UNIT 1

ENTREPRENEUR

Definition of an Entrepreneur.

An Entrepreneur is an individual who efficiently and effectively combines the four

factors of production. Those factors are land (natural resources), labor (human input
into production using available resources), capital (any type of equipment used in
production i.e. machinery) and Enterprise (intelligence, knowledge, and creativity.)

Entrepreneurship is often difficult and tricky, as many new ventures fail is often. Most
commonly, the term entrepreneur applies to someone who creates value by offering a
product or service. Entrepreneurs often have strong beliefs about a market opportunity
and organize their resources effectively to accomplish an outcome that changes
existing interactions.

Business entrepreneurs are viewed as fundamentally important in the capitalistic

society. Some distinguish business entrepreneurs as either "political entrepreneurs" or
"market entrepreneurs," while social entrepreneurs' principal objectives include the
creation of a social and/or environmental benefit.

The Enterprise can be set up in designated industrial areas, where infrastructure

facilities are available and is near to the market identified. It can also be set up in any
other area depending upon nature of activity and local municipal rules.

Entrepreneurship is the practice of starting new organizations or revitalizing mature

organizations, particularly new businesses generally in response to identified
opportunities. Entrepreneurship is often a difficult undertaking, as a vast majority of
new businesses fail. Entrepreneurial activities are substantially different depending on
the type of organization that is being started. Entrepreneurship ranges in scale from
solo projects (even involving the entrepreneur only part-time) to major undertakings
creating many job opportunities. Many "high-profile" entrepreneurial ventures seek
venture capital or angel funding in order to raise capital to build the business. Angel
investors generally seek returns of 20-30% and more extensive involvement in the

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business. Many kinds of organizations now exist to support would-be entrepreneurs,
including specialized government agencies, business incubators, science parks, and
some NGOs.

THE MAIN DIFFERENCES BETWEEN ENTERPRISE, ENTREPRENEUR &

ENTREPRENEURSHIP

S.No Enterprise Entrepreneur Entrepreneurship

1 Is an already formed business Is a person who The process of
organization establishes and establishing new
manages the new business enterprise
enterprise along with the
capacity to identify
the opportunities
2 The enterprise is some business Often the founder to gain profits in
structure/object that usually and owner of the results
carries out some commercial business.
activity

FUNCTIONS OF AN ENTREPRENEUR

An entrepreneur does perform all the functions necessary right from the genesis of an
idea up to the establishment of an enterprise. These can be listed in the following
sequential manner.

 Idea generation and scanning of the best suitable idea.

 Determination of the business objectives

 Product analysis and market research

 Determination of form of ownership/organisation

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  Completion of promotional formalities.

 Raising necessary funds.

 Procuring machine and material.

 Recruitment of men.

 Undertaking the business operation.

ROLES OF ENTREPRENEURS FOR ECONOMIC DEVELOPMENT

1. Wealth Creation and Sharing: By establishing the business entity,

entrepreneurs invest their own resources and attract capital (in the form of debt,
equity, etc.) from investors, lenders and the public. This mobilizes public wealth
and allows people to benefit from the success of entrepreneurs and growing
businesses. This kind of pooled capital that results in wealth creation and
distribution is one of the basic imperatives and goals of economic development.

2. Create Jobs: Entrepreneurs are by nature and definition job creators, as

opposed to job seekers. The simple translation is that when you become an
entrepreneur, there is one less job seeker in the economy, and then you provide
employment for multiple other job seekers. This kind of job creation by new and
existing businesses is again is one of the basic goals of economic development.

3. Balanced Regional Development: Entrepreneurs setting up new businesses

and industrial units help with regional development by locating in less developed
and backward areas. The growth of industries and business in these areas leads
to infrastructure improvements like better roads and rail links, airports, stable
electricity and water supply, schools, hospitals, shopping malls and other public
and private services that would not otherwise be available.

Every new business that locates in a less developed area will create both direct
and indirect jobs, helping lift regional economies in many different ways. The
combined spending by all the new employees of the new businesses and the
supporting jobs in other businesses adds to the local and regional economic

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 output. Both central and state governments promote this kind of regional
development by providing registered MSME businesses various benefits and
concessions.

5. Standard of Living: Increase in the standard of living of people in a community

is yet another key goal of economic development. Entrepreneurs again play a key
role in increasing the standard of living in a community. They do this not just by
creating jobs, but also by developing and adopting innovations that lead to
improvements in the quality of life of their employees, customers, and other
stakeholders in the community. For example, automation that reduces
production costs and enables faster production will make a business unit more
productive, while also providing its customers with the same goods at lower
prices.

6. Exports: Any growing business will eventually want to get started with exports
to expand their business to foreign markets. This is an important ingredient of
economic development since it provides access to bigger markets, and leads to
currency inflows and access to the latest cutting-edge technologies and
processes being used in more developed foreign markets. Another key benefit is
that this expansion that leads to more stable business revenue during economic
downturns in the local economy.

7. Community Development: Economic development doesn’t always translate

into community development. Community development requires infrastructure
for education and training, healthcare, and other public services. For example,
you need highly educated and skilled workers in a community to attract new
businesses. If there are educational institutions, technical training schools and
internship opportunities, that will help build the pool of educated and skilled
workers.

FACTOR INFLUENCNG ENTREPRENURSHIP

1. Creativity

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Do not be dissuaded by the challenge to be creative. You need not be the original wheel
creator to improve upon a stone cylinder. By standing on the shoulders of giants, you
can take existing ideas and make small improvements upon them. Your best ideas may
come to you as you are falling asleep or while you are taking a shower. Recognize when
you have a fresh idea and do not let them get away from you. Write them down! Not
every idea has to be a home run. By accumulating your ideas, you will be able to distill
the great ones from the rest and be ready to run with the best.

