entrepreneurs characteristics, functions & types

Entrepreneurship

Defining Entrepreneurship

The term “entrepreneurship” comes from the French verb “entreprendre” and the German word “unternehmen”, both means to “undertake”.Despite its current prominence, entrepreneurship still remains a vague concept.

Understanding entrepreneurship through various sciences

Economics: - One who brings resources, labor, material and other assets into combinations that make their value greater then before and also one who introduces changes, innovation and new order.

Psychology: - A person who is typically driven by some forces, which create a desire to obtain or attain something.

Understanding entrepreneurship through various sciences

Sociology: - A person whose actions would determine his social status and who contributes to the development of society.

Management: - A person who has a vision and generates an action plan to achieve it.

Entrepreneurship definition

Joseph Schumpeter (1934) he added the concept of innovation to the theory of entrepreneurship. According to him entrepreneur is the bearer of “mechanism for change”, and anybody could be an entrepreneur if he/she “carries out new combinations”.


Schumpeter listed five different kinds of innovations or ways to act as entrepreneur:-

The introduction of new good or quality of good. The introduction of new method of production. The opening of a new market. The utilization of some new sources of supply of

raw materials or intermediate goods. The carrying out of some new organizational form

of the industry


Stevenson and Sahlman (1987): entrepreneurship is “the relentless pursuit of opportunity without regard to resources currently controlled. Moreover, they believe that there is an underlying process in entrepreneurship that starts with the identification of opportunity and ends with harvesting the fruits of one’s labours”


Peter Drucker he defines an entrepreneur as one who always searches for change, responds to it, and exploits it as an opportunity.

Bygrave & Hofer (1991): defined the entrepreneurial process as “all the functions, activities, and actions associated with the perceiving of opportunities and the creation of organizations to pursue them”.


An individual, who identifies, recognizes upcoming opportunity and is able to organize resources to establish an enterprise capitalizing on that opportunity is an entrepreneur.

Entrepreneurship – Highlights

Diversity - Entrepreneurship principle is applicable in diverse settings.

Great potential - Mostly entrepreneurial ventures are started as small enterprises but grow rapidly

Creative thinking - Entrepreneurs identify opportunities creatively.

Difference in entrepreneur & manager Entrepreneur

involved with the start-up process

assumes financial, material and psychological risks

driven by perception of opportunity

initiates change is his own boss gets uncertain rewards

Manager

running the business over a long period of time

does not have to bear risks

Driven by resources he currently possesses

follows rules & procedures is a hired employee gets fixed rewards and

benefits

Entrepreneurship characteristics

Entrepreneurship is viewed as a function involving identification and use of opportunities which exist in the market.

Entrepreneurs bear risks in converting the ideas into action and pursuing opportunities.

Characteristics continued

Entrepreneurship involves creative and innovative action

Entrepreneurs undertake managerial activities as part of their work.

An entrepreneur constantly strives for excellence in his/her field of work.

Qualities of successful entrepreneurs

Initiative In the world of business,

opportunities come and go. He should be able to initiate action and take advantage of opportunity. Once you miss the opportunity it will not come again. Therefore, initiative on the part of entrepreneur is a must.


Willingness to assume risk In

any business there is an element of risk. in other words it is not necessary that every business shall earn profit. This deters individuals to take up business. However, an entrepreneur always volunteers to take risks to run a business and be successful.


Ability to learn from experience

An entrepreneur may commit mistakes. However, once an error is committed, it should not be repeated as that will lead to heavy losses. So, one should learn from his mistakes.


Motivation

Motivation is key to success. Once you get motivated to do something you will not rest unless you complete it. For example, sometimes you become so much interested in reading a story or a novel that you do not sleep unless you complete it.


Self-confidence

For achieving success in life, one should have confidence in himself or herself. A person who lacks confidence can neither do any work himself nor can inspire others to work. Self confidence is reflected in courage, enthusiasm and the ability to lead.


Orientation towards hard workThere is no

substitute for hard work in life. While running a business, everyday, one problem or the other may arise. The businessman has to be vigilant about it and solve it as early as possible. This requires hard work on the part of entrepreneur. He cannot afford to say that now office time is over and I will not work.


Decision making ability

In running an enterprise, the entrepreneur has to take a number of decisions. He should therefore be capable of taking suitable and timely decision. In other words he must take right decision at the right time. In the present world things move very fast. If an entrepreneur does not have the ability to take timely decision, he might miss opportunity and incur losses.

Functions of an entrepreneur

Identifying entrepreneurial opportunity –

There are many opportunities in the world of business. An entrepreneur senses the opportunities faster than others do. And therefore, keeps his eyes and ears open and apply imagination, creativity and innovativeness in attaining business success.


