ENTREPRENEURSHIP

Definition of Entrepreneur
The entrepreneur, by definition, shifts resources from areas of low productivity and yield to areas of higher productivity and yield. Of course, there is a risk the entrepreneur may not succeed.
(Drucker, 85)

The World of the Entrepreneur

A new business is born every 11 seconds in the United States Study of influential Americans the defining issue of the 21st Century: Entrepreneurship! One of 12 Americans is actively involved in trying to start a new business.

Who is an Entrepreneur?
One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them.

Characteristics of Entrepreneurs
Desire for responsibility Preference for moderate risk Confidence in their ability to succeed Desire for immediate feedback High level of energy Future orientation Skilled at organizing Value achievement over money

Myths About Entrepreneurship

1. Successful entrepreneurship takes only a great idea.

2. Entrepreneurship is easy. 3. Entrepreneurship is a risky gamble. 4. Entrepreneurship is found only in small businesses. 5. Entrepreneurial ventures and small businesses are identical.

The Entrepreneurial Process

Starting the Venture:

Exploring the Entrepreneurial Context

Identifying Opportunities/Possible Competitive Advantage

Researching Feasibility
Planning the Venture Organizing the Venture Launching the Venture

Managing the Venture:

Managing Processes Managing People Managing Growth Special Issues

Entrepreneurship Vs Management
Entrepreneurship
Creating something new New product, new method of production, new markets, new source of raw material Challenges the norm

Management
Protects Stewardship of existing resources

Why become an Entrepreneur?

Personal situation Resources Entrepreneurial skills Success stories Desire for independence Opportunity to exploit a gap Frustration

What is the Role of the Entrepreneur?

Innovation Organisation and Management Opportunity recognition Market uncertainties
Dealing with the future

Risk taking
Businesses, financial and personal

Resource gathering Profits/Reward

Skills & Competencies

I can.Communicate I can.... Present I can. Represent my opinion I can. Co-ordinate tasks I can. Develop alternative plans I can. Hand tasks over to a 3rd party I can. Co-operate with others I can. Negotiate I can . Sell I can. Organise and plan I can. Handle numbers I can. Handle technical devices My literacy is . My interaction with people is .

Reasons for Entrepreneurial Success

Hard work and long hours Dedication, drive, enthusiasm and belief in the idea Unsatisfied market demand Managerial competence Luck Strong control systems Sufficient capital

Hurdles in starting up a a business

Lack of the right business idea Complicated regulatory efforts Own financial risk Lack of courage Lack of right founding partner Lack of equity Lack of debt capital Know-how-deficit

Hurdles in starting up a a business

Lack of contact clients/customers Economic cycle Business environment Fear of failure Support by family and friends Lack of time Lack of entrepreneurial skills

Rewards of Being an Entrepreneur

o High degree of independence from constraints freedom

o Get to use a variety of skills and talents o Freedom to make decisions o Accountable to only yourself o Opportunity to tackle challenges o Feeling of achievement and pride o Potential for greater financial rewards

Feeding the Entrepreneurial Fire

Entrepreneurs as heroes Entrepreneurial education Demographic and economic factors Shift to a service economy Technological advancements Independent lifestyles E-Commerce and the World Wide Web International opportunities

Challenges of Being an Entrepreneur

o Must be comfortable with change and uncertainty o Must make a bewildering number of decisions

o May face tough economic choices

o Must be comfortable with taking risks o Need many different skills and talents o Must be comfortable with the potential for failure

The Cultural Diversity of Entrepreneurship

Young entrepreneurs Women Minority-owned enterprises Immigrant entrepreneurs Part-time entrepreneurs Home-based businesses Family businesses Copreneurs Corporate castoffs Corporate dropouts

Differences Between Small Businesses and Entrepreneurial Ventures

o Independently owned, operated, and financed o Less than 100 employees o Doesnt emphasize new or innovative practices

o Innovative practices o Goals are profitability and growth o Seeks out new opportunities o Willingness to take risks

o Little impact on industry

The Small Business Failure Record

24% of new businesses fail after two years. 51% fail within four years. 63% fail within six years.

Qualities of a successful entrepreneur

1. Total commitment, determination and perseverance 2. Drive to achieve and grow 3. Opportunity and goal orientation 4. Taking initiative and personal responsibility 5. Persistent problem-solving 6. Realism and a sense of humour 7. Seeking and using feedback 8. Calculated Risk taking and risk seeking

9. Low need for status and power 10.Integrity and reliability

Entrepreneurs v/s Managers

1. 2. 3. 4. 5. 6. Innovation Risk Taking Reward Skills Status Response to Authority

Model of Entrepreneurial Motivation A Model of

Source: Douglas W. Naffziger, Jeffrey S. Hornsby, and Donald F. Kuratko, A Proposed Research Model of Entrepreneurial Motivation, Entrepreneurship Theory and Practice (spring 1994): 33. 224

Motivational Factors for becoming Entrepreneurs

In his pioneering study, R.A. Sharma classified the factors which prompted the new entrepreneurs to enter industry, as follows: Internal Factors External Factors

Internal Factors
1. Strong desire to do something independent in life 2. Technical knowledge and/or manufacturing experience 3. Business experience in the same or related line.

