entrepreneurship development

ENTREPRENEURSHIP

DEVELOPMENT

An Introduction

11/28/2014PRAJEESH E MENON

MBA,KVM COLLEGE, Cherthala, Kerala

According to George Bernard Shaw, people fall

into three categories:

(1) those who make things happen

(2) Those who watch things happen, and

(3) those who are left to ask what did happen.

Generally, Entrepreneurs fall under the first

category.

11/28/2014PRAJEESH E MENON KVM COLLEGE,

Cherthala, Kerala

ABOUT ENTREPRENEURSHIP…

• Entrepreneurship is a dynamic process of vision, change, and creation.

• It requires an application of energy and passion towards the creation

and implementation of new ideas and creative solutions.

• An entrepreneur is an aggressive catalyst for change in the world of

business.

• He or she is an independent thinker who dares to be different in a

background of common events thereby catering to the social and

economic upliftment.

• The prime focus of any entrepreneur is to capitalize the opportunities

and to build a strong ethical base.

• Entrepreneurial development is a pivotal issue that needs to be

addressed by any country to develop endowed entrepreneurs who can

make a mark in this world of competitions.11/28/2014

PRAJEESH E MENON KVM COLLEGE, Cherthala, Kerala

ENTREPRENEUR

PERSON

ENTREPRENEURSHIP

PROCESS

ENTERPRISE

OBJECT


Cherthala, Kerala

ENTREPRENEUR

• The word entrepreneur is derived from

the French verb “enterprendre”, which

means “to undertake”.

• Entrepreneur is the person who brings

together the factors of production and

combines them into a product.

• He organizes and manages a business

unit assuming the risk for profit.


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ENTREPRENEURSHIP

• Entrepreneurship is the process of

creating value by bringing

together a unique package of

resources to exploit an

opportunity.


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EVOLUTION OF THE CONCEPT…

EARLY PERIOD:

• The earliest definition of the entrepreneur as a go-between is

Marco Polo.

• He tried to establish trade route to the far East.

• He used to sign a contract with a venture capitalist to sell his

goods.

• The capitalist was the risk bearer.

• The merchant adventurer took the role of trading.

• After his successful selling of goods and completing his trips, the

profits were shared by the capitalist and the merchant.


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MIDDLE AGES:

• The term entrepreneur was referred to a person who was

managing large projects.

• He was not taking any risk but was managing the projects using

the resources provided.

• An example is the cleric who is in charge of great architectural

works such as castles, public buildings, cathedrals etc.


Cherthala, Kerala


16th CENTURY:

• The term entrepreneur was referred to a person who was

involved in military expeditions.

17th CENTURY:

• An entrepreneur was a person who entered into a contractual

arrangement with the Govt. to perform a service or to supply

some goods.

• Civil engineering activities such as construction and

fortification.

• The profit was taken (or loss was borne) by the entrepreneur.


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18th CENTURY:

3 MAIN CONCEPTS EVOLVED

• It was Richard Cantillon, French Economist, who applied the

term entrepreneur to business for the first time (1734).

• He is regarded by some as the founder of the term.

• He defined an entrepreneur as a person or an agent who buys

factor services at certain prices with a view to sell them at

uncertain prices in the future.

• Concept 1: ENTREPRENEUR = RISK BEARER


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• Jean-Baptiste Say, (aristocratic industrialist) in 1803— An

entrepreneur is an economic agent who unites all means of

production- land, labour and capital to produce a product or

service.

• Product sales pay rent, wages, interest and what remains is profit.

• He shifts economic resources from an area of lower to an area of

higher productivity.

• Concept 2: ENTREPRENEUR = ORGANISER


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• Joseph A. Schumpeter (1934)

• The entrepreneur in an advanced economy is an individual who

introduce something new in the economy- a method of production

not yet tested by experience in the branch of manufacturing, a

product with which consumers are not yet familiar, a new source of

raw material or of new markets and the like.

• Concept 3: ENTREPRENEUR = INNOVATOR


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• 1910: Adam Smith – An entrepreneur is a person who

only provides capital without taking active part in the

leading role in the enterprise.

• 1961: David McClelland—A person with a high need

for achievement [N-Ach] who is energetic and a

moderate risk taker.

• 1964: Peter Drucker—One who 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.