2. Risk Tolerance

Rewards rarely come without risk. Your ability to take advantage of an opportunity will
depend, in part, on your tolerance for risk. As the founder of a start-up, investors will
expect you to have a vested interest in your business. If you will not bet on your idea,
why should anybody else? If you cannot afford the risk, financially or emotionally, then
you might make decisions that are too tepid to be successful. To do well, an
entrepreneur needs the strong sense of self-efficacy to believe the risk will be
surmountable.

3. Responsiveness

Opportunity can leave quickly. With the internet, the spread of information and ideas has
led to deeper, faster competition to be the first mover. The ability to respond to the
market and new business opportunities can be the difference between a successful
entrepreneur and a failed business model. To be responsive, an entrepreneur must have
the flexibility of mind and resources necessary to see and take advantage of new and
upcoming possibilities. Learning from your mistakes and those of others to implement
change can keep businesses afloat. Calcifying rigidity, on the other hand, can turn a
start-up into dust.

4. Leadership

It is up to the entrepreneur to marshal assets. Leaders are challenged with taking

possibilities and turning them into inspiring visions for others. You will inevitably have to
sell either your idea or your product to begin your entrepreneurship. It will be up to the

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entrepreneur to take the idea and turn it into actions and products to capitalize on the
opportunity. Leadership can come in many forms, but it is nevertheless essential to
entrepreneurship. You must take the lead for your ideas to come to fruition.

5. Rights

Intellectual property laws can provide you with exclusive business rights to your ideas. If
you do not protect your ideas, they may be copied -- cheaply. Once an idea is in the
public domain, it may no longer be possible to use that idea as a competitive advantage.
Society values ideas being shared. In exchange for sharing ideas, governments provide
limited monopolies that will allow you to capitalize on them for a period, making up in
part for the costs you have incurred in research and development. Intellectual property
professionals can aid you in seeking such rights.

6. Economic factors

a) Lack of adequate overhead facilities:

Profitable innovations require basic facilities like transportation, communication power

supply etc. They reduce cost of production and increase profit.

b) Non availability of capital

Inventions are capital oriented. In less developed countries most capital equipment
have to be imported which involves foreign exchange which acts as a difficult problem.

c) Great risk

Risk is high in case of less developed countries as there is lack of reliable information,
markets for good and services is small etc.

d) Non availability of labor and skills

Though there is abundant labor supply there is generally scarcity of skills at all levels.’

7. Social factors

A society that is rational in decision making would be favorable for decision making.

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Education, research and training is given less importance in less developed countries
therefore there is very little vertical mobility of labor.

8. Cultural factors

If the culture is economically or monetarily oriented entrepreneurship would be

applauded and praised. In less developed countries people are not economically
motivated. People have ample opportunities of attaining social distinction by non
economic pursuits.

9. Personality factors

In less developed countries the entrepreneur is looked upon with suspicion. Public
opinion in the less developed nations sees in the entrepreneur only a profit maker and
exploited.

ADVANTAGES (PROS) OF ENTREPRENEURSHIP

Every successful entrepreneur brings about benefits not only for himself/ herself but for
the municipality, region or country as a whole.

The benefits that can be derived from entrepreneurial activities are as follows:

 Enormous personal financial gain, Self-employment, offering more job

satisfaction and flexibility of the work force.

 Development of more industries, especially in rural areas or regions

disadvantaged by economic changes, for example due to globalization effects.

 Encouragement of the processing of local materials into finished goods for

domestic consumption as well as for export.

 Income generation and increased economic growth.

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  Promotion of the use of modern technology in small-scale manufacturing to
enhance higher productivity.

 Encouragement of more researches/ studies and development of modern

machines and equipment for domestic consumption.

 Development of entrepreneurial qualities and attitudes among potential

entrepreneurs to bring about significant changes in the rural areas.

 Freedom from the dependency on the jobs offered by others.

 The ability to have great accomplishments.

IMPORTANCE OF ENTREPRENEURSHIP IN DEVELOPED ECONOMY

 The nature of a developing economy is quite different from a developed economy.

The developing economy can be an agricultural country moving towards the
industrialization or it may be the one where in the industry may be in its infancy
lacking advance technology.
The modern era is an era of changes. The whole world is becoming a village due to the
industrial revolution and fast developing communication technology. The globalization
of industry and commerce is bringing a vast change in various aspects of life.

 The modern era is an era of changes. The whole world is becoming a village due
to the industrial revolution and fast developing communication technology. The
globalization of industry and commerce is bringing a vast change in various
aspects of life.
 Economic development of a country is the outcome of purposeful human activity.
 Economic development is a highly dynamic process characterized by the pattern
of Demand shifts, new products are needed, appear for the production of goods
within a country.
 A developing country needs entrepreneurs who are competent to perceive new
opportunities and are willing to incur the necessary risk in exploiting them.

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  A developing economy is required to be brought out of the vicious circle of low
income and poverty.
 Entrepreneur can break this cruel circle. Entrepreneurs and helping government
can change a developing economy in Developed economy.

PROBLEMS (CONS) FACED BY ENTREPRENEURS

1. Cash flow management

The challenge: Cash flow is essential to small business survival, yet many
entrepreneurs struggle to pay the bills (let alone themselves) while they’re waiting for
checks to arrive. Part of the problem stems from delayed invoicing, which is common in
the entrepreneurial world. You perform a job, send an invoice, and then get paid
(hopefully) 30 days later. In the meantime, you have to pay everything from your
employees or contractors to your mortgage to your grocery bill. Waiting to get paid can
make it difficult to get by — and when a customer doesn’t pay, you can risk everything.