External Factors
1. 2. 3. 4. 5. Financial assistance from institutional sources Accommodation in industrial estates Machinery on hire purchase Attitude of the government to help new units Financial assistance from non-government sources 6. Encouragement from big business

External Factors Continued

7. Heavy Demand 8. Profit Margin 9. Unsound units available at a cheap price.

Other Factors
1. Entrepreneurial Ambitions To make money To continue family business To secure self-employment/ independent living To fulfill desire of self/wife/parents To gain social prestige

Other Factors Continued

2. Compelling Reasons Unemployment Dissatisfaction with the job so far held or occupation pursued Make use of idle funds Make use of technical or professional skills Others- importance of large families, revival of sick unit started by father, etc.

Other Factors Continued

3. Facilitating Factors Success Stories of Entrepreneurs Previous Associations Previous employment in the same or other line of activity Property inherited/ self acquired Associations as apprentices and sleeping partners.

Motivating Factors
1. 2. 3. 4. 5. 6. 7. 8. 9. Educational Background Occupational Experience Desire to work independently in manufacturing line Desire to branch out to manufacturing Family background Assistance from government Assistance from financial institutions Availability of technology/raw materials Other factors- demand of particular product, utilization of excess resources

Types of Entrepreneurs

Classification based on the Timing of Venture Creation

Early Starters Experienced Mature

Classification Based on Socio-Cultural Variables

First Generation Entrepreneurs Entrepreneurs from Business Families Women Entreprenuers

Based on Entrepreneurial Activity

Novice Serial Entrepreneur Portfolio Entrepreneur

Theories of entrepreneurship
Max Weber Theory of Social Change Cohran :the Theory of Social Change Hosetitz: :Theory of Culture McClelland : Need for Achievement Theory Bowen and Hisrich : Life Cycle Theory Schumpeter theory of Innovation Leibenstein: X-efficiency Theory Hayek : Market Process Theory

Theory of Entrepreneurship

Schumpeters Views
Entrepreneurship is essentially a creative activity. An entrepreneur is one who innovates, i.e. carries out new combinations or enterprise.

Innovations involve problem solving and the entrepreneur is a problem solver.

Innovation may occur in the following forms: i. The introduction of a new product with which consumers are not yet familiar or introduction of a new quality of an existing product. ii. The introduction of a new method of production, that is not yet tested by experience in the branch of manufacture concerned, can also exist in a new way of handling a commodity commercially.

iii. The opening of a new market, that is a market into which the particular branch of manufacture of the country in question has not previously entered, whether or not this market has existed before. iv. \the conquest of a ne source of supply of raw materials or semi-manufactured goods, irrespective of whether this source already exists or whether it has first to be created. v. The carrying out of new organization of any industry, like the creation of a monopoly position or the breaking up of a monopoly position.

Walkers Theory
Francis A. Walker considered an entrepreneur as an organiser and coordinator of the various factors of production. Entrepreneur is endowed with above average ability for organization and coordination. In practice, although the entrepreneur possess different degrees of organizational skill and coordinating capacity.

Druckers Theory
According to Peter Drucker, An entrepreneur is one who always searches for change, responds to it and exploits it as an opportunity. He says entrepreneurship is increasing the value and satisfaction obtained from resources by the consumer. Successful entrepreneurs create new values or increase the values of what already exists. Entrepreneurship is based on purposeful and systematic innovation.

 Entrepreneurship is a practice or discipline that has a knowledge based theory. It is not confined to big business and economic institutions. It is equally important to small business and non-economic institutions. An entrepreneur need not necessarily be a capitalist or an owner.

Theories of Entrepreneurial Supply (Origin)

1. The Economists View 2. The Sociologists View 3. The Psychologists view

Economic Theory
According to economists, entrepreneurship and economic growth ill take place in those situations where particular economic conditions are most favorable. Economic incentives are regarded as main drive for entrepreneurial activities. Lack of vigorous entrepreneurship is due to various kinds of market imperfections and inefficient economic policies.

Sociological Theory
Social reasons, cultural values and role expectations are responsible for the emergence of entrepreneurship. As per Cochran, Entrepreneur represents societys model personality. Hoselitz suggests that culturally marginal groups promote entrepreneurship and economic development.