Turning ideas into action –

An entrepreneur should be capable of turning his ideas into reality. He collects information regarding the ideas, products, practices to suit the demand in the market. Further steps are taken to achieve the goals in the light of the information collected.


Feasibility study – The entrepreneur conducts

studies to assess the market feasibility of the proposed product or services. He anticipates problems and assesses quantity, quality, cost and sources of inputs required to run the enterprise. Such a blue print of all the activities is termed as a ‘business plan’ or a ‘project report’.


Resourcing –

The entrepreneur needs various resources in terms of money, machine, material, and men to running the enterprise successfully. An essential function of an entrepreneur is to ensure the availability of all these resources.


Setting up of the Enterprise –

For setting up an enterprise the entrepreneur may need to fulfill some legal formalities. He also tries to find out a suitable location, design the premises, install machinery and do many other things.


Managing the enterprise –

One of the important function of an entrepreneur is to run the enterprise. He has to manage men, material, finance and organize production of goods and services. He has to market each product and service, after ensuring appropriate returns (profits) of the investment.


Growth and Development – Once the

enterprise achieves its desired results, the entrepreneur has to explore another higher

goal for its proper growth and development. The entrepreneur is not satisfied only with

achieving a set goal but constantly strives for achieving excellence.

Types of entrepreneurs

Necessity based / Opportunity based Profit oriented / Social entrepreneurs Serial entrepreneurs Intrapreneurs First generation / family business

Intrapreneurship

Pinchot (1985) defines an intrapreneur as a "person who focuses on innovation and creativity and who transforms a dream or an idea into a profitable venture, by operating within the organizational environment."

Intrapreneurship

It is the practice of using entrepreneurial skills without taking on the risks or accountability associated with entrepreneurial activities. It is practiced by employees within an established organization using a systemized business model.

Intrapreneurship

Employees, perhaps engaged in a special project within a larger firm are supposed to behave as entrepreneurs, even though they have the resources and capabilities of the larger firm to draw upon.

Intrapreneurship

Intrapreneurship types

Employee Intrapreneur Self-employed Intrapreneur – franchising,

multi level marketing

How Intrapreneurship could be promoted in organizations:-

Support from ownership and top management Recognition that Intrapreneurship is compatible

to the existing culture Communication channels that are open Allocation of resources to the new innovations Rewards for Intrapreneurship Follow through by the intrapreneurs in order to

see the finished product.

Rules for the intrapreneur to get his or her idea accepted

Do any job needed to make your project work regardless of your job description

Share credit wisely Remember, it is easier to ask for forgiveness

than permission Come to work each day willing to be fired Ask for advice before asking for resources

Rules for the intrapreneur to get his or her idea accepted

Follow your intuition about people; build a team of the best

Build a quiet coalition for your idea: early publicity triggers the corporate immune system

Never bet on a race unless you are running in it Be true to your goals, but realistic about ways to

achieve them Honor your sponsors.

Successful entrepreneurs

Arun Jain, Chairman & CEO of Polaris Software Lab Limited, emphasizes that it is quality consciousness which has made him one of the most highly successful first generation entrepreneurs.


Dhirubhai Ambani’s company Reliance is one of the few Indian enterprises truly on the world stage – employing thousands of people and with a turnover of many crores of rupees.

Mr. D.H. Ambani is a perfect example of an ENTREPRENEUR.


Madhuri Mathur, made the life of ladies in kitchen easier by bringing out the idea of a kitchen machine that would blend, chop, mince and grind that culminated into sumeet mixer.


Shahnaz Husain introduced herbal cosmetics to the world. Her creams and lotions have found their way into salons in different parts of the globe. She has 650 salons at 104 countries.


As the inventor of Hotmail, Sabeer Bhatia strengthened India's IT revolution. Hotmail went from strength to strength as the Web email address of choice for an estimated 200 million users worldwide.

Shri Jhunjhunwala is an Entrepreneur

Shri Jhunjhunwala of Varanasi is a businessman engaged in the production of “Jhula Vanaspati”. He started his business career from a humble beginning. He had a small retail shop of oil and ghee. His earning was limited and not sufficient to meet the needs of his family. He started looking for an opportunity to earn more.

Government policies/programs related to entrepreneurship promotion

Government specially focuses on development of :-

1. Rural areas

2. Women

3. Economically Weaker sections

Of the society in form of various policies and programs to promote entrepreneurship.


Indian Government has been very actively promoting the cause of entrepreneurship in form of various policy initiatives like:-

IRDP – Integrated Rural Development Program PMEGP – Prime Minister Employment Generation P. NREGA – National Rural Employment Guarantee Act RGUMY - Rajiv Gandhi Udyami Mitra Yojna etc.


