Chapter one
Entrepreneurship
1.1 Meaning of the terms entrepreneur,
entrepreneurship and owner manager;
1.2 The entrepreneurship process
1.3 Characteristics of Entrepreneurs
1.4 Motivation for starting a business
1.5 Success factors for entrepreneurs
1.6 Kinds of Entrepreneurship
Meaning of the terms Entrepreneur,
Entrepreneurship, Owner-Manager
What is Entrepreneur?
• Entrepreneurs are action-oriented, highly motivated
individuals who take risks to achieve goals.
• Entrepreneurs are people who have the ability
to see and evaluate business opportunities,
to gather the necessary resources to take advantage of
them; and
to initiate appropriate action to ensure success.
Con’t
• Economists may view entrepreneurs as those who bring resources
together in unusual combinations to generate profits.
• Psychologists tend to view entrepreneurs in behavioral terms as
those achievement- oriented individuals driven to seek challenges
and new accomplishments.
• Peter Drucker states, as “Entrepreneur is someone who always
searches for change responds to it, and exploits it as an opportunity.”
• Example: It is the entrepreneur who only knows
• Opening of new university near the society
• Opening of Hotels near tourists’ attraction-center
Con’t
What is Entrepreneurship?
“ Entrepreneurship is the dynamic process of creating incremental wealth. This
wealth is created by individuals who assume the major risks in terms of equity,
time and /or career commitments of providing value for some product or service.
The product or service itself may or may not be new or unique but value must
somehow be infused by the entrepreneur by securing and allocating the
necessary skills and resources” Robert Ronstadt
Entrepreneurship is very rarely a get rich-quick proposition; rather, it is one of
building long-term value and durable cash flow streams.
What Is An Entrepreneur & Entrepreneurship ?
ENTREPRENEUR
A vision-driven individual who assumes significant personal and
financial risk to start or expand a business.
ENTREPRENEURSHIP
The pursuit of opportunity through
innovation, creativity and hard work
without regard for
the resources currently controlled.
Who is an Entrepreneur?
The Entrepreneurship Process
The Entrepreneurial Process...
• It is opportunity/market driven
• It is driven by a lead entrepreneur and an
entrepreneurial team
• It is resource parsimonious/saving/economical
and creative
• It depends on the fit and balance among these
• It is integrated and holistic
The entrepreneur versus the owner manager
(similarities and differences)
Entrepreneur
a. Entrepreneurial function is the organization of
production:
Entrepreneurship is an economic concept. Economics describes
four factors of production, namely, land, labor, capital and
entrepreneurial ability (organizational skill).
b. Decision-making and calculated risk bearing:
c. An entrepreneur has an all-round personality:
d. High levels of achievement motivation
e. Innovative, creative, imaginative soul
f. The entrepreneur is the owner of the business who enjoys
the position of an employer.
Owner Manager
• They may or may not be entrepreneurs.
• They own and manage a small enterprise, in a way,
which fits with their personal motivations.
• They are more intent on survival than seeking innovative
change and growth.
1. Limited scope for innovativeness, creativity and
imagination
2. Managerial jobs are transferable
-As a manager in the business organization, his job is
transferable from office to office, from one unit and
location to another location
3. Managers do not bear-risk
-Risk bearing capacity is an entrepreneurial quality
Characteristics of Entrepreneurs /personal competencies
1. Need for Achievement:- vision
2. Willingness to take risks:-financial, careers, family ,
3. Self-Confidence:- internal and external locus of control
4. Innovation:-. The entrepreneurial manger is constantly looking for
innovations, not by waiting for a flash of inspirations, but through an
organized and continuous search for new ideas
5. Total Commitment
6. All-rounders
7. A need to seek refuge:- escape from environmental factor
a. The “Foreign Refugee”
b. Corporate Refugee.
c. Other Refugees
Con’t
Other types of “ refugees” mentioned are the following:
[Link] parental (paternal) refugee
Who leaves a family business to show the parent that “I can do it
alone”.
[Link] feminist refugee
Who experiences discrimination and elects to start a firm in which
she can operate independently male chauvinist.
[Link] housewife refugee
• Who starts her own business after her family is grown or at some
other point when she can free herself from household
responsibilities.
[Link] educational refugee
• Who tires of an academic program and decide to go into business.
Motivation for starting a business
The reason for small firm formation can be divided between
“pull” and “push” influences.
