Unit -1

Entrepreneurship

Content:
Meaning
Who

and Concept of Entrepreneur

is an Entrepreneur ?

Characteristics

of Entrepreneur

Qualities/

Skills of an Entrepreneur

Functions

of Entrepreneur

Features
Types

of Entrepreneur

of Entrepreneur

 Intrapreneur
Difference

meaning and concept

between Entrepreneur and

Intrapreneur
Comparison

between male and female

Entrepreneur.
Meaning

of Entrepreneurship

Comparison

between Entrepreneur and

Entrepreneurship
Classification

of Entrepreneurship

Entrepreneurship

Development

The term 'Entrepreneur' has been derived from

a

French

undertake

word

'Entreprendre'

certain

activities.

meaning

to

Normally,

entrepreneur has to perform two types of

functions
1.

Organization Function

2.

Risk Bearing Functions

Factors of production viz. land, labour and capital

are scattered at different places. All these factors
have to be assembled together. This work is done
by enterprise through entrepreneur.
This is an 'Organization Function'.
Organization function is the work of bringing the
required factors together and making them work
harmoniously.

Entrepreneur has to bear risks and uncertainties.

For facing uncertainties he may get profit or
may incur loss. This is the 'Risk Bearing
Function' and entrepreneur is the risk bearer.

According to A Schumpeter The

entrepreneurship

is

essentially

activity or it is an innovative function.

creative

Entrepreneur: An entrepreneur is an innovative

person who maximizes his profits by following
new strategies or venturing into new products or
services. A good entrepreneur is one who is
capable of inspiring confidence in people, and has
the ability to motivate them. He undertakes:

introduction of a new quality in a product,

introduction of a new product,

discover fresh demand and fresh source of

supply,

changes in the organization and management.

WHO IS AN ENTREPRENUER

He is a person who develops and owns his own

enterprise

He is a moderate risk taker and works under

uncertainty for achieving the goal.

He is innovative

Reflects strong urge to be independent.

 Determined

but patient

Exhibits sense of leadership

Also exhibits sense of competitiveness

Takes personals responsibility

Oriented towards the future.

Tends to persist in the face to adversity

Convert a situation into opportunity.

The characteristics of an unique entrepreneur

are :

- Need for achievement

- High need for power

- Independence

- Propensity to take risk

- Personal modernity

- Support

- Leadership

Qualities / Skills of an Entrepreneur

Ability to organize : He should be able to

organize various factors effectively. He has to
understand all the aspects of the business.

Professional

approach

He

should

be

objective and professional in approach.

Risk bearer : He should be risk taker. He

should be ready to bear risk and uncertainties.

Innovative : Organizer should be innovative. He

should adopt modern techniques of production. He
should not be reluctant to changes.

Decision Making : One has to take right decision

at a right time by showing his promptness. Quick
decisions

are

expected

but

hasty

decisions

shouldn't

be taken. Delay in decisions may

increase cost of project and reduce the profits.

Negotiation skills : Businessman regularly

comes into contact with various persons like
consumers, workers, government officials, etc.
so he should communicate tactfully.

Functions of Entrepreneur
1.Entrepreneur initiates the business activity
He has to start the business activity by
preparing a proper plan. The plan should deal
with the type of goods or service to be produced,
sources of raw material and credit, type of
technology to be used, the markets where the
products can be sold, etc. The plan should be
detailed one covering all the aspects of the
business.

2.

Entrepreneur

organizes

the

factors

of

production
The entrepreneur has to collect all the other
factors of production and combine them in the right
proportion.
3. Entrepreneur is a decision maker
Business involves variety of decisions to be
taken. The entrepreneur has to decide about the
nature

of

product,

technology,

price

policy,

advertisement strategy, employment of labour, etc. A

proper strategy has to be adopted by him to take the
right decision.

4. Entrepreneur co-ordinate things effectively

A business firm consists of a number of
departments. He has to co-ordinate various units
effectively by having proper communication channels
and supervision.
5. Entrepreneur tries to introduce innovations
According to Prof. Schumpeter, the true
function

of

an

entrepreneur

is

introducing

innovations. Innovations imply introduction of a new

product, discovering a new product, introduction of a
new technology or new method of production etc.

Innovation involves risk. The

entrepreneur may get profit or may incur loss.
Hence,

few

entrepreneurs

try

to

introduce

innovations. By innovating, they contribute to

technological

process

of

the

economy

accelerate the growth and development.

and

6.Entrepreneur

handles

budget

of

his

business
The entire budgeting process is the
responsibility of the entrepreneur. He has to
mobilize resources for the implementation of the
business plan. All other factors have to be paid
contractual payments. He gets the residual
income, he has to make provision for future
investments for expansion and diversification. He
has to maintain a balance between income and
expenditure.