The solution: Proper budgeting and planning are critical to maintaining cash flow, but
even these won’t always save you from stressing over bills. One way to improve cash
flow is to require a down payment for your products and services. Your down payment
should cover all expenses associated with a given project or sale as well as some profit
for you.

2. Hiring employees

The challenge: . The hiring process can take several days of your time: reviewing
resumes, sitting through interviews, sifting through so many unqualified candidates to
find the diamonds in the rough. Then, you only hope you can offer an attractive package
to get the best people on board and retain them.

The solution: Be exclusive. Far too many help wanted ads are incredibly vague in terms

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of what qualifications candidates must have, what the job duties are, what days and
hours will be worked, and what wages and benefits will be paid. You can save yourself a
ton of time by pre-qualifying candidates through exclusive help wanted ads that are
ultra-specific in what it takes to be hired at your firm, as well as what the day-to-day
work entails. Approach your employee hunt the same way you would approach a
customer-centric marketing campaign: through excellent targeting.

3. Time management

The challenge: Time management might be the biggest problem faced by entrepreneurs,
who wear many (and all) hats. If you only had more time, you could accomplish so much
more!

The solution: Make time. Like money, it doesn’t grow on trees, of course, so you have to
be smart about how you’re spending it. Here’s how:

 Create goal lists: You should have a list of lifetime goals, broken down into
annual goals, broken down into monthly goals, then broken down into weekly
goals. Your weekly goals, then will be broken down into specific tasks by day. In
this manner, what is on your task list in any given day is all you need to do to stay
on track with your lifetime goals

4. Delegating tasks

The challenge: You know you need to delegate or outsource tasks, but it seems every
time you do something gets messed up and you have to redo it anyway.

The solution: Find good employees (see above) and good outsourced contract help, for
starters. You might have to pay a little more for it, but the savings in time (and the
resulting earning potential) more than make up for it.

5. Choosing what to sell

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The challenge: You know you could make a mint if you just knew what products and
services to sell. You’re just unsure how to pick a niche.

The solution: Admit that you’re weak in identifying prosperous niches, and delegate the
task to someone who is strong in this area. You don’t have to hire a huge, expensive
marketing firm; rather, recruit a freelance researcher who has experience in whatever
type of field you’re considering entering (retail e-commerce, service industry, publishing,
etc.). Have them conduct market research and create a report with suggested niches,
backed by potential profit margins and a complete SWOT analysis: Strengths,
Weaknesses, Opportunities and Threats.

6. Marketing strategy

The challenge: You don’t know the best way to market your products and services: print,
online, mobile, advertising, etc. You want to maximize your return on investment with
efficient, targeted marketing that gets results.

The solution: Again, if you’re not adept at creating marketing plans and placing ads, it’s
a good idea to outsource your marketing strategy to someone who is. At this point, all
you need is a core marketing plan: what marketing activities will you undertake to
motivate purchases? Give your planner a budget and tell them to craft a plan that
efficiently uses that budget to produce profits.

7. Capital

The challenge: You want to start or grow your business, but you have little capital to do
it with.

The solution: There are many ways to earn funding, from traditional bank loans to
family and friends to Kickstarter campaigns. You can choose these routes, certainly, but
I prefer the self-fueled growth model in which you fund your own business endeavors.

Instead of trying to launch a multi-million dollar corporation overnight, focus on your

initial core customers. Continually work to find new customers, of course, but

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consistently strive to be remarkable to those customers you already serve. Word-of-
mouth will spread, and more customers will come looking for you. As they do, develop
systems and business processes that allow you to delegate tasks without sacrificing
quality. Your business will grow slow and steady, and you’ll be able to solve problems
while they’re small.

8. Strapped budget

The challenge: Even though cash flow is fine, it seems you never have enough in your
budget to market your company to its full potential.

The solution: Unless you’re one of the Fortune 500 (and even if you are), every
entrepreneur struggles with their budget. The key is to prioritize your marketing efforts
with efficiency in mind — spend your money where it works — and reserve the rest for
operating expenses and experimenting with other marketing methods.

Keep a close eye on your money, too: chances are, there are areas you can skim to free
up more funds. Unless an expense is absolutely critical to your business and/or
represents an investment with an expected return, cut it. In fact, do this exercise: See
how lean you can run your business. You don’t have to actually do it, but cut everything
you can and see if you still feel you can run your business (save for what you have to
delegate and market with). Somewhere in between your leanest figure and your current
budget is a sweet spot that will allow you to be just as effective and leave funds leftover
to fuel growth.

9. Business growth

The challenge: We’re assuming you are growing, not that you can’t grow, and you’ve
come to the point at which you can’t take on any more work in your current structure.

The solution: Create new processes that focus on task delegation. Many entrepreneurs,
used to wearing all the hats, find themselves in this position once they’ve achieved a
modicum of success. Because you’re doing everything, your growth halts to a stop

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when it hits a self-imposed ceiling. The only way to break through is to delegate tasks to
others to take yourself out of the production end, and segue into management and,
finally, pure ownership.

10. Self-doubt

The challenge: An entrepreneur’s life is not enviable, at least in the beginning. It’s
extremely easy to get discouraged when something goes wrong or when you’re not
growing as fast as you’d like. Self-doubt creeps in, and you feel like giving up.

The solution: Being able to overcome self-doubt is a necessary trait for entrepreneurs.
Having a good support system will help: family and friends who know your goals and
support your plight, as well as an advisory board of other entrepreneurs who can
objectively opine as to the direction of your business.

One of the best ways to deal with self-doubt is to work on your goals and tasks lists.
When you’re down and lack motivation, look at your lists and know that the tasks you do
today are contributing to your lifetime goals. By doing them, you’re one step closer, and
you can rest assured that you are, indeed, on the path to business success.