The Ministry of Micro, Small and Medium Enterprises is the nodal Ministry for formulation of policies, programmes and schemes, their implementation and related co-ordination, for the promotion and development of small scale industries in India.


Micro, Small and Medium Enterprises Development Organization (MSME-DO) :- the Office of the Development Commissioner (Micro, Small and Medium Enterprises) . It is the apex body for assisting the Government in formulating, coordinating, implementing and monitoring policies and programmes for micro, small and medium enterprises (MSMEs) in the country.


National Small Industries Corporation Ltd (NSIC) :- it helps in promoting, aiding and fostering the growth of micro, small and medium enterprises in the country, with a focus on commercial aspect of their operations. It deals in the areas of raw material procurement, product marketing, credit rating, acquisition of technologies, adoption of improved management practices, etc.


Khadi and Village Industries Commission (KVIC)

:- established under the Khadi and Village Industries Commission Act, 1956, as a statutory organization engaged in promotion and development of khadi and village industries for providing employment opportunities in the rural areas.


Coir Board :- is a statutory body, for the promotion and development of coir industry in India as well as for uplifting the living conditions of the workers engaged in this industry.

National Commission on Enterprises in the Unorganised Sector (NCEUS)

has been set up for addressing the wide range of issues affecting the productive potential of the unorganized micro and small productive units.


For the development of training modules, undertaking research and providing consultancy services for entrepreneurship development in the small scale sector:-

1. National Institute for Micro, small and Medium Enterprises (NIMSME) at Hyderabad

2. National Institute of Entrepreneurship and Small Business Development (NIESBUD) at Noida

3. Indian Institute of Entrepreneurship (IIE) at Guwahati

An entrepreneur has to obtain several clearances or permissions depending upon the nature of his unit and products manufactured.

Regulatory or Taxation Clearances Environment & Pollution Related Clearances Product Specific Clearances

Regulatory or Taxation Clearances

Registration under Sales Tax Act Commercial Tax officer of area concerned Registration under Central Excise Act Collector of Central Excise or his nominee for

area Payment of Income Tax.- ITO of the area

concerned Registration of Partnership deed - Inspector

General of area concerned

Regulatory or Taxation Clearances

Calibration of weights & measures - Weights and Measures Inspector of State

Power Connection - Designated Officer of State Electricity Board

Employee strength exceeding 10 with power connection or 20 without power - Chief Inspector of Factories

Environment & Pollution Related Clearances

The method of granting consent under water and air pollution to SSI units has been simplified. Except for 17 critically polluting sectors, in all other cases SSI units will merely have to file an application and obtain an acknowledgement which will serve the purpose of consent.

Product Specific Clearances

Establishing a Printing Press - District Magistrate

License for Cold Storage Construction - Designated Official in State

Pesticides - Central/State Agricultural Department - Ministry of Agriculture

Drugs and Pharmaceuticals - Drug license from State Drug Controller

Product Specific Clearances

Safety Matches/ Fireworks - License under Explosives Act from Directorate of Explosives, Nagpur

Household Electrical Appliances - License from Bureau of Indian Standards

Wood Working Industry within 8 km from forest - District Forest Officer

Milk Processing & Milk products manufacturing units - Approval under Milk and Milk Products Order from State Agricultural/ Food Processing Industries Department above a designated capacity.

Filing of Entrepreneurs Memorandum with District Industry Centre of it’s area

Any person who intends to establish a micro or small enterprise, at his discretion shall file the Memorandum of Micro, Small Enterprise with District Industries Centre of its area.

Business Plan Basics

Students at any level of education can use the concept of preparing a business plan as a method of exploring all kinds of ideas for starting a business. It is merely a series of questions that lead you to think about the requirements and the possibilities of any kind of business. Until you start to ask these questions, you aren't able to visualize the details necessary to be successful in a business.

Preparing a Business Plan

The design of the business plan depends on the kind of venture envisaged and what plan should accomplish

Clarity Objectivity Interest Simple Consistent style Realistic

Elements of a business plan

1. Executive summary2. Product or service3. Management team4. Market and competition5. Marketing and sales6. Business system and organization7. Operations and implementation schedule8. Opportunities and risk9. Financial planning

Elements of B-plan – Executive summary

• Value to the customer• Innovativeness• Uniqueness• Management expertise• Financial profitability• Readiness to launch the project• Risk analysis

Elements of B-plan – product/service

The product / service conceptWhat customer need is proposed to be

fulfilledHow your product is different from othersAbility to sustain the innovationStage of developmentQuality specifications

