”. More recently, the term has evolved to include other types of
entrepreneurship such as:
 Social entrepreneurship that applies the “entrepreneurial principles to organize, create
and manage a venture to achieve social change” and
 Political entrepreneurship or “starting a new political project, group, or political party.”
Nature of Entrepreneurship
♦ Creation of an enterprise – It involves creation and operation of an Enterprise
♦ Organizing function – It brings together various factors of production for economic use.
♦ Innovation – It is an automatic, spontaneous and creative response to changes in the
environment.
♦ Risk bearing capacity – It assumes uncertainty of future.
 ♦ Managerial and leadership function – It is responsible for controlling and coordinating
the human resource and giving direction to an enterprise.
♦ Gap filling – It fills the gap between human needs and available products and services.
Process of Entrepreneurship

Identify an opportunity – An Entrepreneur senses opportunities and visualizes a market since

they are creative and open to new ideas and seek challenges. They look for needs, wants,
problems and challenges that are not met or dealt effectively. Since their ideas are innovative
they gain first movers advantage which provides product identification and higher credibility in
the market.
Establishing a vision – It involves generation of ideas using past experience and creativity to
develop new and innovative ways to solve a problem, or satisfy a need. Out of many ideas the
most feasible and profitable are chosen and narrowed to one best idea. He evaluates different
opportunities and the business environment to assess the (i) Real and Perceived value of the
product/service (ii) Risks and rewards associated with the project (iii) and differential advantage
in its competitive environment.
Persuade others – He forms a foundation team which consists of a group of individuals who
work together to turn his vision into reality. They may be partners, financiers, family members
etc.
Gathering Resources – It involves using a business plan to attract investors, venture capitalists,
partners, financial institutions, promoters etc. The main task is to research and identify resources
that are needed to turn the idea into a viable venture.
Resources can be categorized into –
 • Financial Resources – Personal savings, retained capital, banks, government
institutions, family, friends, partnerships, venture capital, publicissue.
• Operating Resources – They can be Tangible or Intangible.
Tangible – (a) machines (b) raw materials (c) land and building (d) office
equipments (An entrepreneur has to make a decision to buy, rent or hire them).
Intangible resources – (a) company’s image (b) operating procedures (c)
transportation (d) management
• Human – Temporary/permanent employees, Amount of man power needed,
Recruitment, Selection and Training of staff, Compensation, Organization culture.
• Information – An efficient management information system is needed in order to have
timely info about customers, markets, competitors and external environment. All the data
is networked on real time basis to speed up actions based on information.
Create new Venture – When all the resources have been arranged, the next step is Creation and
establishment of a new venture and running the business venture successfully. It requires a lot of
enthusiasm and persuasion to gather optimum resources and it requires a lot of perseverance and
passion to believe in self.
Change/Adapt with time – It is necessary to monitor and upgrade the organization with
changing market conditions. It requires availability of funds to make changes and the
adaptability of human resource towards changed environment.

Functions of Entrepreneurship
(A) Primary Functions
Planning
Organizing
Decision Making
Managing
Innovating
Risk bearing
(B) Secondary Functions
Diversification of production
Expansion of the enterprise
Maintaining cordial employer and employee relations
Tackling Labour problem
Co-ordinating and communicating with third parties
(C) Other Functions
Managing of scarce resources
 Dealing with public bureaucracy
Identifying parallel opportunities
Building Strong customer relations
Barriers to Entrepreneurship
(i) Environmental Barriers
(a) Raw Material – Non-availability of raw materials required for production during peak
seasons. It leads to increase in price of raw materials due to competition.
(b) Labour –
Lack of skilled labour
Lack of committed and loyal employee
Quality and Quantity of labour
(c) Machinery – Machines are necessary but they are also costly and due to rapid change in
technology they become obsolete and require replacement which requires cash in hand. It
becomes very difficult for small business organization to keep updating its production process.
(d) Land and Building – Acquisition of land and construction of building at a prime location
require heavy expenditure. If the land is taken on rent, it becomes a fixed cost and a constant
concern for the entrepreneur.
(e) Infrastructure support – Adequacy of power, proper roads, water and drainage facilities etc.
There is less support from development authorities due to red-tapism and corruption.
(ii) Financial barrier → Availability of funds is a major concern. A delay in source of finance
results in delay of starting or running business.
(iii) Personal Barrier → They are caused by emotional blocks of an individual. They cause a
mental obstruction. They are :-
(a) Lack of confidence – They think they will never find a successful business idea and would be
unable to attract necessary resources. Therefore, they dismiss the thought of being self-
employed.
(b) Lack of Dependability on others – They aim to gain their additional expertise through trail
and error and experience, rather than seeking further development or personal assistance from
others.
(c) Lack of Motivation – Lose interest and motivation when ideas don’t work.
(d) Lack of Patience – When desire to achieve success in first attempt or to become rich instantly
are confronted with business challenges/problems they lose interest. They give up at during
initial losses.
(e) Inability to Dream – Sometimes they are short of vision or satisfied with what they have
achieved and lose interest in further expansion of business.
(f) Sense of Pride/Embarrassment – they are too proud or too embarrassed to take help.
(iv) Societal Barrier →
 Socio-cultural norms and values
Degree of approval or disapproval of entrepreneurial behaviour
Financial stability and family background
Caste and religious affiliation
(v) Political Barrier →
Government incentives and concessions
Facilitating socio-economic setting
Interest in economic development of society