Entrepreneurs face many challenges, and volumes have been written about how to
overcome them. Perseverance and intelligence are your allies; use them to your
advantage to keep working toward your goals. Understand that you’re not the first to
struggle. Because of that, there are many resources available to help you get through
your darkest days as an entrepreneur, so you can reap the immeasurable rewards that
come with building your own successful business

DISTINCTION BETWEEN ANENTREPRENEUR AND MANAGER

Sometime the two terms, namely, an entrepreneur and manager are considered as
synonyms, i.e., meaning the same. In fact, the two terms are two economic concept
meaning two different meanings. The major points of distinction between the two are
presented in following table.

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Points Entrepreneurs Manager
Motive The main motive of an But, the main motive of a
entrepreneur is to start a manager is to render his services
venture by setting up an in an enterprise already set up by
enterprise. He understands the someone else.
venture for his personal
gratification.
Status
An entrepreneur is the owner of A manager is the servant in the
the enterprise. enterprise owned by the
Risk-bearing entrepreneur.
An entrepreneur being the A manager as a servant does not
owner of the enterprise bear any risk involved in the
assumes all risks and enterprise.
Rewards uncertainty involved in running
the enterprise.

The reward an entrepreneur A manager gets salary as reward

gets for bearing risks involved for the services render by him in
in the enterprise is profit which the enterprise. Salary of a
Innovation is highly uncertain. manager is certain and fixed.

Entrepreneur himself thinks But, what a manager does is

over what and how to produce simply to execute the plans
goods to meet the changing prepared by the entrepreneur.
demands of the customers. Thus, a manager simply
Hence, he acts as an innovator translates the entrepreneur’s idea
also called a ‘change agent’. into practice.
Qualifications
An entrepreneur needs to
possess qualities and On the contrary, a manager needs

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 qualifications like high to possess distinct qualifications
achievement motive, originality in terms of sound knowledge in
in thinking, foresight, and risk management theory and practice.
bearing ability and so on.

CONTRIBUTIONS OF ENTREPRENEURS TO DEVELOPMENT

1) Develop new markets.

Under the modern concept of marketing, markets are people who are willing and able to
satisfy their needs. In Economics, this is called effective demand. Entrepreneurs are
resourceful and creative. They can create customers or buyers. This makes
entrepreneurs different from ordinary businessmen who only perform traditional
functions of management like planning, organization, and coordination.

2) Discover New Sources Of Materials.

Entrepreneurs are never satisfied with traditional or existing sources of materials. Due
to their innovative nature, they persist on discovering new sources of materials to
improve their enterprises. In business, those who can develop new sources of materials
enjoy a comparative advantage in terms of supply, cost and quality.

3) Mobilize Capital Resources.

Entrepreneurs are the organizers and coordinators of the major factors of production,
such as land, enterprise, labor and capital. They properly mix these factors of
production to create goods and service. Capital resources, from a layman's view, refer
to money. However, in economics, capital resources represent machines, buildings, and
other physical productive resources. Entrepreneurs have initiative and self-confidence in
accumulating and mobilizing capital resources for new business or business expansion.

4) Introduce new technologies.

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Aside from being innovators and reasonable risk-takers, entrepreneurs take advantage
of business opportunities, and transform these into profits. So, they introduce
something new or something different. Such entrepreneurial spirit has greatly
contributed to the modernization of economies. Every year, there are new technologies
and new products. All of these are intended to satisfy human needs in a more
convenient and pleasant way.

5) Create Employment.

The biggest employer is the private business sector. Millions of jobs are provided by the
factories, service industries, agricultural enterprises, and the numerous small-scale
businesses.

PROMOTION OF ENTREPRENEURSHIP

Entrepreneurship was potential to support economic growth and social cohesion; it is

the policy goal of many governments to develop a culture of entrepreneurial thinking.
This can be done in a number of ways: by integrating entrepreneurship into education
systems, legislating to encourage risk-taking, and national campaigns

Many of these initiatives have been brought together under the umbrella of Global
Entrepreneurship Week, a worldwide celebration and promotion of youth
entrepreneurship, which started in 2008.

Financial assistance

Financial assistance is available from institutions such as National Banks, Small

Industries Development Bank of India, Regional Rural Banks, National Small Industries
Corporation, State Financial Corporations etc. depending upon the project requirement
and promoters background. Financial assistance has two components.

a. Loan for fixed capital is used to acquire Plant and Machinery, land and building.

b. Working capital loan is used to meet day to day operational cost of the production.

NB. State Financial Corporation and National Small Industries Corporation generally

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provide working capital. However under a package assistance, State Financial
Corporations also provide a composite loan covering plant and machinery and working
capital.

The general conditions for getting financial assistance are:

 Eligibility criteria

 Technical /Economic viability

 Promoters contribution

 Capacity to repay loan

 Collateral securities/guarantee

CHARACTERISTICS OF AN ENTREPRENEUR:

Hard work:

Willingness to work hard distinguishes a successful entrepreneur from unsuccessful

one. The entrepreneur with his tedious, sweat-filled hours and perseverance revive their
business even from on verge of failure. In nutshell, most of the successful
entrepreneurs work hard endlessly, especially in the beginning and the same becomes
their whole life.

Desire for high achievement:

The entrepreneurs have strong desire to achieve high goals in business. This high
achievement motive strengthened them to surmount the obstacles, suppress anxieties,
repair misfortunes and devise expedients and only set up and run a successful business.

Highly optimistic:

The successful entrepreneurs are not distributed by the present problems faced by
them. They are optimistic for future that the situation will become favourable to

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business in future. Thus, they can run their enterprises successfully in future.

Independent:

One of the common Characteristics of the successful entrepreneurs has been that they
do not like be guided by others and to follow their routine. They resist to be pigeonholed.
They liked to be independent in the matters of their business.