• 2013: Ronald May—Someone who commercializes his

or her innovation.11/28/2014


CHARACTERISTICS OF AN ENTREPRENEUR11/28/2014


• HARD WORK

• BUSINESS ACUMEN AND SINCERITY

• PRUDENCE

• ACHIEVEMENT MOTIVATION

• SELF-RELIANCE AND INDEPENDENCE

• HIGHLY OPTIMISTIC

• KEEN FORSIGHT

• PLANNING AND ORGANISING ABILITY

• INNOVATIVENESS

• RISK TAKING

• SECRECY MAINTENANCE

• MAINTAIN PUBLIC RELATIONS

• COMMUNICATION SKILL


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QUALITIES OF AN ENTREPRENEUR11/28/2014


• ENTERPRISING

• RISK BEARER

• CREATIVE THINKER

• AMBITIOUS

• HIGH NEED ACHIEVEMENT

• CHANGE AGENT

• GOOD ORGANISER AND MANAGER

• DECISION MAKER

• STRONG COMMITMENT

• FIRM DETERMINATION


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FUNCTIONS OF AN ENTREPRENEUR


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• Risk Assumption Function

• Business Decision Making Function

• Managerial Function

• Function of Innovation


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RISKS FACED BY ENTREPRENEURS

1. FINANCIAL RISK:

• The entrepreneurship has to invest money in the

enterprise on the expectation of getting in return

sufficient profits along with the investment.

• He may get attractive income or he may get only

limited income. Sometimes he may incur losses.

2. PERSONAL RISK:

• Starting a new venture uses much of the

entrepreneur’s energy and time.

• He or she has to sacrifice the pleasures attached

to family and social life.


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3) CARRIER RISK:

• This risk may be caused by a number of reasons such

as leaving a successful career to start a new business

or the potential of failure causing damage to

professional reputation.

4) PSYCHOLOGICAL RISK:

• Psychological risk is the mental agonies an

entrepreneur bears while organizing and running a

business venturesome entrepreneurs who have

suffered financial catastrophes have been unable to

bounce back.


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11/28/2014

TYPES OF ENTREPRENEURS


1. CLASSIFICATION BY CLARENCE

DANHOF:

Clarence Danhof, On the basis of

American agriculture, classified

entrepreneurs in the following categories:

a) INNOVATIVE ENTREPRENEURS

b) ADOPTIVE OR IMITATIVE

ENTREPRENEURS

c) FABIAN ENTREPRENEURS

d) DRONE ENTREPRENEURS


Cherthala, Kerala

INNOVATIVE ENTREPRENEURS

• They are generally aggressive on experimentation and cleverly

put attractive possibilities into practice.

• An innovative entrepreneur, introduces new goods, inaugurates

new methods of production, discovers new markets and

reorganizes the enterprise.

• Innovative entrepreneurs bring about a transformation in

lifestyle and are always interested in introducing innovations.


Cherthala, Kerala

ADOPTIVE OR IMITATIVE ENTREPRENEURS

• Imitative entrepreneurs do not innovate the changes

themselves, they only imitate techniques and technology

innovated by others.

• They copy and learn from the innovating entrepreneurs.

• While innovating entrepreneurs are creative, imitative

entrepreneurs are adoptive.


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FABIAN ENTREPRENEURS

• These entrepreneurs are traditionally bounded.

• They would be cautious.

• They neither introduce new changes nor adopt new methods

innovated by others entrepreneurs.

• They are shy and lazy. They try to follow the footsteps of their

predecessors.

• They follow old customs, traditions, sentiments etc. They take

up new projects only when it is necessary to do so.


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DRONE ENTREPRENEURS

• Drone entrepreneurs are those who refuse to adopt and use

opportunities to make changes in production.

• They would not change the method of production already

introduced.

• They follow the traditional method of production.

• They may even suffer losses but they are not ready to make

changes in their existing production methods.


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COLE’S CLASSIFICATION

1. EMPIRICAL ENTREPRENEUR

Who never introduces anything new in his method of production or

business.

Simply follows the rule of thumb

Like drone entrepreneurs

2. RATIONAL ENTREPRENEUR

Who is ready to introduce even revolutionary changes on the basis of

general economic conditions prevailing in that area.

Takes rational decisions himself depending up on the situation.

3. COGNITIVE ENTREPRENEUR

Who takes advices and services of experts and introduces changes.


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ON THE BASIS OF STAGES OF DEVELOPMENT

1) First Generation Entrepreneur: He is one who starts an industrial

unit by means of his own innovative ideas and skills. He is

essentially an innovator. He is also called new entrepreneur.

2) Modern Entrepreneur: He is an entrepreneur who undertakes those

ventures which suit the modern marketing needs.

3) Classical Entrepreneur: He is one who develops a self supporting

venture for the satisfaction of customers’ needs. He is a stereo type

or traditional entrepreneur.


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ON THE BASIS OF TYPE OF BUSINESS

1) Business Entrepreneur: He is an individual who discovers an idea to start

a business and then builds a business to give birth to his idea.

