Concept of Entrepreneur and Entrepreneurship

Sheetal Wagh

• Entrepreneurship has traditionally been defined as the process of designing, launching and running a new business, which typically begins as a small business, such as a start-up company, offering a product, process or service for sale or hire, and the people who do so are called 'entrepreneurs'.

• It has been defined as the "capacity and willingness to develop, organize, and manage a business venture along with any of its risks in order to make a profit.“

• While definitions of entrepreneurship typically focus on the launching and running of businesses, due to the high risks involved in launching a start-up, a significant proportion of businesses have to close, due to a "lack of funding, bad business decisions, an economic crisis -- or a combination of all of these“ or due to lack of market demand.

• In the 2000s, the definition of "entrepreneurship" has been expanded to explain how and why some individuals (or teams) identify opportunities, evaluate them as viable, and then decide to exploit them, whereas others do not, and, in turn, how entrepreneurs use these opportunities to develop new products or services, launch new firms or even new industries and create wealth. Recent advances stress the fundamentally uncertain nature of the entrepreneurial process, because although opportunities exist their existence cannot be discovered or identified prior to their actualization into profits .

• What appears as a real opportunity ex ante might actually be a non-opportunity or one that cannot be actualized by entrepreneurs lacking the necessary business skills, financial or social capital.

• Traditionally, an entrepreneur has been defined as "a person who starts, organizes and manages any enterprise, especially a business, usually with considerable initiative and risk".

• "Rather than working as an employee, an entrepreneur runs a small business and assumes all the risk and reward of a given business venture, idea, or good or service offered for sale. The entrepreneur is commonly seen as a business leader and innovator of new ideas and business processes.“

• Entrepreneurs tend to be good at perceiving new business opportunities and they often exhibit positive biases in their perception (i.e., a bias towards finding new possibilities and seeing unmet market needs) and a pro-risk-taking attitude that makes them more likely to exploit the opportunity.

• "Entrepreneurial spirit is characterized by innovation and risk-taking.“

• While entrepreneurship is often associated with new, small, for-profit start-ups, entrepreneurial behaviour can be seen in small-, medium- and large-sized firms, new and established firms and in for-profit and not-for-profit organizations, including voluntary sector groups, charitable organizations and government.

An entrepreneur is one who undertakes the risk of investment to create and market a good or service for financial gains. He is very perceptive and takes advantage of business opportunities that will generate high profits. Entrepreneurs can be sole traders, partners in a business or a group of shareholders.

Entrepreneurs are of vital importance to an economy.

They are motivated by their own self-interest to make profits and in so doing provide employment, create goods and services and generate revenue impacting on the economy’s level of national income and hence potential for economic growth.

The entrepreneur is a shrewd investor and takes calculated risks i.e. ones that minimize loss when choosing investment opportunities.

The entrepreneur is the conceptualizer of the initial business idea.

He must identify the best resources that suit the business operation and ensure the efficiency of each resource employed.

For example, training workers, using machinery to increase labour productivity, maximizing the use of factory and shop space and borrowing money at low interest rates. The entrepreneur must continuously evaluate the performance of his ventures. Information can be garnered from the balance sheets and Management Information Systems.

Personal Qualities of an Entrepreneur:

Entrepreneurship requires the following characteristics for success:

1. The creativity to innovate new product and ideas.

2. The drive and determination to be successful.

3. The ability to take calculated risks.

4. The flexibility to adapt to changes in the market and industry.

5. Very goal- oriented to purposely and aggressively accomplish task and meet objectives.

Characteristics of Successful Entrepreneurs:

1) Risk-bearing2) Inner drive to succeed3) Independence4) Stress takers5) Ability to mobilize resources6) Innovators7) Competitive by nature8) Self-confidence9) Openness to change10) Time Management11) Leadership12) Business Planning13) Locus of control14) Perseverance15) Flexibility16) Analytical ability of mind17) Creative18) Highly motivated and energetic19) Communication Skills20) Confronting uncertainty

Traits/Qualities of an Entrepreneur:

1) Self-motivation2) Time Management3) Self-confidence4) Financial Knowhow5) Administration Skills6) Problem-solving Skills7) Vision and Leadership Skills8) Sales9) Conflict and Consensus Management Skills10) Technical Skills11) Interpersonal Skills12) Communication Skills13) Ethics and Morals

Entrepreneur's Role/Task:

1. Conceptualization

• All business ventures begin with the conceptualization of an idea.