Foresight:

Theentrepreneurs have a good foresight to know about future business environment. In

other words, they well visualize the likely changes to take place in market, consumer
attitude, technological developments, etc. and take timely actions accordingly.

Good organizer:

Different sources required for production are divorced from each other. It is the ability
of theentrepreneurs that brings together all resources required for starting up an
enterprise and then to produce goods.

Innovative:

Production is meant to meet the customers’ requirements. In view of the changing taste
of customers from time to time, the entrepreneurs initiate research and innovative
activities to produce goods to satisfy the customers’ changing demands for the
products. The research institute/centres established by TATA, BIRLA, KIRLOSKAR, etc.
are examples of the innovative activities taken by the successful entrepreneurs in our
country

Entrepreneurs have many of the same character traits as leaders, similar to the early
great man theories of leadership; Entrepreneurs are often contrasted with managers
and administrators who are said to be more methodical and less prone to risk-taking.
Such person-centric models of entrepreneurship have shown to be of questionable

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validity, not least as many real-life entrepreneurs operate in teams rather than as single
individuals

 The Entrepreneur has an enthusiastic vision.

 The Entrepreneur's vision is an interlocked collection of specific ideas.

 The overall blueprint to realize the vision is clear.

 The Entrepreneur promotes the vision with enthusiastic passion.

 The Entrepreneur develops strategies to change the vision into reality.

 The Entrepreneur takes the initial responsibility to cause a vision to become a

success.

 Entrepreneurs take prudent risks.

 An Entrepreneur is usually a positive thinker and a decision maker.

QUALITIES OF AN ENTREPRENEUR

 Capacity to assume risk

 Possessing self confidence

 Technological knowledge

 Alternates to new opportunities

 Willingness to accept change

 Ability to imitate

 Ability to organization

 Ability to administration

TYPES OF ENTREPRENEURS:

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Clarence danhof, on the basis of his study of the American agriculture, classified
entrepreneurs in the manner that at the initial stage of economic development,
entrepreneurs have less initiative and drive as economic development proceeds, they
become more innovative and enthusiastic. Basing on this, he classified entrepreneurs
into four types. These are discussed in seriatim.

1. Innovative entrepreneurs:

An innovative entrepreneur is one who introduces new goods, inaugurates new method
of productions, discovers new market and reorganizes the enterprise. it is important to
note that such entrepreneurs can work only when a certain level of development is
already achieved, and people look forward to change and improvement.

2. Imitative entrepreneurs:

These are characterized by readiness to adopt successful innovation inaugurated by

innovating entrepreneurs. Imitative entrepreneurs do not innovate the changes
themselves, they only imitate techniques and technology innovated by others. Such
types of entrepreneurs are particularly suitable for the under-developed regions for
bringing a mushroom drive of imitation new combination of factors of production
already available in developed regions.

3. Fabian entrepreneurs:

Fabian entrepreneurs are characterized by very great caution and skepticism in

experimenting any change in their enterprises. They imitate only when it becomes
perfectly clear that failure to do so would result in loss of the relative position in the
enterprise.

4. Droneentrepreneurs:

These are characterized by refusal to adopt opportunities to make changes in

production formulate even at the cost of severely reduced returns relate to other like
producers. Such entrepreneurs may even suffer from losses but they are not ready to
make changes in their existing production methods.

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Following are some more types of entrepreneurs listed by some other behavioral
scientists:

5. Solo operators:

These are entrepreneurs who essentially work alone and if needed at all, employ a few
employees. in the beginning, most of the entrepreneurs start their enterprise like them.

i. Active partners:

Active partners are those entrepreneurs who start/carry on an enterprise as a

joint venture. it is important that all of them actively participate in the operations
of the business. Entrepreneurs who only contribute funds to the enterprise but do
not actively participate in business activity are called ‘partners’.

ii. Inventors:

Suchentrepreneurs with their competence and inventiveness invent new products.

Their basic interest lies in research and innovative activities.

iii. Challengers

These are the entrepreneurs who plunge into industry because of the challenges
it presents. When one challenge seems to be met, they begin to look for new
challenges.

iv. Buyers:

These are those entrepreneurs who do not like to bear much risk. Hence, in order
to reduce risk involved in setting up new enterprise, they like to buy the ongoing
one.

v. Life timers:

These entrepreneurs take business as an integral part of their life. Usually the
family enterprise and businesses which mainly depend on exercise of personnel

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 skill fall in this type/category of entrepreneurs.

6. Intrapreneurs:

Of late, new breed of entrepreneurs is coming to the fore in large industrial

organisations. They are called ‘intrapreneurs’. They emerge from within the confines of
an existing enterprise. In big organisations, the top executives are encouraged to catch
hold of new ideas and then convert these into products through research and
development activities within the framework of organisations. The concept of
entrepreneurship has become very popular in developed countries like America. It is
found that an increasing number of intrapreneurs is leaving their jobs in big
organisations and is starting own enterprises. Many of such intrapreneurs have become
exceedingly successful in their venture. What is more that they are causing a threat to
the organisations they left? Such intrapreneurs breed to the innovative entrepreneurs
who inaugurate new products.