Scope of Entrepreneurship in India

Individuals are opting for entrepreneurship as a career due to reasons such as –
Desire of control over one’s future
More profits
Lack of employment opportunity
Government measures to promote entrepreneurship
Entrepreneurship provides employment and source of earning to people. It helps in reducing the
monopoly of rich businessman and achieving a balanced regional development and growth in
economy. Government of India is conducting development programmes to identify
entrepreneurial potential and assistance from financial and non-financial institutions are being
provided to entrepreneur. Entrepreneurship training institutes have been established and financial
and operational support is being provided to young entrepreneurs in India
Entrepreneurial Myths:
Starting a business is easy
Takes a lot of money to finance a new business
Start-ups can‘t be financed with debt
Banks don‘t lend money to start-ups
Start business in mostly attractive industries
Growth of start-up depends more on entrepreneurial talent
Success is assured financially
Distinction between Entrepreneur and Enterprise

Entrepreneur Enterprise

1) Entrepreneur is person. Enterprise is the business unit.

2) Entrepreneur is risk-taker. Enterprise is the unit involving risk and uncertainty.

Enterprise serves as the framework within which decision

Entrepreneur is decision-
3) concerning what to produce, how much to produce, where to
maker.
produce are taken by the entrepreneur.

Entrepreneur engages Enterprise implies the harmonious interrelation or service of

4) himself in producing and functions and staff primarily for the purpose of making/ selling
selling the product. product or service.

Entrepreneur procures raw

Enterprise utilizes the raw materials and other inputs in the
5) materials and other inputs
process of production.
for production.

Difference between an Entrepreneur and a Manager

Points Entrepreneur Manager

The main motive of an entrepreneur

But, the main motive of a manager is to
is to start a venture by setting up an
Motive render his services in an enterprise
enterprise. He understands the
already set up by someone else.
venture for his personal gratification.

An entrepreneur is the owner of the A manager is the servant in the

Status
enterprise. enterprise owned by the entrepreneur.

An entrepreneur being the owner of

the enterprise assumes all risks and A manager as a servant does not bear
Risk-bearing
uncertainty involved in running the any risk involved in the enterprise.
enterprise.

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

Entrepreneur himself thinks over But, what a manager does is simply to

Innovation what and how to produce goods to execute the plans prepared by the
meet the changing demands of the entrepreneur. Thus, a manager simply
customers. Hence, he acts as antranslates the entrepreneur’s ideas into
 innovator also called a “change- practice.
agent.”

An entrepreneur needs to possess

On the contrary, a manager needs to
qualities and qualifications like high
possess district qualifications in terms
Qualifications achievement motive, originally in
of sound knowledge in management
thinking, foresight, risk- bearing
theory and practice.
ability and so on.

Entrepreneur vs. Entrepreneurship

The term “entrepreneur” is often used interchangeably with “entrepreneurship”. But,
conceptually, they are different, yet they are just like the two sides of a coin. Their differences
are as follows:

Entrepreneur Entrepreneurship

Refers to a person Refers to a process

Visualizer Vision

Creator Creation

Organizer Organization

Innovator Innovation

Technician Technology

Initiator Initiative

Decision- maker Decision

Planner Planning

Leader Leadership

Motivator Motivation

Programmer Action

Risk-taker Risk-taking

Communicator Communication

Administrator Administration
Traits of Entrepreneur
Following are the top 10 essential entrepreneurial traits that anyone who is interested in starting a
business must possess:
i) 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 laboring under the
gaze of a master.
ii) 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 thy may encounter on the road. This
persistence and determination is fueled by a burning desire to achieve the goal of succeeding in
the chosen field of business.
iii) 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 endeavors 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.
iv) Creativity: In the business world, you cannot afford to be complacent and uncreative unless
you want the competition to move up on ahead of you. Creative people are naturally curious,
inquisitive, bright and highly flexible when thinking. Thy keenly observe their environment and
have an eye for spotting new trends that could spark a business opportunity.
v) Organized and Goal- oriented: An entrepreneur knows the value of organization in a business
endeavor. A good entrepreneur has the ability to consolidate resources.
vi) Visionary: An entrepreneur has a vision for his/her future.
vii) Risk- Taking and Tolerance for Failure: A good entrepreneur realizes that loss and failure
are inherent in any business endeavor. Thus, an entrepreneur must always be ready to make
calculated risks and face whatever consequences accompany those risks. As in all fields of
endeavor, 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.
viii) Perseverance and Hard Work: These are perhaps two of the most important entrepreneurial
traits.
ix) Commitment: An entrepreneur will not important mark of a good entrepreneur is being
honest and honorable in all business dealings and interpersonal relationships- Whether it is
between business partners, employees, peers or investors.
ENTREPRENEURIAL SKILLS
What skills are needed to be an entrepreneur? There are many skills that entrepreneurs develop
over time, but there are a few skills that every entrepreneur must have before opening their
“door” for business. Successful entrepreneurs have to start with these six skills:
1) Self-Motivation: People who start their own businesses have typically worked in a larger
organization and have enjoyed the amount of control and autonomy that self- employment gives
them, when they see the direct rewards for labor, they are motivated to setup their own business.
Money is also a big motivator.
Many top entrepreneurs have had unhappy experiences in childhood, and are motivated by
something negative. They want to go on and prove that they can succeed and are driven by
control and power. And while those negative experiences may drive many to set their own
businesses in the first place, motivation grows with the enterprise; those who run small
businesses generally do so because their work is also their passion.
2) Self-Confidence: Every entrepreneur needs to be confident in themselves, their product and
their business. One needs to know that his product can truly help people and he is charging prices
that are both fair to him and his clients.
3) Ethics and Morals: Ethics and morals are the foundation of every good entrepreneur. Early
on one must decide what he and his business will stand for and what lines he will refuse to cross.
Many entrepreneurs close their doors because the dollar outshines their morals. If one stray too
far from his morals he will give himself and his business a bad name. No one wants to do
business with someone who will not stand up for his own morals.
4) Time Management: One should schedule his day and stick to that schedule. This cannot be
emphasized enough. New entrepreneurs need to realize that every minute is valuable. When first
starting out, most likely one will not have enough “work” to fill an eight hour day. This does not
mean that he has time to take a three hour lunch with friends. He should utilize this time to learn
more skills related to his business, find ways to advertise and contact potential clients.
5) Sales: No matter how much you do not like the idea of it, every business has to work with
sales. Each industry and business has a unique way of handling its sales. As an entrepreneur, it is
his job to figure out what type of sales he will prefer and what type is best for his services or
products. If he had ever worked in retail sales or advertising he already have an edge on most
other hopeful business people. All entrepreneurs will benefit from sales seminars, books and
motivational programs.
6) Financial Knowhow: When in business, knowledge of finance is a must. Knowing how to
balance a check-book and keep track of numbered invoices is all most small businesses need to
start out. The most important aspect of small business finance is scheduling time specifically for
the finance management. Granted it helps to have an accounting degree or extensive Quick
Books knowledge but these skills are not mandatory.
7) Communication Skills: Businesspeople communicate by writing letters and memos, talking
on the telephone, and meeting with customers, suppliers, bankers, employees, and others. To
succeed as an entrepreneur, he will need to develop his writing, speaking and listening skills
because he will use them everyday:
i) Writing Skills: As an entrepreneur, a person will have to frequently communicate in writing
with customers, suppliers and employees, among others. To do so effectively, he will need to
develop his business writing skills. Good business writing communicates ideas clearly. It also
gets results by being positive and persuasive and by convincing readers that they should accept
what the writer is communicating.
ii) Speaking Skills: Much of our communication as a business owner will be conducted verbally
either over the telephone or face-to –face. How we yourself will have a big impact on the people
with whom we deal.
iii) Listening Skills: Problems in business often occur because people fail to listen to each other.
As a business owner, we need to listen carefully to our employees. We also need to listen to
bankers, suppliers, customers and anyone else who may impact our business. What can we do to
improve our listening skills?
8) Problem-Solving Skills: Many entrepreneurs make decisions casually or base them on
intuition. As a result, their decisions are based on faulty assumptions or illogical thinking. The
best entrepreneurs use formal problem- solving mechanisms to gather information and evaluate
different options.
For many kinds of problems, a person will need to make decisions alone. For other kinds of
decisions, however, involving other people in the company in brainstorming and consensus-
building techniques can make the most of group decision- making.
Possessing or nurturing these skills before going into business will help to ensure successful
outcome. So long as one has an excellent.
ENTREPRENEURIAL STRUCTURES
When looking at the subject of organisational structures, entrepreneurial structures are probably
the simplest and often how many organisations start.
This type of structure is built around the owner manager and is typical of small companies in the
early stages of their development.
The entrepreneur often has specialist knowledge of the product or service
Example owner/managed business
Types of structures
Most organisations out-grow an entrepreneurial structure evolving into one of the following:
Functional structures
Divisional structures
Geographical structures
Matrix structures
Advantages & disadvantages of entrepreneurial structures
Advantages
There is only one person taking decisions - this should lead to decisions being made
quickly.
As soon as an element of the market alters, the entrepreneur should recognise it and act
quickly.
A lack of a chain of command and the small size of the organisation should mean that the
entrepreneur has control over the workforce and all decisions within the organisation
leading to better goal congruence.
Disadvantages
This type of structure is usually suited to small companies where due to the size; there is
no career path for the employees.
 If the organisation grows, one person will not be able to cope with the increased volume
of decisions etc.
Functional structure
This type of structure is common in organisations that have outgrown the entrepreneurial
structure and now organise the business on a functional basis.
 It is most appropriate to small companies which have few products and locations and
which exist in a relatively stable environment.
 For example a business making one type of electrical component for use in a car
manufacturing company.