Psychological Theory
There are some main psychological characteristics that determine the emergence of entrepreneurship. These are: An institutional capacity to see things in a way which afterwards proves correct Energy of will and mind to overcome fixed habits of thought The capacity to withstand social opposition

 McClellands theory of high need for achievement suggests that it is need for achievement that drives people towards entrepreneurial activities.

Entrepreneurial Process

Steps in the Entrepreneurial Process

1.
2.

Deciding to be an entrepreneur
Identifying and Evaluating the Opportunity

3. 4.

Developing a Business Plan Resourcing

5.
6.

Actualization
Harvesting

Steps in the Entrepreneurial Process

1. Deciding To be an Entrepreneur: The stage in which the entrepreneur generates ideas, recognizes opportunities, and studies the market
Innovation Opportunity

Deciding To be an Entrepreneur

Consider your hobbies or skills

Consider consumer needs and wants

Conduct Surveys and questionnaires test the market

Study demographics

2. Identifying and Evaluating the Opportunity

In this process, the entrepreneur recognizes potential opportunities. The evaluation of the identified opportunity helps entrepreneur in assessing whether the opportunity is realistic and the returns of the opportunity are as per the resources required.

3. Developing a Business Plan:

Develop a business plan: a detailed proposal describing the business idea

Code of ethics
Executive summary

Mission Statement
We thrive in an environment of academic excellence where students are prepared to meet and exceed their future challenges. We recognize each student's worth and develop lifelong learners who make positive contributions to our changing society.

Typical Outline
Executive Summary Introduction and Business Premise Market Analysis and Customer Needs Product Overview Value Proposition Business Model Business Operations Plan Marketing and Sales Market Entry Transition to Revenue Service Competitive Assessment Partnership Strategy Management Team and Advisors Financial Projections Key Business Metrics Capital Structure/Financing Plans

Concept Development
Choose business location Will a patent or trademark be required?

Steps in the Entrepreneurial Process

4. Determining the Required Resources: The stage in which the entrepreneur identifies and acquires the financial, human, and capital resources needed for the venture startup, etc

Start-up resources

Determining the Required Resources (Resourcing)

Apply for loans, grants and assistance

Identify potential investors

Hire employees

5. Converting the ides to an enterprise (Actualization): The

stage in which the entrepreneur operates the business and utilizes resources to achieve its goals/objectives.
$$ Grand Opening $$
Day-to-Day Operations

6. Managing and Growing the enterprise (Harvesting): The

stage in which the entrepreneur decides on ventures future growth, development, or demise
What is your 5-year or 10-year plan? Consider adding locations or providing different products/services Will you go public?

Entrepreneurial Culture

What is Culture
Culture of Civilization is that complex whole which includes knowledge, belief, art, mortals, law, culture, custom, and other capabilities and habits acquired by man as a member of society. - Edward Burnett Taylor As per Francis Merill, culture is: a. The characteristically human product social interaction b. Provides socially acceptable patterns for meeting biological and social needs c. Is cumulative, for its is handled down from generation to generation in a given society

Culture Continued..
d. Is meaning to human beings because of its symbolic quality e. Is learned by each person in the course of his development in a particular society f. Is therefore, a basic determinant of personality, and g. Depends for its existence upon the continued functioning of the society but is independent of any individual or group.

Elements of Culture
(from institution point of view)
1. Individual initiative 2. Risk Tolerance 3. Direction 4. Integration 5. Management Support 6. Control 7. Identity 8. Reward System 9. Conflict Tolerance 10. Communication Patterns

Business Culture and Culture of a Society

Meaning of Entrepreneurial Culture

Entrepreneurial Culture implies vision, values, norms, and traits that are conducive for the development of the economy.

Sub-Cultures of Entrepreneurship
Culture of a Business Business Ethics Productivity Culture Total Quality Culture Organizations Culture Leaders in organization Corporate Values

Cultural Change
The TOP Programme, Eight modules: mobilisationa nd communication, idea initiatives, teaching of operational skills, cooperation with non-industrial research, patent initiatives, white space projects, and strategic innovation projects.