Having understood the meanings of entrepreneurs and intrapreneurs, now the two can
easily be distinguished from each other on the following bases:

NEED OF ENTREPRENUERSHIP

1. Creation of Employment Opportunities

Unemployment is one of the most important problems confronting developing and

underdevelopment countries, EDP’s enable prospective entrepreneurs in the setting up
of their own units, thus enabling them to get self employment. With the setting up of
more and more units by entrepreneurs, both on small and large scale, numerous job
opportunities are created for the others.
Entrepreneur in this way get an opportunity to lead an independent and honorable life
and at the same time they enable others in getting gainful employment. Several
schemes like Nehru Rozgar Yojna, National Rural Employment Programme (NREP),
Integrated Rural Development Programme (IRDP) etc. have been initiated by the

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government, of India in this direction. The thrust of all these schemes is to eliminate
poverty and generate gainful employment opportunities for the unemployed. Thus
entrepreneur can play an effective role in reducing the problem of unemployment.
2. Capital Formation
It is not possible to set up an enterprise without adequate funds. Entrepreneur as an
organizer of factors of production employs his own as well as borrowed resources for
the setting up of his enterprise. Entrepreneur mobilizes idle savings of the public and
put them to productive use. In this way he helps in capital formation, which is so
essential for the industrial and economic development of a country. Various
development banks like ICICI, IFCI, IDBI; SFCs, SIDCs take initiative in promoting
entrepreneurship through assistance to various agencies involved in EDP and by
providing financial assistance to new entrepreneurs.

3. Balanced Regional Development

Small scale units can be set up in industrially backward and remote areas with limited
financial resources. Successful EDP’s assist in accelerating the pace of industrialization
in the backward areas and reduce the concentration of economic power in the hands of
a few, Entrepreneurs feel like taking advantage of the various concessions and
subsidies offered by the state and central government. Success story of entrepreneurs
set right example for others to follow and this accelerates the pace of industrialization
in the backward areas. Setting up of more units leads to more development of
backward areas and balanced regional development.

4. Use of Local Resources

In the absence of any initiative local resources are likely to remain unutilized. Proper use
of these resources can result in the progress or development of the area and that too at
lower cost. Alert entrepreneurs seize the opportunity and exploit it in the best interests
of the area and industry. Effective EDPs can help in the proper use of local resources by
providing guidance, assistance, education and training to the prospective entrepreneurs.

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5.Improvement in per Capita Income

Entrepreneurs are always on the look out for opportunities. They explore and exploit the
opportunities. Entrepreneurs take lead in organizing various factors of production by
putting them into productive use through the setting up of enterprises. More enterprises
will lead to more production, employment and generation of wealth in the form of goods
and services. It will result in the increase in the overall productivity and per capita
income in the country. EDPs play a positive role in the setting of more units and thus
help in generation of more employment and income.

ENTREPRENEUR’S LEADERSHIP

Definition of leadership

Leadership defined as “the ability of a manager to induce subordinates to work with

confidence and zeal”

According to George R. Terry leadership is “the activity of influencing people to strive

willingly for mutual objectives”

Characteristics of leadership

Self-Esteem: Underlying everything is a high sense of one's own self-worth. Without that,
individuals will never undertake tough challenges. If one does not have it, it's important
to develop self-esteem.

Need to Achieve: This need has been associated with entrepreneurs and leaders who
constantly seek to perform at their best. For example, this leadership characteristic

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would have described Oliver Cromwell (1599 to 1658) the Lord Protector of England,
who once remarked, “He who stops being better, stops being good.” The great Harvard
psychologist David McClelland is most associated with need for achievement, a need
learned by children primarily from their parents (McClelland, 1965).

Individuals high in this need are open to feedback, are goal oriented, seek to be unique,
and strive for accomplishments based on their own efforts—characteristics important
to effective leadership. They also take risks, not extreme risks, but moderate ones.

And what is moderate risk? Moderate risk means you have the ability to influence
events, but don’t have complete control. The key is that individuals believe they will be
successful, but it is not a sure thing.

Screening for Opportunity: Like all individuals, leaders screen incoming information to
separate the useful from the useless. However, successful entrepreneurs and business
leaders screen incoming information to constantly seek new growth opportunities. They
act like gold miners who must shift through tons of dirt to find those a few precious
golden nuggets.

Unfortunately, the vast majority of business people seem blind to new opportunities and
so continually miss new ways to grow the business. Some would argue that it is not
really finding opportunity, but getting lucky. Of course there are individuals who seem to
have the knack of being in the right place and the time. For example, I have a good
friend George who had escaped communist Romania in the early 1960s and made his
way to the United States.

After being here for a while, he decided to start a leather goods business. Putting
together a few samples, he then went out to talk to buyers about the possibility of
getting started. Getting an appointment with the very first buyer, he showed his samples
and got this response, “I’ll buy everything you can sell me.” He asked why he was so
fortunate and the buyer responded, “I wanted to drop our previous vendor since he was
ripping us off” From this “lucky” start, George went on to develop an extremely
successful business—becoming a millionaire many times over. One could argue that he

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was lucky or that he capitalized on an opportunity missed by competitors.

Locus of Control: Successful leaders and entrepreneurs typically show a high internal
locus of control (Lee, 2001). In many different studies done over the years, those with a
high internal locus of control are more likely to experience success, than individuals
who are high on the external locus of control. When someone perceives events as under
the control of others, fate, luck, the system, their boss, etc. they have an external locus
of control. Individuals high on the internal locus of control have a different assumption
about how the world works. They assume that any success they experience is due to
their personal efforts and that they have the ability to influence events. Interestingly,
internal also assume failure was also their fault.

Goal Orientation: Businesses come and go, but those that last always share a common
characteristic with their founder—a relentless drive to accomplish goals. They
understand what the priorities are and continue to work at toward that goal, day in and
day out.

For many, leadership characteristic of staying focused on a goal is a very difficult thing
to do since life in the world of business tends to distract us. McKinsie in this book “The
Time Trap” put it this way, “A man was struggling to cut down enough trees to build a
fence. An old farmer came by, watched for a while, and then quietly said, “Saw’s kind of
dull, isn’t it?” “I reckon,” said the fence builder. “Hadn’t you better sharpen it? Said the
farmer. “Maybe later," said the man, "I can’t stop now—I got all these trees to cut down.”
Our goal should be to continue to perfect ourselves, something we rarely have time for.