Advantages & disadvantages of functional structures

Advantages
 This organisational structure relates to an organisation which has outgrown the
entrepreneurial stage. Rather than duplicating roles in different parts of the company,
similar activities are grouped together so leading to:
 lower costs
 standardisation of output/systems, etc.
 people with similar skills being grouped together and so not feeling isolated.
 Due to the larger size of the organisation and the grouping into functions, there is a career
path for employees - they can work their way up through the function.
Disadvantages
 Managers of the functions may try to make decisions to increase their own power/be in
the best interest of their function rather that work in the best interest of the company
overall, leading to empire building and conflicts between the functions.
 Due to the longer chain of command, decisions will be made more slowly.
 This style of structure is not suited to an organisation which is rapidly growing and
diversifying - the specialists in for example the production function would not be able to
cope with making gas fires and radios.
Divisional structure
o A divisional structure occurs when an organisation is structured in accordance with
product lines or divisions or departments.
o They are headed by general managers who enjoy responsibility for their own resources.
 o Divisions are likely to be seen as profit centres and may be seen as strategic business
units for planning and control purposes.
o Some departments, e.g. accounts will be centralised.

Advantages & disadvantages of divisional structures

Advantages
 If an organisation wants to grow and diversify, the functional structure cannot cope, so
instead the divisional structure should be adopted. Should the company want to diversify
further, it is easy to 'bolt on' another division.
 It encourages growth and diversity of products, e.g. by adding additional flavours etc to
capture other segments of the market. This in turn promotes the use of specialised
equipment and facilities.
 Due to the breakdown of the company's activities into the divisions, it should mean that
the divisional managers can clearly see where their area of responsibility lies and it
should leave the top management free to concentrate on strategic matters, rather than to
get involved in the day to day operations of each division - although this can lead to a
lack of control over the activities of the division and possible lack of goal congruence.
 The focus of attention is on product performance and profitability. By placing
responsibility for product profitability at the division level, they are able to react and
make decisions quickly on a day to day basis.
 The role of the general manger has less concentration upon specialisation. This promotes
a wider view of the company's operations.
Disadvantages
 In most divisionalised companies, some functions, e.g. accounting or human resources
will be provided centrally. If this is the case, the cost of the centralised function could be
recharged to those divisions using e.g. the human resource function. There are different
ways of calculating the recharge and divisional managers may complain if the
profitability of their division is reduced by an amount that they perceive as being
arbitrary.
Geographical structures
  Grouping activities on the basis of location.
 Common in organisations that operate over a wide geographic area.
 Often, some departments e.g. accounts will be centralised.