7. Entrepreneur bears risk and uncertainty

This function distinguishes the entrepreneur
from other functions while other factors need
not

bother

about

entrepreneur

has

uncertainties

while

risk
to

and

uncertainties,

bear

risks

are

uncertainties cannot be insured.

risks

and

insurable,

E.g. risk like fire, theft, etc. can be insured.

Uncertainties like changes in tastes, fashions,
cannot

be

insured.

While

facing

these

uncertainties entrepreneur may get profit or may

incur loss. Thus, risk and uncertainty bearing is
one of the unique function of an entrepreneur.

Features of Entrepreneurship
1. Scare human resource
Entrepreneurship is a very scarce human factor as
it involves specific talent, organizational capacity,
innovative sprit and boldness to bear risk which is
not found in every person. In developing countries
like India lack of entrepreneurship is a major
impediment to development.

2. Heterogeneous factor
Entrepreneurship is a heterogeneous factor
of production because efficiency, talents, organizing
skills, ability to bear risk, foresights and innovating
capacities,

etc.

vary

from

entrepreneur

to

entrepreneur. The nature of enterprise varies with

various forms of business organizations like sole
trading,

partnership,

co-operatives,

Company and public undertakings.

Joint

Stock

In a small business, the same

person may work as an entrepreneur, manager
and capitalist.

3. Indispensable factor
In modern business entrepreneur is a
very

important

factor

of

production

as

he

organizes production of goods & services by

coordinating the other factors in an optimum
way. He is an organizer & owner of the firm.
Production is impossible in his absence.

4. Intangible factor
Entrepreneurship is an abstract phenomenon.
It is intangible. Entrepreneurial efforts cannot be
measured in quantitative terms while we can measure
in terms of hours of work and number of days. We can
calculate the number of individual workers and their
contribution to the firm but it is not possible to
measure entrepreneurship as the firm itself is the
enterprise.

5. Highly mobile
Of all factors entrepreneur possess
a higher degree of mobility as he can easily
move from one industry to another or from one
region to another. An entrepreneur's ability to
move from one industry to another depends
upon

his

specialization.

knowledge,

experience

and

6. Cannot be Bought & Sold

Land labour and capital can be bought and
sold in factor markets but it is not possible to deal
with

entrepreneurs

in

factor

market.

Since

enterprise is an intangible factor, it cannot be

bought and sold. Hence, like land, labour and
capital market there is no entrepreneurial market
where entrepreneurship can be bought and sold.
Transaction is not possible in case of enterprise.

7. Residual reward
Entrepreneurship is a reward in
terms of profit which is a residual reward, i.e.
an income which is left after meeting all
business
revenue.

expenses

from

the

total

sales

Types of Entrepreneur
1.Idealist
The idealist entrepreneur is the most
common type of entrepreneur shown above.
He/She likes innovation and enjoys working on
something

new

or

personally meaningful.

creative

or

something

2.Optimizers
The optimizer entrepreneur comes
in a close second and is content with the
personal satisfaction of simply being a business
owner.

3.Hard Workers
The hard workers
entrepreneur category includes persons who
enjoy putting in long hours to build a larger
more

profitable

business.

They

like

the

challenge it presents and of course reap the

most rewards if the business turns out to be a
multi-million dollar enterprise.

Hard work comes with all

businesses but as we now see not everyone
works hard for the business to grow as this
group of entrepreneurs does.

4.Jugglers
The juggler entrepreneur likes
the concept that the business gives them a
chance to handle everything themselves. They
are usually people with lots of energy and exist
on the pressure of meeting deadlines, paying
bills and of course making payroll.

5.Sustainers
The sustainers entrepreneur
category consists of people who like the
thought of balancing work and a personal life.
Most often they do not wish the business to
grow too large where it will cut into their
personal life too much.

Intrapreneur
Coined in the 1980s by management
consultant Gifford Pinchot, intrapreneurs are used by
companies that arein great need of new, innovative
ideas. Today, instead of waiting until the company is in
a bind, most companies try to create an environment
where employees are free to explore ideas. If the idea
looks profitable, the personbehind it is given an
opportunity to become an intrapreneur.

Comparison between Male and Female

Entrepreneur.