Elements of B-plan – management team

Capability of the team to run a promising business• The core entrepreneurs• Professional experience• Genesis of the project idea• The management team

Elements of B-plan – management team

The company description• Legal ownership• Mission and objectives• Geographical information

Elements of B-plan – target market

• Targeted market segment• Demographic profile• Buying sensitivity• Purchasing patterns• Potential revenues• Special strategies required

Elements of B-plan – Market analysis

• Size and growth trends• Maturity of the industry• Vulnerability to economic factors• Seasonality factors• Technological factors• Regulatory issues• Supply and distribution requirements• Other Influencing factors

Elements of B-plan – Competition

• Competing services• Competitive position• Strengths and weaknesses of

competitors• Barriers to entry• Possible future competition• Positioning vis-a-vis the competition

Common pitfalls – Market

Everybody is waiting for my product Lack of clarity on dimensions of

dissatisfaction Insensitive to potential competition No clear appreciation of the entry barriers What stage of product life cycle you are

entering Planning and action based on analysis of

industry competitiveness

How to get market knowledge

Gut feel is not good enough Volume determination – quantitative analysis Behavior determination – qualitative analysis Data collection – primary and secondary

sources Questionnaire design Careful extrapolation

Elements of B-plan – operations

• Location• Sources and complexity of technology• Plant, equipment, facilities,

infrastructure• Recruitment, training and retaining

personnel• Input materials – sources, cost• Production, capacity utilization

Common pitfalls - Technology

In-house

Challenges of prototype and commercializing

Technology expertise with only one person Collaboration

Proven technology, Untested technology

Exclusivity, technical feasibility Absorption

Acquisition, Assimilation, Fine tuning

Elements of B-plan – Implementation schedule

Prepare a realistic 3 to 5 yr. plan to inspire credibility

• Identify major milestones• Plan for aggregating resources• Ramp up plan• Human resource planning• Investment scheduling• Strategic partnerships

Common pitfalls - Roll out plan

Location – poor home work on availability, suitability, cost and further development cost

Availability of quality inputs – workforce, power, water, transport, parking space

Equipment – installation and after sales support

Personnel – attracting, training and retaining

Elements of B-plan – Opportunities & risks

Identify major trends in external environment Identify major competitive forces operating

on the firm Possible impact of the forces on the firm’s

competitiveness in future Which are the most likely scenarios and what

are their implications to us

Elements of B-plan – Financial plan

Is the business concept profitable an worth investing in

Plan for investment, source of funds, cash flow, liquidity and steps for improving profitability

Elements of B-plan – Financial plan

Prepare• Project cost• Projected income• Break-even analysis• Projected cash flow statements• Pro forma balance sheets

Common pitfalls - Finance

Optimistic assessment of project cost and funding

Lack of budgeting of trial production Not taking fully into account the cost

implications Improper assessment of working capital The gap between sanction and disbursement Lack of efforts in confidence building with

investors

Business Plan Basics

Basic components of a business plan can be organized as follows:

providing a description of the business, choosing the best marketing strategy, identifying the management plan, and analyzing the finances needed to start the

business and make it successful.

Business Plan Basic- questions

How can you describe the business...in only one paragraph please?

What is your product, or service? Who will buy it? Where should you locate the business? How can you attract customers? What is your competition? How much should you charge for the products

or service?


What advice do you need and who can provide it?

How will you organize the managers and/or workers of the business?

How will you split the profits? Who is responsible for the losses?

What should you consider to be able to produce the product and get it to the customer?


How much money is needed to get the business started?

How many customers will you have per month and how much will they buy per month?

How much does it cost to make the product or provide the service?

What are your operating costs? (Include your own salary)


How much money will your business earn each month by selling your product or service?

How much investment will you need to keep the business going until you make a profit?

What is your potential profit per year for Year I, Year II, and Year III?

How much money do you need to borrow to start this business?

How will you make the business grow in the future?

QUESTIONS FOR CREATIVE THINKING

What kind of business would you start if your family would lend you $5000 to get it started?

What kind of business would you start if you and two classmates had access to a loan for $100,000?

What kind of business could you start if you want to do business with another country?

What type of business could you start while still going to school?

QUESTIONS FOR CREATIVE THINKING

What type of business could you start using the skills you have now?

What type of business could you run while also working in a part time job (to provide the security of a salary while the business grows)?

How could you start a business and then later make it into your own franchising business for purposes of expansion?

Questions- Financing the venture

How much will be needed for development of the product or service?

How much will be needed for setting up operations?

How much will be needed for working capital? Where will the money come from? What if more

is needed?

entrepreneurs characteristics, functions & types

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