Advantages
 Enables geographic growth - e.g can add a new division if the business expands into a
new country
 Gives clear responsibility for geographical sales areas
 Good training of general managers, as each division will effectively function like a
company in its own right
 Senior managers are thus freed to concentrate on group strategy
Disadvantages
 As for divisional structure above
Product vs geographic divisional structure
Product divisionalisation is generally preferred over say geographic divisionalisation when the
product is relatively complex and requires a high cost of capital equipment, skilled operators,
etc., e.g. the car industry.
Matrix structure
o A matrix structure aims to combine the benefits of decentralisation (e.g. speedy
decision making) with those of co-ordination (achieving economies and synergies across
all business units, territories and products).
o It usually requires employees from various departments to form a group to achieve a
specific target.
o They require dual reporting to managers and the diagram shows a mix of product and
functional structures.
o For example in a university, a lecturer may have to report to both subject and department
heads.
Advantages & disadvantages of matrix structures
Advantages
 In today's rapidly changing environment, there is a need for effective coordination in very
complex situations. If a car manufacturer wants to design, produce and market a new
model, the process involves most parts of the organisation and a flexible/adaptable
system is needed to achieve the objectives. The more rigid structure experienced in a
divisional company would not have the flexibility to be able to coordinate the tasks and
the people, whereas the matrix structure can cope.
 The production managers could be replaced with customer managers, in which case the
whole team will be focussed on meeting the needs of the customer.
Disadvantages
 Where the matrix structure can cause difficulty is in the lines of control. These may
become ambiguous and conflict with each other. A team member may be answerable to
the product manager and to a functional head, and this may cause confusion and stress.
Time consuming meetings may be required to resolve the conflict, so resulting in higher
administration costs.
Entrepreneurial Culture & Bureaucratic/administrative Culture:
The customs, ideas & attitudes which are shared by a group makes up its culture & this is
passed on from generation to generation by a learning process. The culture consists of material &
non-material culture. Material culture consists of manmade things like T.V, phone etc while non-
material culture includes language, ideas, beliefs, music etc.
Culture when viewed from the point of view of business can be further divided into;
1. Entrepreneurial culture.
2. Bureaucratic culture.
 Entrepreneurial culture includes the vision, values, norms, traits that are conducive for the
development of the economy. It is governed by the idea of opportunity, social values, ambition &
helps the entrepreneur to do something valuable.
On the other hand, bureaucratic culture / administrative culture are corporate or
organizational culture which focuses on existing opportunity, HRIS, controlling procedure in the
company etc.
According to Stevenson, organizations must have both entrepreneurial & administrative
culture. An able entrepreneur must be able to combine both the cultures for achieving excellence
& success. A comparison between both can be done as follows:

Points of Distinction Entrepreneurial Culture Administrative Culture

Strategic orientation Driven by perception of
opportunity Driven by controlled resources

Revolutionary with short term Evolutionary with long term

Commitment to seize duration duration
opportunity
Multiple information network Hierarchy system & formal
Management structure & flat structure network