2) Trading Entrepreneur: He is an entrepreneur who undertakes trading

activity i.e; buying and selling manufactured goods.

3) Industrial Entrepreneur: He is an entrepreneur who undertakes

manufacturing activities.

4) Corporate Entrepreneur: He is a person who demonstrates his innovative

skill in organizing and managing a corporate undertaking.

5) Agricultural Entrepreneur: They are entrepreneurs who undertake

agricultural activities such as raising and marketing of crops, fertilizers and

other inputs of agriculture. They are called agripreneurs.


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ON THE BASIS OF USE OF TECHNOLOGY

Technical Entrepreneur:

• They are extremely task oriented.

• They are of craftsman type.

• They develop new and improved quality goods

because of their craftmanship.

• They concentrate more on production than on

marketing.


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Non-Technical Entrepreneur:

• These entrepreneurs are not concerned with the

technical aspects of the product.

• They develop marketing techniques and

distribution strategies to promote their business.

• Thus they concentrate more on marketing

aspects.


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Professional Entrepreneur:

• He is an entrepreneur who starts a business unit

but does not carry on the business for long

period.

• He sells out the running business and starts

another venture.


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ON THE BASIS OF MOTIVATION

Pure Entrepreneur:

• They believe in their own performance while

undertaking business activities.

• They undertake business ventures for their

personal satisfaction, status and ego.

• They are guided by the motive of profit.

• For example, Dhirubhai Ambani of Reliance

Group.11/28/2014



Induced Entrepreneur:

• He is induced to take up an entrepreneurial

activity with a view to avail some benefits

from the government.

• These benefits are in the form of assistance,

incentives, subsidies, concessions and

infrastructures.


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Motivated Entrepreneur:

• These entrepreneurs are motivated by the desire to

make use of their technical and professional

expertise and skills.

• They are motivated by the desire for self-

fulfillment.

Spontaneous Entrepreneur:

• They are motivated by their desire for self-

employment and to achieve or prove their

excellence in job performance.

• They are natural entrepreneurs.11/28/2014


ON THE BASIS OF ENTREPRENEURIAL ACTIVITY

Novice:

• A novice is someone who has started his/her first entrepreneurial venture.

Serial Entrepreneur:

• A serial entrepreneur is someone who is devoted to one venture at a time

but ultimately starts many.

• He repeatedly starts businesses and grows them to a sustainable size and

then sells them off.

Portfolio Entrepreneurs:

• A portfolio entrepreneur starts and runs a number of businesses at the same

time.

• It may be a strategy of spreading risk or it may be that the entrepreneur is

simultaneously excited by a variety of opportunities.11/28/2014PRAJEESH E MENON KVM COLLEGE,

Cherthala, Kerala

ENTREPRENEUR VS MANAGER

ENTREPRENEUR

• Owner of the business

• Profit

• Full risk bearing

• All functions

• Innovator

MANAGER

• Servant of the business

• Salary

• No risk bearing

• Managerial functions only

• Executor


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INTRAPRENEURS

• The new brand of corporate entrepreneurs from within an

organisation are called as intrapreneurs.

• The term intrapreneur was coined in USA in the late seventies.

• Many senior executives of big companies in America left their jobs

and started small business of their own.

• They left the organisation because they did not get any opportunity

to apply their own ideas and innovative ability.

• These entrepreneurs become successful in their own ventures.

• Some of them caused a threat to the corporations they left.


Cherthala, Kerala

INTRAPRENEURS

• This type if entrepreneurs have come to be called Intrapreneurs.

• They believe strongly in their own talents.

• They have desire to create something of their own.

• They want responsibility and have a strong drive for individual

expression and more freedom in their present organisational

structure.

• When this freedom is not forthcoming, they become less productive

or even leave the organisation to achieve self actualisation

elsewhere.


Cherthala, Kerala

ENTREPRENEUR VS INTRAPRENEUR

ENTREPRENEUR

• Independent

• Need not be highly educated

• Fund raising

• Risk bearing

• Routine work

• Operation from outside

• Strong authoritarian

INTRAPRENEUR

• Dependent

• Highly educated

• No fund raising

• No risk bearing

• Specialist

• Operation from inside

• Less authoritarian


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COPRENEUR

• Copreneurs are entrepreneurial couples who work

together as co-owners of their business.

• They are creating a division of labour that is based on

expertise as opposed to gender studies show that

companies co-owned by spouses represent one of the

fastest growing business sectors.


Cherthala, Kerala

ULTRAPRENEUR

• The concept of ultrapreneuring is to identify a business

opportunity, determine its viability and form a company.