I.“Pull” Influence
• Some individuals are attracted towards small business
ownership by positive motive such as a specific idea which
they are convinced will work. ”Pull” motives include:
a. Desire for independence
b. Desire to exploit an opportunity
c. Turning a hobby or previous work experience in to a
business
d. Financial Incentive
• The promise of long-term financial independence can
clearly be a motive in starting new firm, although it is
usually not quoted as frequently as other factors.
Con’t
“Push” Independence
• Many people are pushed into founding a new enterprise by
variety of factors including:
[Link]==>Being without a job (idleness)
[Link] (or threat of)
[Link] with previous employer==>Uncomfortable
relation at work has also pushed new entrants into small
business.
• The dividing line between those “pulled” and those “pushed”
is often blurred.
Outcomes of Entrepreneurship
• Economic growth
• New industry formation
• Job creation
Success factors for entrepreneurs
Most new ventures succeed because their founders are capable
individuals.
[Link] entrepreneurial team
[Link] growth of product or services
[Link] and timing: Market potential is critically
influenced by timing of new products or services.
Drawbacks of entrepreneurship
a. Limited resource:- entrepreneurship mostly starts from small
investment or contribution of owners are more than one
individual
b. Lack of experience:- most of entrepreneurs have no
experience and this may lead to in efficiency
c. Disagreement between member: if the owner of entrepreneur
is more than one person, disagreement between them can be
created. This disagreement can limit the operation of the
business.
d. Uncertainty of income:- opening and running a business
provide no guarantee that an entrepreneur will earn enough
money to survive
Con’t
e. Risk:- starting or buying a new business involves risk and
the higher rewards the greater the risk entrepreneurs
usually face. This is why entrepreneurs tend to have
evaluate risk very carefully
f. Lower quality of life until the business gets established:-
the long hour and hard work needed to launch a business
can take their tall in the rest of the entrepreneurs life
g. Complete responsibility:- it is great to be the boss but
many entrepreneurs find they must make decision on
issues about which they are not knowledgeable. When
there is no one to ask the pressure can build quickly the
realization that, the decisions they make are the cause of
success or failure.
Elements involved in Entrepreneurship
[Link]:- Simply stated risk is “a condition in which there is a
possibility of an adverse deviation from a desired outcome that is
expected or hoped from applied to a business risk translates in to
the possibility of losses associated with the assets and the earning
potential of the firm. ”
Con’t
Business risks can be classified in to two broad category market risk
and pure risk.
Entrepreneurs face a number of different types of risk. These can be
grouped in to basic areas.
a. Political risk:-
b. Business risk:-
c. Economic risk:-
d. property risk
e. Personal risk
• Reading Assignment….
Con’t
[Link]
Information gives the following importance to the
businessmen’s
To know the position of their competitors that is their strength
and weaknesses, business strategy they use and their long
term plan.
To know threats and opportunity in doing business
Helps to design long term objectives and goals indicate
capital requirement (labor, capital and machinery)
Helps to know market position locally and internationally.
Con’t
Sources of information
• Information are obtained from two main methods of data
collection. That is primary data collection and secondary data
collection
1. Collection of primary data:
– Observation method
– Interview method
– Through questioner
– Other methods which includes warranty cards, consumer
panels, etc
Con’t
2. Collection of secondary data:-Secondary data are available in
– Various publication of the central state and local
government
– Various publications of foreign government or international
bodies and their subsidiary organization.
– Technical and trade journals
– Books, magazines and newspapers
– Reports
– Public records and statistics, historical documents.
Con’t
By way of caution, the entrepreneur before using secondary data must see
that the process following characteristics
[Link] of data
a. Who collected the data?
b. What were the sources of data?
c. Were they collected by using proper methods?
d. At what time they collected. Etc.
[Link] of data:- the data that are suitable for one enquiry may not be
suitable for another enquiry, then the researcher has to check the
suitability of the data properly.
[Link] of data
Kinds of Entrepreneurship
• Founding Entrepreneurs /Founders/ : Generally considered to be the
“Pure” entrepreneurs, funders may be inventors who initials
business as an the basis of new or improved products or services.
Founders refer to entrepreneurs who bring new firms into existence.
• General managers : As new firms become well established, founders
become less innovators and more administrators. Thus, we
recognize another class of entrepreneurs called general managers.
General Managers preside over the operation of successful ongoing
business firms. They manage the week to week and month – to
month production, marketing and financial functions of small firms
• Franchisees :A system in which semi-independent business owners
(franchisees) pay fees and royalties to a parent company
(franchiser) in return for the right to become identified with its
trademark, to sell its products or services, and often to use its
business format and system.