Looks at things from macro Looks from micro view point

View point view point
Entrepreneurial culture faces pressures like;
1. Rapidly changing technology.
2. Social values.
3. Lack of predictable resource needs.
4. Risk of obsolescence.
5. Employee desire for independence.
6. Foreign competition.
Administrative or bureaucratic culture faces pressures like;
1. Coordinating with existing resources.
2. Formal planning system.
3. Clearly defining authority & responsibility.
4. Control system.
5. Day to day administration problems.
Characteristics of Entrepreneurship
1) Decision Making: A decision is a course of action which is consciously chosen from among a
multiple of alternatives to achieve the desired result. As entrepreneurship involves both risk and
uncertainty, decision making is crucial on the part of the entrepreneurs to establish and run the
enterprise successfully.
2) 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 for building and running the enterprise.
3) Risk Taking: This characteristic feature implies assuming the responsibility for loss that may
occur due to unforeseen contingencies of the future. Entrepreneur, by his deep insight and
scientific approach, analyses the situation objectively and reduces the risk considerably on one
hand and enhances the profit factor on the other.
4) Building Organization: Entrepreneurship presupposes the initiative and skill on building
organization. It is by delegation of authorities and proper leadership that organization can be
built up. As per the views of Harbison, organization building is the most critical skill need for
entrepreneurship as it facilitates the economic use of other innovations.
5) Skillful Management: For effective management of an enterprise, the role of an entrepreneur
to initiate and supervise design of organization- improvement projects in relation to upcoming
opportunities is very much important.
6) Innovation: David Mc Clelland identified two important characteristics of entrepreneurship-
first doing things in a new and better way, which is synonymous to innovation given by J.A.
Schumpeter and second, decision making under uncertainty. So innovation is one of the most
important characteristics of entrepreneurship.
7) Mobilization of Resources: resources are the help needed to carry out activities resulting in
accomplishment of goal. They are found in scattered manner in the environment and required to
be perceived, identified and mobilized by entrepreneurs to attain business goal. Thus,
entrepreneurs make themselves distinct from the rest of population because of their innate
capability to mobilize resources.
Contributions of Entrepreneurs
1) Develop New Markets: Under the modern concept of marketing, markets are people who are
willing and able to satisfy their needs. In Economics, this is called effective demand.
Entrepreneurs are resourceful and creative. They can create customers or buyers. This makes
entrepreneurs different from ordinary businessmen who only perform traditional functions of
management like planning, organization and coordination.
2) Discover New Sources of Materials: Entrepreneurs are never satisfied with traditional or
existing sources of materials enjoy a comparative advantage in terms of supply, cost and quality.
3) Mobilize Capital Resources: Entrepreneurs are the organizers and coordinators of the major
factors of production, such as land, labor and capital. They properly mix these factors of
production to create goods and services. Capital resources, from a layman’s view, refer to
money. However, in economics, capital resources represent machines, buildings, and other
physical productive resources. Entrepreneurs have initiative and self confidence in accumulating
and mobilizing capital resources for new business or business expansion.
4) Introduce New Technologies: Aside from being innovators and reasonable risk- takers,
entrepreneurs take advantage of business opportunities and transform these into profits. So, they
introduce something new or something different. Such entrepreneurial spirit has greatly
contributed to the modernization of economies. Every year, there are new technologies and new
products. All of these are intended to satisfy human needs in a more convenient and pleasant
way.
5) Create Employment: The biggest employer is the private business sector. Millions of jobs are
provided by the factories, service industries, agricultural enterprises, and the numerous small–
scale businesses.
Role of Entrepreneurs
Entrepreneurs, on the other hand, are district from business owners and managers. They are
essentially strategic innovators, seeking profitability with growth. Promoting entrepreneurship, in
that sense, is intrinsically different from promoting small- scale industry.
Entrepreneurs are essentially strategic innovations, seeking profitability with growth.
1) Initiator: Key man who envisages new opportunities, new lines of production, new products &
co-ordinates all other activities.
2) Innovator: Brings in overall change through innovation for maximum social good. Human
values remain scared & inspire him to serve society. He is headed with innovation & creativity.
3) Coordinator: He has firm belief in social betterment & carries out this responsibility with
conviction. In this process, he accelerates personal, economic as well as human development.
4) Leader: He is a visionary & an integrated man with outstanding leadership qualities. With a
desire to excel, he gives top priority to research and Development.
5) Social Worker: He always works for the well-being of the society.
6) Welfare Agent: Entrepreneurial activities encompass all fields? Sectors & foster a sport of
enterprise for the welfare of mankind.
7) Employer: Small business, bring crowned with innovations bring more profit & create jobs.
8) Development Agent: He contributes in development of country by way of providing
employment & building up nation’s economy. Results in raising standard of living of people.
Role of Entrepreneurship in economic development
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 input in the
economic development of a country. The entrepreneur acts as a trigger head to give spark to
economic activities by his entrepreneurial decisions. He plays a pivotal role not only in the
development of industrial sector of a country but also in the development of farm and service
sector. The major roles played by an entrepreneur in the economic development of an economy
are discussed in a systematic and orderly manner as follows.
(1) Promotes Capital Formation:
Entrepreneurs promote capital formation by mobilizing the idle savings of public. They employ
their own as well as borrowed resources for setting up their enterprises. Such types of
entrepreneurial activities lead to value addition and creation of wealth, which is very essential for
the industrial and economic development of the country.
(2) Creates Large-Scale Employment Opportunities:
Entrepreneurs provide immediate large-scale employment to the unemployed which is a chronic
problem of underdeveloped nations. With the setting up of more and more units by
entrepreneurs, both on small and large-scale numerous job opportunities are created for others.
As time passes, these enterprises grow, providing direct and indirect employment opportunities
to many more. In this way, entrepreneurs play an effective role in reducing the problem of
unemployment in the country which in turn clears the path towards economic development of the
nation.
(3) Promotes Balanced Regional Development:
Entrepreneurs help to remove regional disparities through setting up of industries in less
developed and backward areas. The growth of industries and business in these areas lead to a
large number of public benefits like road transport, health, education, entertainment, etc. Setting-
up of more industries lead to more development of backward regions and thereby promotes
balanced regional development.
(4) Reduces Concentration of Economic Power:
Economic power is the natural outcome of industrial and business activity. Industrial
developments normally lead to concentration of economic power in the hands of a few
individuals which results in the growth of monopolies. In order to redress this problem a large
number of entrepreneurs need to be developed, which will help reduce the concentration of
economic power amongst the population.
(5) Wealth Creation and Distribution:
It stimulates equitable redistribution of wealth and income in the interest of the country to more
people and geographic areas, thus giving benefit to larger sections of the society. Entrepreneurial
activities also generate more activities and give a multiplier effect in the economy.
(6) Increasing Gross National Product and Per Capita Income:
Entrepreneurs are always on the look out for opportunities. They explore and exploit
opportunities, encourage effective resource mobilization of capital and skill, bring in new
products and services and develops markets for growth of the economy. In this way, they help
increasing gross national product as well as per capita income of the people in a country.
Increase in gross national product and per capita income of the people in a country, is a sign of
economic growth.
CLASSIFICATION OF ENTREPRENEURS
The entrepreneurs in business are broadly classified according to the types of business, use of
professional skill, motivation, growth and stages of development.
Accordi
According According to According According According to
According Others or ng to
to the types the stages of to the to the use of the
to area unclassified gender
of business Development growth technology motivation
and age
1. Business 1. First According 1. 1. Men1. Pure
entrepreneur generation 1. Growthto the use of Professional entrepren entrepreneur
1. Urban
2. Trading entrepreneur entrepreneur technology entrepreneurs eurs 2. Induced
entrepreneur
entrepreneur 2. Modern2. Super- 1. Technical 2. Non- 2. entrepreneur
2. Rural
3. Industrial entrepreneur growth entrepreneur Professional Women 3. Motivated
entrepreneur
entrepreneur 3. Classicalentrepreneur 2. Non- entrepreneurs entrepren entrepreneur
i) Large entrepreneur technical 3. Modern eurs 4.
ii) Medium entrepreneur entrepreneurs i) YoungSpontaneous
iii) Small 3. 4. Traditional entrepren entrepreneur
and Professional entrepreneurs eurs
iv) Tiny entrepreneur 5. Skilled ii) Old
4. Corporate 4. High-tech entrepreneur entrepren
entrepreneur entrepreneur 6. Non- eurs
5. Skilled iii)
Agriculture entrepreneurs Middle-
entrepreneur 7. Imitating aged
i) Plantation entrepreneurs entrepren
ii) 8. Inherited eurs
Horticulture entrepreneurs
iii) Dairy 9. Forced
iv) Forestry entrepreneurs
6. Retail 10. National
entrepreneur entrepreneurs
7. Services 11.
entrepreneur International
entrepreneurs
12.
Bureaucratic
entrepreneurs
13.
Entrepreneur
entrepreneurs
14. Immigrant
entrepreneurs.