Difference between Entrepreneur and

Intrapreneur

Entrepreneurship:
Entrepreneurship means "the
process

of

the

entrepreneur".

It

is

an

attempt to create value through recognition of

business

opportunity.

It

is

basically

communicative and management functions to

mobilize financial and material resources.

Entrepreneur

Entrepreneurshi
p

Refers to a Person

Refers to a Process

visualiser

Vision

Creator

Creation

Organiser

Organisation

Decision maker

Decision

Classification of Entrepreneurs
Entrepreneurs are generally classified
based on expertise, business and motivation
levels.

Based on Expertise

Based on Motivation
Level

Based on Type of
Business

Technical entreprises

Pure entrepreneur

Business entrepreneur

Non-Technical
entreprises

Induced entrepreneur

Trading entrepreneur

Professional entreprises Spontaneous

entreprises

Industrial entrepreneur,
Corporate and
Agriculture.

a) Entrepreneurs based on expertise

Technical entrepreneurs: Develop improved
quality of goods because of craftsmanship. The
greatest strength of technical entrepreneur is
skill

in

production

technique.

Improve

goods/services by using innovative technology

and

concentrate

marketing.

more

on

production

than

Non-technical entrepreneurs:
Not concerned with the technical
aspects of the product produced. Focus more on
marketing and distribution strategies and less
on production.

Professional entrepreneurs:
Focus more on establishing a
business but not in managing or operating it. Sell
out the running business and start another
venture with the sales proceeds. Conceive new
ideas to develop alternative projects.

b)

Entrepreneurs

based

on

motivation

levels
Pure entrepreneurs:
Motivated by psychological and
economic
entrepreneurial

rewards.
activity

Undertake
for

his

satisfaction in work, ego or status.

an

personal

Induced entrepreneurs:
Induced to take up an entrepreneurial
task due to the policy measures of the
government like assistance, concessions and
necessary
venture.

overhead

facilities

to

start

Motivated entrepreneurs:
Influenced by the desire for self
fulfillment. They come into being because of the
possibility of making and marketing of some
new product for the consumer

Spontaneous entrepreneurs:
Start the business by natural
talents.

Self

motivation

makes

undertake entrepreneurial activity.

them

to

c) Entrepreneurs based on type of business

Business entrepreneurs:
Conceive an idea for a new product or
service. Utilize both production and marketing
resources
opportunity.

to

develop

new

business

Trading entrepreneurs:
Undertake trading activities but
not concerned with the manufacturing work.
Identify potential markets, stimulate demand for
its product line and creates a desire and interest
among buyers.

Industrial entrepreneurs:
Essentially manufacturers who
identify the potential needs of the customers and
tailors

product

marketing needs.

or

service

to

meet

the

Corporate entrepreneurs:
Demonstrate the skill in organizing
and managing corporate undertaking. Follow
the

regulations

corporate.

and

requirements

of

the

Agricultural entrepreneurs:
Undertake agricultural activities
like raising and marketing of crops, fertilizers
and the inputs of agriculture.

ENTREPRENEURIAL DEVELOPMENT
The process of starting a new venture
is embodied in the entrepreneurial development
process. The process has four distinct phases.
1) Identification and evaluation of the opportunity
2) Development of the business plan
3) Determination of the required resources
4) Management of enterprises

1.

Identification

and

Evaluation

of

the

Opportunity: The process by which an entrepreneur

come up with the opportunity for new venture. Each
opportunity

must

be

carefully

screened

and

evaluated. It is important for the entrepreneur to

understand the cause of opportunity. It may be
technological

change,

market

shift,

government

regulation or competition. Opportunity analysis focus

only on the opportunity but not the entire venture .

2.Development of the Business Plan:

A good business plan must be
developed

in

order

to

exploit

the

defined

opportunity. A good business plan is not only

important on developing the opportunity but also
essential in determining the resources required
and obtaining these resources and successfully
managing the resulting venture.

3.Determination of the Required Resources:

The resources needed for the
opportunity
process

must

stars

also

with

be
an

entrepreneur's

available

resources

are

that

determined.
appraisal

critical

of

resources.
must

then

distinguished from those are just helpful.

This
the
Any
be

4.Management of Enterprises:
After resources are identified, the
entrepreneur must employ them through the
implementation of the business plan. A control
system must be established so that problem
areas can be carefully monitored.

GLOSSARY
1.Entrepreneur

Innovative

and

risk

taking

person.
2.Entrepreneurship : Process of the entrepreneur.
3.Entrepreneurial Management: Techniques of
managing enterprises.