Mobilisation of Employees

Customer Orientation

PRODUCTIVI TY

INNOVATIO N

NEW MARKETS

CULTURE CHANGE

Table

13.3

The Entrepreneurial Culture versus the Administrative Culture

Administrative Focus
Characteristics Pressures

Entrepreneurial Focus
Characteristics Pressures

Strategic Orientation

Driven by perception of opportunity

Revolutionary, with short duration

Diminishing opportunities Rapidly changing technology, consumer economics, social values, and political rules
Action orientation Narrow decision windows Acceptance of reasonable risks Few decision constituencies

Planning systems and cycles

Social contracts Performance measurement criteria

Acknowledgement of multiple constituencies Negotiation about strategic course Risk reduction Coordination with existing resource base Need to reduce risk Incentive compensation Turnover in managers Capital budgeting systems Formal planning systems Power, status, and financial rewards Coordination of activity Efficiency measures Inertia and cost of change Industry structures Need for clearly defined authority and responsibility Organizational culture

Commitment to Seize Opportunitie s

Evolutionary, with long duration

Commitment of Resources

Many stages, with minimal exposure at each stage

Lack of predictable resource needs Lack of control over the environment Social demands for appropriate use of resources Foreign competition Demands for more efficient use Increased resource specialization Long resource life compared with need Risk of obsolescence Risk inherent in the identified opportunity Inflexibility of permanent commitment to resources Coordination of key noncontrolled resources 1372

A single stage, with complete commitment out of decision

Control of Resources

Episodic use or rent of required resources

Ownership or employment of required resources

Management Structure

Flat, with multiple informal networks

Hierarchy

Ten Steps to change Entrepreneurial Culture (steps to help entrepreneur to create a culture supportive of change) Start at the top. Lead the enterprise Attune to a culture of innovation Remove the hidden obstacles Create an integrated enterprise culture Create a marketing culture Create a listening environment

1. 2. 3. 4. 5. 6.

7.

Absorb competing technologies and involve people.

8. Dont let product innovations fail you. 9. Be flexible and open for diversification and new ideas. 10.Always be ready to change cultures.

New Generation of Entrepreneurs

Work Cultures of the past and the future
Work Culture of the Past
1. 2. 3. 4. 5.
6. 7. 8. 9. 10.

Work culture of the future

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Communitarianism Interdependence Democracy Humanity part of nature Sustainable production & consumption Gender equality intercultural tolerance Interreligious tolerance Reliance on security Reliance on emotional intelligence

Individualism Independence Autocracy Humanity against nature Unsustainable production

Patriarchy Intercultural intolerance Interreligious intolerance Reliance on defense Reliance on rational intelligence

ENTREPRNEURSHIP DEVELOPMENT
Entrepreneurship development is achieved within the conceptual framework in which various strategies and policies of an entrepreneurship development programme are evolved or formulated. Entrepreneurship development should be viewed in the total perspective and should integrate entrepreneurial training, provision of incentives, consultancy services, sectoral development and other essential strategies of intervention.

ENTREPRNEURSHIP DEVELOPMENT
continued

Human Resources Development: In words of Harbison and Myer, HRD is the process of increasing the knowledge, the skills and the capacities of all the people in the society It is achieved more effectively through training, education, information, and scholastic exchange, but also as supply and demand of manpower, with a view to improving employment generation and income distribution and supporting the expanded socioeconomic development activities of the country. HRD is the key to growth of the small-scale industries.

EDP
Entrepreneurial Development (EDP) means programme designed to help a person in strengthening his entrepreneurial motive and in acquiring skills and capabilities necessary for playing his entrepreneurial role effectively. EDP covers three major variables: location, target group and enterprise (entrepreneurial activities).

The Development Process Involves

Activities/Initiatives People Formal organizing Informal organizing

Activities...
The nature of initiatives a community engages in to stimulate economic development The ends of individual development initiatives become the means by which the communitys overall goal is accomplished

Evaluating Attractiveness of Activities/Initiatives

fit with communitys capabilities low capital requirements high margin for error significant payoffs low exit costs

Fostering Entrepreneurship: Task/Activity Requirements

Task uncertainty Short-term focus on getting outcomes from action responding to need** Broad task definition** Flexibility* Freedom to experiment* Tolerance for failure Diverse skill, knowledge and ability requirements* Interdependent control/ ownership Holistic set of tasks Intrinsic rewards Opportunities for learning by doing

Types Of EDP
1. Entrepreneurship Awareness Training Programme 2. Industrial Motivation Programme 3. Entreprneurship Development Programme 4. Product-Oriented Entrepreneurship Development Training Programme 5. Skill Development Programme (SDP) 6. Management Development Programme (MDP) 7. Target-group Oriented Entrepreneurship Development training Programme

Issues of Entrepreneurial Development Programmes

1. 2. 3. 4. Structure and Composition of EDPs Areas of operation Fixing Priorities Lack of Specialists Support

Strategy for Entrepreneurship Development

i. Public entrepreneurship should remain confined to only those industries and sectors where private enterprise, individual or corporate, is generally not attracted. All possible efforts be made very seriously for the development of an industrial culture. There is need to develop management education and industrial training. Adequate measures are a must for mobilizing and fostering entrepreneurial talent in the country. Economic administration by the state should be improved and made more effective so that the objectives of economic policies may be fully achieved in the overall interest of the countrys economy.

ii. iii. iv. v.