The above classification of entrepreneurs is not exhaustive, for it aims at highlighting the broad
range of entrepreneurs found in business and profession. We shall now discuss in brief, each type
of entrepreneurs.
According to the type of Business
Entrepreneurs are found in various types of business occupations of varying size.
1) 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.
2) 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 engaged in
both domestic and overseas trade.
3) 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.
4) 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.
5) Agricultural Entrepreneur: Agricultural entrepreneurs are those entrepreneurs who
undertake such agricultural activities as raising and marketing of corps, fertilizers and other
inputs of agriculture. They are motivated to raise the productivity of agriculture through
mechanization, irrigation and application of technologies for dry land agriculture.
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.
1) Technical Entrepreneur: “A technical entrepreneur is essentially an entrepreneur of “craftsman
type.” He develops new and improved quality because of his craftsmanship. He concentrates
more on production than marketing. The greatest strength, which the technical entrepreneur has
is his skill in production techniques.
2) Non-technical Entrepreneur: They are concerned only with developing alternative marketing
and distributions strategies to promote their business.
3) Professional Entrepreneur: Professional entrepreneur is a person who is interested in
establishing a business but dos 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. Such an entrepreneur is dynamic and he conceives no ideas to develop
alternative projects.

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. He is also
motivated to influence others by demonstrating his power thus satisfying his ego.
1) Pure entrepreneur: A pure entrepreneur is an individual who is motivated by psychological
and economic rewards. He undertakes an entrepreneurial activity for his personal satisfaction in
work, ego or status.
2) Induces Entrepreneur: Induced entrepreneur is one who is induced to take up an
entrepreneurial task due to the policy measures of the government that provides assistance,
incentives, concessions and necessary overhead facilities to start a venture. Most of the
entrepreneurs are induced entrepreneurs who enter business due to financial, technical and
several other facilities provided to them by the state agencies to promote entrepreneurship.
3) 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. If the product is developed to a saleable stage, the entrepreneur is further
motivated by reward in terms of profit.
4) 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. Such entrepreneurs have a strong conviction and confidence
in their ability.
According to Growth
The development of a new venture has a greater chance of success. The entrepreneur enters a
new and open field of business. The customer approval to the new product gives the
psychological satisfactions and enormous profit. The industrial units are identified as high
growth, medium growth and low growth and low growth industries and as such we have
“Growth Entrepreneur” and “Super Growth Entrepreneur.”
1. Growth Entrepreneur: Growth entrepreneurs are those who necessarily take up a high growth
industry. These entrepreneurs choose an industry which has sustained growth prospects.
2. Super- Growth Entrepreneur: Super- growth entrepreneurs are those who have shown
enormous growth of performance in their venture. The growth performance is identified by
liquidity of funds, profitability and gearing.
According to Stages of Development
i) 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
technologies to produce a marketable product or service.
ii) Modern Entrepreneur: A modern entrepreneur is one who undertakes those venture which go
well along with the changing demand in the market. They undertake those ventures which suit
the current marketing needs.
iii) Classical entrepreneur: A classical entrepreneur is one who concerned with the customers and
marketing needs through the development of a self- supporting ventures. He is stereotype
entrepreneur whose aim is to maximize his economic returns at a level consistent with the
survival of the firm with or without an element of growth.
According to Gender
i) Men Entrepreneur: Generally men are found as an entrepreneur in the society. When a male
member of the society performs the entrepreneurial functions, it is called men entrepreneur.
ii) Women Entrepreneur: In 1988, for first time, the definition of Women Entrepreneurs’
Enterprise was evolved that termed an SSI unit? Industry- related service or business enterprise,
managed by one or more women entrepreneurs in proprietary concerns, or in which she/thy
individually or jointly have a share capital or not less than 1 percent as partners/shareholders/
directors of private limited company/ members of a cooperative society, as a men Enterprise.
Women entrepreneurs have been on the Indian business scene for quite some time now and have
achieved remarkable success. Moreover, like any other entrepreneur, any first generation woman
entrepreneur has to compete in the business against those already will established.
Realizing the great untapped potential, the Government has been making concerned efforts to
channelize the skills and talent if women towards economic and business generating activities.
Others:
1) Innovating Entrepreneurs: Innovating entrepreneurship is characterized by aggressive
assemblage of information and analysis of results, deriving from a novel combination of factors.
Men/ Women in this group are generally aggressive in experimentation who exhibit cleverness in
putting attractive possibilities into practice. One need not invent but convert even old established
products or services, by changing their utility, their value, their economic characteristics, into
something new, attractive and utilitarian.
2) Initiative Entrepreneurs: Imitative entrepreneurship is characterized by readiness to adopt
successful innovations by innovating entrepreneurs. They first imitate techniques and technology
innovated by others.