• It requires assembling a super competent management team,

who then develop, produce and markets the product or service

in the shortest optimum time period.

• They create business and then sell out, merge or combine.

• In short, going beyond the simple undertaking and keeping a

focus on the benefits of that undertaking provides a sensible

definition of the word Ultrapreneur.


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The Concept of Entrepreneurship…


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DEFINITION

According to A. H. Cole, “Entrepreneurship is the purposeful

activities of an individual or a group of associated individuals

undertaken to initiate, maintain or organize a profit oriented

business unit for the production or distribution of economic

goods and services”.


Cherthala, Kerala

THE ENTREPRENEURIAL PROCESS

1• IDENTIFY AN OPPORTUNITY

2• ESTABLISH VISION

3• PERSUADE OTHERS

4• GATHER RESOURCES

5• CREATE NEW VENTURE , PRODUCT OR MARKET

6• CHANGE OR ADAPT WITH TIME


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ENTREPRENEURIAL COMPETENCIES/ TRAITS

TRAITS

KNOWLEDGE

SKILLMOTIVE


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• KNOWLEDGE: Collection and retention of information in

ones mind

• SKILL: The ability to demonstrate a system and sequence of

behaviour which results in something that one can see

• MOTIVE: Urge to achieve one’s goal


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TYPES OF COMPETENCIES

• HARD-SKILL COMPETENCIES:

Skills that are acquired through

education or work experience.

• SOFT-SKILL COMPETENCIES:

Skills that are generally inherent in an

individual or developed by him

consciously.

E.g., Communication Skill11/28/2014


MAJOR ENTREPRENEURIAL COMPETENCIES


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Entrepreneurship Development Institute of India, Ahemedabad

conducted a study under Prof. David C. McClelland. The core

competencies according to the study are:

• Initiative

• Looking for opportunities

• Persistence

• Information seeker

• Quality conscious


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• Committed to work

• Efficiency seeker

• Proper planning

• Problem solver

• Self-confidence

• Assertive

• Persuasive

• Efficient monitor

• Employees’ well wisher

• Effective strategist


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ACCORDING TO B. C. TANDON

• Entrepreneur is enough risk-bearer.

• He is ready to adapt change, if the situation warrant.

• He has the ability to Marshall the resources at his command.

• He is a good organiser as well as a good manager.


Cherthala, Kerala

DEVELOPING COMPETENCIES

• Kakinada Experience.

• The procedure involves four

steps:

– Competency Recognition

– Self-Assessment

– Competency Application

– Feed back


Cherthala, Kerala

ENTREPRENEUR VS ENTREPRENEURSHIP

ENTREPRENEUR

• Person

• Organiser

• Innovator

• Motivator

• Leader

• Creator

ENTREPRENEURSHIP

• Function/ Process

• Organisation

• Innovation

• Motivation

• Leadership

• Creation


Cherthala, Kerala

ENTREPRENEUR VS ENTREPRENEURSHIP

ENTREPRENEUR

• Risk-bearer

• Initiator

• Visualiser

• Technician

• Imitator

• Administrator

ENTREPRENEURSHIP

• Risk-bearing

• Initiative

• Vision

• Technology

• Imitation

• Administration


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ENTREPRENEURIAL MOTIVATION


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Motivation means….

• Willingness to exert high levels of effort toward organizational

goals

• Conditioned by the effort’s ability to satisfy some individual

need

• Motivation can be described in terms of intensity, persistence,

and direction


Cherthala, Kerala

Definition…

• According to Dalton E. McFarland, “Motivation refers to the

way in which urges, drives, desires, strives, aspirations and

needs direct, control or explain the behaviour of human being”


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Nature of Motivation…

• Motivation: The set of forces that leads people to

behave in particular ways

• The Importance of Motivation

– Performance depends upon motivation, ability, and

environment

– P = M + A + E


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Concepts…

• Needs and Motives

• Goals

• Behaviour

• Incentives

• Instincts


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Process of Motivation

GOAL

MOTIVEBEHAVIOR


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MOTIVATION THEORIES


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Abraham Maslow’s Need Hierarchy Theory

Self Transcend

ence

Self actualization

Self Esteem

Social Needs

Safety and Security Needs

Physiological Needs


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David McClelland’s Acquired Needs Theory

Power

Achievement

Affiliation


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Motivating Factors…

1. Intrinsic Factors:

• Desire to do something new

• Educational background

• Occupational background or experience

2. Extrinsic Factors:

• Government assistance and support

• Availability of labor and raw materials

• Encouragement from big business houses

• Promising demand for the product11/28/2014


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