Optimism: Underlying successful entrepreneurial leadership is a boundless font of

optimism that never seems to end. When faced with a problem, they view it as a
challenge. When faced with a setback, they view it as a new direction, when told no, they
say, “Maybe not now, but I know you’ll change your mind later.” This characteristic
contrasts sharply with the vast majority of people who project a more pessimistic,
defeatist quality. It’s this belief in the positive that serves as the foundation for dealing
with the many set-backs one will inevitably encounter in the world of business.

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Young children naturally have a positive view which seems to turn more negative as
they age. Parents can easily test this in children by asking the question, “What will you
be when you grow up?” Young children confidently say, exactly what they want to be.
However, ask a teenager the same question and they aren’t so sure.

Courage: Many professors talk about entrepreneurs as risks takers. But this leadership
characteristic is like saying snow is cold—it's accurate but missing something. Another
way is to say the same thing is that one must have guts. It requires a great deal of
courage to build a company from the ground up.

Someone once explained that large organizations function like “womb” protecting
employees from a harsh and unforgiving environment. It takes a great deal of courage
to leave a corporate or government womb and strike out by oneself into the cold, cruel
world of business. When one first starts a business, one is alone.

Tolerance to Ambiguity: This term refers to a person’s tolerance to uncertainty and risk.
Entrepreneurs generally score high on this scale (Entrailgo, 2000).

As we age, we have a tendency to be more comfortable repeating a relatively small set

of behaviors. For example, we eat pretty much the same food, shop in the same stores,
watch the same programs, have lunch with the same people, and listen to the same
music. etc. One may change jobs, but rarely does one change industries. Its’ amazing
how many people end up retiring in the same industry in which they got their first job

If one’s tolerance for ambiguity is low, one will gravitate toward large, established
organizations—better still, work for the government where things change little if at all. In
contrast to older, established organizations, entrepreneurial start-ups exist in an
environment where almost everything is new and many things have not been done
before. For example, no policies exist to guide action and start-ups typically lack the old
timers who serve as the voice of experience.

Strong Internal Motivation—the “Fire Inside"

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The motivation that drives our behavior comes from two sources: internal (intrinsic) and
external (extrinsic). Intrinsic factors include constructs like needs, desires, motives, and
will power. Extrinsic factors include any type of motivational influence from the
environment such as rewards and punishments.

For entrepreneurs, the most important motivational factor is the intrinsic one.
Entrepreneurs keep going despite the fact that employees tell them they are foolish,
friends say they are wasting their time, and family tells them to get a real job. When the
intrinsic drive goes away, so does any chance of success.

A few years ago, we put together a 160-hour program to teach very bright scientists and
engineers how to put together an investor quality business plan. The thinking was that
with the right knowledge and coaching, these future entrepreneurs would be able to get
a seed round from investors and go on to build a fast growing organization. However, a
number of these individuals never opened the doors. Why you might ask? It wasn’t that
they lacked knowledge and brilliance—it was a lack of desire, what we called the “fire
inside.”

ENTREPRENEURS DECISION-MAKING

Decision Making Styles

Management is the art of making decisions; and good management is the art of making
good decisions. To become a better decision maker, and thus a better manager, it helps
to be cognizant of your decision making options.

There are four different decision making styles, each of which you might apply in
different situations.

Autonomous

An autonomous decision is one you make yourself. You, as the manager, make the
decision, based either on information you already have, or on information you’ve
gathered from employees and other sources.

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Autonomous decisions are appropriate when you have sufficient expertise, when you
have private information, or when it’s urgent. Autonomous decisions also apply when
you have already made up your mind, or when the problem is trivial.

Consultative

A consultative decision is when you share the problem with direct reports, discussing
it with the whole team, as a team. Although you try to have everyone buy into the
solution and are open to being convinced, in the last analysis the decision is yours to
make.

Consultative decisions are especially appropriate when the implementation of the

decision is within an individual person’s area, and your decision is easily directive. Such
decisions also apply when the problem is of intermediate importance, or when you want
to avoid major errors. Consultative decisions are also important when the team is not
(yet) working well together and thus requires decision making leadership.

Joint

In a joint decision, you and your direct reports share in the decision-making process,
making decisions by consensus. By consensus, we mean that the decision may not be
your first choice, but it’s something we can live with and support. Joint decisions work
best when the problem is important and complex, and when there is not one single
expert, but perhaps several members of the team have expertise. Joint decisions also
help ensure a quality solution.

Delegative

When the problem is delegated to one or more employees who have the authority to
make the decision, this is a delegative decision. Delegate when there is one expert (and
you are not it). You can also delegate when the problem is not that important, or if the
task can also serve as a developmental exercise (provided you and your team can live
with the solution).

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Keeping these definitions in mind when you are faced with decisions will allow you to be
more self conscious of which style you are using, or should be using, and will help you
become a better manager.--by Jonathan Linowes

Steps of Entrepreneurial Decision Making

There are lots of controversy about the steps and characteristics of an entrepreneur.
Some urges that characteristics are the most important thing to be an entrepreneur. It is
true, because in order to be an entrepreneur, a person must possess some
characteristics. But exploring these characteristics and qualities to become an
entrepreneur, is not an easy task. Because there is no certain guideline for being an
entrepreneur. It cannot learn in school, college or in university. Moreover, entrepreneurs
are likely to come from families in which parents sets high standard for their children’s’
performance, encourage habits of self reliance and avoid being strict disciplinarians
(Siropolis, 1998). And become successful in the field of business or entrepreneur is not
an easy task. But some steps can be followed to find out the appropriate business
sector, which increase the chance of being a successful entrepreneur. The steps are
discussed in as follows –
Step – 1: Personal Determination:

The first step in entrepreneurial decision making is the self-assessment to determine

whether you have the personal traits you need to succeed in business. Owning a
business provides entrepreneurs the independence and the opportunities to achieve
what is important to them, given the opportunity to use full potential and contribute to
society. Again on the other side this choice have uncertainty in income and future, high
risk, high level of stress, low quality of life at the beginning (Zimmerer & Scarborough,
2005). So deciding whether to go for it or not is one of the important factors. If anyone
has decided about it then the next step will start for him/her.