• At this initial stage the product or service idea is envisioned.

• Most Entrepreneurs identify a need in the market i.e. a service that is not being provided or a product that does not exist. If the product or service already exists then ideas to make improvements may be conceptualized.

2. Research

• The entrepreneur is a shrewd investor and takes calculated risks.

• Before investing money in a business venture a market research must therefore be done to ascertain the extent of the need for the product or service.

• This helps to minimize losses.

• A market research involves gathering information about a potential market to help an investor make decisions about entering that market.

3. Identification of resources

• What resources are needed to start the business?

• If the market research is favourable the entrepreneur must now identify the necessary resources to operate business.

• The resources required are land, labour and capital. Land refers to location or place used to set up a business. This may be bought, rented or family home.

• Labour employed must be qualified and skilled to efficiently carry out their duties.

• Capital includes money, raw material and assets such as machinery and equipment.

4. Creation of a business plan

• Preparing a business plan is very important before the start of a business.

• This will help the business to ascertain whether or not the business will be profitable.

• A business plan outlines the goals of a business and the strategies that will be employed to achieve them.

• Usually financial institutions require that a business plan be presented when a loan is requested for business investment.

5. Acquisition of funds

• There are several ways of acquiring funds to start a business.

• There are a myriad of financial institutions that are willing to assist small businesses once their business plans are deemed workable.

• The investor must weigh the advantages and disadvantages of acquiring funds from the various financial institutions.

• The cost of borrowing i.e. the interest rate charged and the length of the repayment period are factors to consider.

• Funds may be borrowed from friends and relatives that may attract a lower or no repayment cost and a more flexible repayment schedule.

• Funds can also be acquired from personal savings. Encouraging partners or selling shares are ways of avoiding high costs of capital.

6. Operation of a business

• A business must be efficiently operated to ensure high quality goods and service.

• This is important to keep existing customers and for business growth.

• Many companies employ an operation manager to design and oversee its operations.

• This person develops and manages the various processes used to create goods and services efficiently to ensure customer satisfaction.

Advantages of Entrepreneur:

1. It gives a great amount of freedom -

If you are working for a boss and a company, you need to meet all their requirements and only have very little freedom on the job.

On the other hand, if you start your own business, you will be able to make your own demands and set your own schedule.

You dictate everything you do, giving you a level of freedom that you will not see when you are employed.

2. It can be exciting –

Entrepreneurship can be very exciting, with many entrepreneurs considering their ventures highly enjoyable.

Every day will be filled with new opportunities to challenge your determination, skills and abilities.

3. It allows you to set your own earnings –

Of course, you will be the one setting your own wage and making investments when you own the business.

The work that you do would be for something you own, which can be a huge advantage compared to when you are working as an employee for a certain company.

4. It offers flexibility –

As an entrepreneur, you can schedule your work hours around other commitments, including quality time you would spend with your family.

5. Being in Control –

The best thing about an entrepreneur is that he is in absolute control of his life. He does not have to report to anybody.

He can take a vacation anytime he feels he needs one. He gets to decide what can happen in his venture.

Best of all, nobody can fire him.

Disadvantages of Entrepreneur:

1. It requires you to dedicate a huge amount of time -

One big challenge in starting your own business is the amount of time you have to dedicate to it.

Remember that entrepreneurship is not easy, and for it to be successful, you have to take a level of time commitment that many people are just not willing to make.

And even if you are able to enjoy flexibility in your work schedule when your venture does become successful, you will still have to dedicate a substantial amount of time to growing the business.

2. It can be difficult to compete with other businesses - It is very important for an entrepreneur to stay competitive.

This means that you have to differentiate your business from others in your niche in order to build a solid customer base and, finally, become profitable.

3. It does not guarantee 100% success -

Entrepreneurship would make your dreams come true, which does not often happen with traditional employment, but you need to make some sacrifices to make it happen.

You should know that this type of venture does not guarantee 100% success.