Entrepreneurial Life Cycle

1. Development / Seed Stage
The development or seed stage is the beginning of the business lifecycle. This is when your
brilliant idea is merely just a thought and will require a round of testing in its initial stage. In
testing your business idea, you may conduct research regarding the industry, gather feedbacks
from your friends, family, colleagues, or other industry specialists. This is when you are
determining whether the business idea that you had is worth pursuing and if so it will be the birth
of your new business.
Challenges
 Business Idea Profitability
 Market Acceptance
 Establishing Business Structure
 Accounting Management
2. Startup Stage
You’ve decided that your business idea is worth pursuing and have now made your business
entity legal. In this stage, you’ve finished developing the products or services that your business
has to offer and will begin marketing and selling. During this stage, you will be tweaking your
products or services according to the initial feedback from your first paying customers and
market demand. You will need to learn and adjust your business model to ensure profitability
and that it meets your customer’s expectations. By adjusting your business model, you’ll be able
to set your business on the right track.
Challenges
 Managing Cash Reserves
 Managing Sales Expectations
 Accounting Management
 Establishing Customer Base
 Establishing Market Presence
3. Growth / Survival Stage
Your business has endured through the initial stages of the business lifecycle and is currently in
its growth or survival stage. The business is consistently generating revenue and adding new
customers. These recurring revenue will help pay for your operating expenses and open up new
business opportunities. Currently, your business could be operating at a net loss or maintaining a
healthy profit, but there could be some competition. This is also when you need to fine tune your
business model and implement proven methodologies, sales model, marketing model, and
operations model before expanding your venture for the mass market.
Challenges
 Dealing with Increasing Revenue
 Dealing with Increasing Customers
 Accounting Management
 Effective Management
 Market Competition
4. Expansion / Rapid Growth Stage
Your business has been a thriving company and established its presence in the industry. You
have now reached the stage in which your business will expand and spread its roots into new
markets and distribution channels. In order to start capitalizing on the success of your business,
you will need to capture a larger market share and find new revenue. Therefore your business
will experience a rapid growth in revenue and cash flow. The rapid growth stage takes advantage
from the proven sales model, marketing model, and operations model set forth from your
growth/survival stage.
Challenges
 Increasing Market Competition
 Accounting Management
 Moving into New Markets
 Adding New Products/Services
 Expanding Existing Business
5. Maturity Stage
After a successful expansion, your business is on top of its industry and has matured. At the final
stage of the business lifecycle, your business has a dominating presence in its market. Your
business could still be growing but not at the substantial rate as you’ve previous experienced.
Your current option is to decide to take a step back towards the expansion stage or to think of a
possible exit strategy.
Challenges
 Increasing Market Competition
 Accounting Management
 Moving into New Markets
 Adding New Products/Services
 Expanding Existing Business
  Exit Strategy
Every stage of the business lifecycle brings new or pre-existing challenges. Solutions that may
have worked for one stage may not work in another stage, which is why you should always
adjust your business plan and operations accordingly.
At each stage, your business will rely on a financial source to help overcome the challenges your
business faces. This is especially important to have an accounting management software in place
so that you will have an accurate reflection of your current business finances. Having an
accounting software in place will help you understand where your business is on the current
business lifecycle and the details will allow you foresee upcoming challenges and to make better
business decisions.