Step – 2: Selecting Business:

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The second step is selecting the business that the person wants to enter. The number
of business may one or two or more. But the main question is what type of business
should be selected? This question is very hard to answer. It varies from person to
person. It depends on the personal attitude, for instance – a study shows that 41%
choose to be entrepreneur to be his own boss, 16% choose for making money, 12%
choose for creating something new, 9% choose for proving himself, 6% choose by
dissatisfied with job. And from other side it also depends on the environment in which
the business is going to operate, for example – luxury product business is not so much
suitable for village side but it is quiet suitable in the city or town. But first it should be
determined about the business. It is better if the number of business selected is more
than one or two, because it will enhance the possibility of entering into the business.
The better way to choice the business is to determine what type of business interest
you most. If the business / businesses are interesting to you it will increase the chance
of being successful in the business, you will learn quickly and can ran the business with
customer satisfaction.

Step – 3: Analyzing the Possibility of Selected Business:

Now another important part is analyzing the viability or feasibility of selected options in
various aspects. The first part is the social acceptance of the selected business. The
success of the business, especially small business as the most of the entrepreneurs are
start with small business, vastly depend on the social acceptance of such business.
Other deciding factors are demographic trends or the age, race, ethnicity and location of
the target customers. This trend is important because the basis for any market is
people. Technology, the application of science and engineering skills and knowledge to
solve production and organizational problems, is another deciding factor. Because it
directly associated with production and operation process. Other deciding factors are
economic system and laws and regulations etc. Last and the most important factor to
be considered is financial aspect. Money required to start the selected business should
be determined exclusively. By considering all of these factors, first the options should
be ranked and then selecting the best option based on other factors, such as – personal

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choice, financial capabilities etc.

Step – 4: Planning:
The most important step in the entrepreneurial decision making is planning. The work of
planning is basically mental. It requires thinking through logically (Skinner & Houston,
2003). A proper planning will reduce the stress and hazardous of managing a new
business and act as a proper guideline for the future operation. This planning process is
quite different from the planning of management process. This planning includes
planning about operation, marketing, and management and financing. The details of this
planning are given below –

Operation Planning – This section will describes the product or services offers and find
out its’ unique features; explain why people will buy the product or service and available
legal protection – patents, copyrights, trademarks and danger of technical. This part of
the planning also explains the type of manufacturing or operating should be used;
describes the facilities, labor, raw materials and product processing requirements. This
section should offers the following description; operating or manufacturing methods,
operating facilities (location, space and equipment), quality controls methods,
procedures to control inventory and operations, sources of supply and purchasing
procedures (Gitman &Daniel, 2002, page – 182). If the business is not the
manufacturing business some of the activities related to production will not present in
this section.

Management Plan – this part will identify the key players – active investors,
management team, and directors – citing the experience and competence they possess.
This section should offer the following description; management team, outside
investors, directors and their qualifications, outside resource people and their
qualifications and plans for recruiting and training employees (Gitman &Daniel, 2002,
page – 182).

Marketing Plan – in this step entrepreneur will painstakingly researched their markets

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and the marketing plan should be creative and productive. It describes how the
entrepreneur plans to use his marketing tools – marketing channels, price,
advertisement, personal selling, and sales promotion (Siropolis, 1998, page -103). This
section should also offer the following description; analysis of target market and profile
of target customer, methods of identifying and attracting customers, selling approach,
types of sales forces and distribution channels, types of sales promotion and
advertising and credit and pricing policies (Gitman &Daniel, 2002, page – 182). But the
marketing plan may differ sharply in some aspects between manufacturing organization
and merchandising organization.

Financial Plan – A financial plan binds all the preceding steps by translating operating
plans – production, marketing, management and all other plans related to the
operations of the venture – into money. In other words, the financial plan is the
monetary expression of the entrepreneur’s operating plans (Siropolis, 1998,page - 106).
This part of the plan should contain the following descriptions; projected financial
statement for the next three or five years or as available including income statements,
balance sheets, cash flow statements, and cash budgets; break even analysis of profit
and cash flows and planned source of financing (Gitman & Daniel, 2002, page – 182). It
is the most important part of the planning as it is the financial indication of the business
in future and set out the primary monetary target for the entrepreneurs. Another reason
is that it includes source of financing for the business. And another thing is that all the
part of the financial aspects should be backed by strong arguments.

Step – 5: Entering into the Business:

The last step of my process is to entering or starting the business. But this part includes
another decision making process, because there are three process for entering into the
business –
1. Starting a new business.
2. Buying an existing business.
3. Doing business under other (franchising).

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All the three ways have advantages and disadvantages includes with them. The
advantage of starting a new business is no longer need to discuss as it is already
discussed in the starting of this paper. The advantages and disadvantage of the last
two are discussed below –

Buying an Existing Business – advantages of buying an existing business includes –

established infrastructure, goodwill, market share, skilled employees, suitable location,
existing supply chain, no startup cost and legal facilities. But in the other way it may
have legal binding, inefficient management, ill will, unsuitable location, ]old and out
dated machinery, lower customer satisfaction etc. so in case of buying an existing
business following steps should be followed –
1. Prepare a list of potential candidates.
2. Investigate the all candidate’s problems and benefits and
3. Chose the best one.

The whole process discussed above are presented in the following diagram

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35