4. It comes with unpredictable work schedules -

One major drawback of being an entrepreneur is that more work and longer hours will be required from you than being an employee.

While you want to become your own boss, you must first know the amount of effort, time and investment to make your venture successful.

Even though there is a lot of rewards coming from it, it also has certain downsides.

Entrepreneurship

The capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit.

The most obvious example of entrepreneurship is the starting of new businesses.

In economics, entrepreneurship combined with land, labor, natural resources and capital can produce profit.

Entrepreneurial spirit is characterized by innovation and risk-taking, and is an essential part of a nation's ability to succeed in an ever changing and increasingly competitive global marketplace.

Characteristics of Entrepreneurship:

1} Economic Activity: involves creation and operation of an enterprise. Hence, it is essentially an economic activity concerned with value or wealth.

2} Purposeful Activity: It is the purposeful activity of an individual or a group of individuals who seek to earn profits through the production and distribution of goods and services.

3} Decision making: Entrepreneurship involves both risk and uncertainty, decision making is crucial on the part of the entrepreneurs to establish and run the enterprise successfully.

4} Accepting challenges: 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 the resources together for building and running the enterprise.

5} Risk Taking: Entrepreneur, by his deep insight and scientific approach, analyses the situations objectively and reduces the risk considerably on one hand and enhances the profit factor on the other.

6} Building Organization: Entrepreneurship presupposes the initiative and skill on building the organization. It is by delegation of authorities and proper leadership[ that organization can be built up.

7} Dynamic Process: Entrepreneurs thrive on the challenging environment which brings new opportunities for business. Flexibility is the hallmark of a successful entrepreneur.

8} Gap Filling Function: It is the job of an entrepreneur to fill the gaps between needs and goods or services. They have to complete the inputs and provide the knowledge about the production process.

9} Mobilization of Resources: Entrepreneurs make themselves distinct from the rest of the population because of their innate capability to mobilize resources.

10} Skillful Management: For effective management, the role of an entrepreneur is to initiate and supervise design of organization-improvement projects in relation to upcoming opportunities is very much important.

Role of Entrepreneurship in Economic Development

1. Entrepreneurship promotes capital formation by mobilising the idle saving of the public.

2. It provides immediate large-scale employment. Thus, it helps reduce the unemployment problem in the country, i.e., the root of all socio-economic problems.

3. It promotes balanced regional development.

4. It helps reduce the concentration of economic power.

5. It stimulates the equitable redistribution of wealth, income and even political power in the interest of the country.

6. It encourages effective resource mobilisation of capital and skill which might otherwise remain unutilized and idle.

7. It also induces backward and forward linkages which stimulate the process of economic development in the country.

8. Last but no means the least, it also promotes country’s export trade i.e., an important ingredient to economic development.

Thus, it is clear that entrepreneurship serves as a catalyst of economic development. On the whole, the role of entrepreneurship in economic development of a country can best be put as “an economy is the effect for which entrepreneurship is the cause”.

Difference between Entrepreneur and Entrepreneurship:

Entrepreneur EntrepreneurshipAn entrepreneur one who undertakes and operates a new enterprise and assumes some accountability for the inherent risks

Entrepreneurship is the practice of starting new organizations, particularly new businesses generally in responses to identified opportunities.

Entrepreneur is often synonymous with founder. Entrepreneurship ranges in scale from solo projects to major undertakings creating many job opportunities.

The person who starts and operates a business enterprise is an entrepreneur.

The process in which an entrepreneur starts and operates his business enterprise is entrepreneurship.

The entrepreneur is a coordinator as he coordinates all the three elements of production i.e. land, labour and capital.

Entrepreneurship is the coordination maintained by an entrepreneur.

The person who innovates something new is an entrepreneur.

The innovation of something new or the process of innovation is entrepreneurship.

He who leads an enterprise towards its vision thorough leadership, motivation is an entrepreneur.

The way in which an entrepreneur leads his manpower, motivates them for the achievement of the firms goal is entrepreneurship.

He who bears risk of the firm for the sake of making a reasonable profit is an entrepreneur.

The risk bearing practice that is done by an entrepreneur is entrepreneurship.

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