UNIT – I

ENTREPRENEURSHIP
CONCEPTS
 INTRODUCTION
 Entrepreneurship is the art of starting a business, basically a
startup company offering creative product, process or service.
 An entrepreneur perceives everything as a chance and displays
bias in taking decision to exploit the chance.
 To be a successful entrepreneur, it is very important to have
managerial skill and strong team building abilities.
 Leadership attributes are a sign of successful entrepreneurs.
 An entrepreneur is a creator or a designer who designs new ideas
and business processes according to the market requirements and
his/her own passion.
 Definitions of Entrepreneur
 An individual, who undertakes the formation of an organization for
commercial purposes by recognizing the potential demand for goods and
services, and there by acts as an economic agent and transforms demand
into supply.
Adam Smith
 As a person, who pays a certain price to a product to resell it at an
uncertain price, thereby making decisions about obtaining and using the
resources while consequently admitting the risk of enterprise.
Richard Cantillon
 An entrepreneur is one who always searches for changes, responds to it
and exploits it as an opportunity.
 Believes in increasing the value and consumer satisfaction.
 Professional manager who mobilises resources and allocates them to
make a commercial gain from an opportunity, is also called an
entrepreneur.
Peter F. Drucker
 Entrepreneurship
Definition
 Entrepreneurship is a process of actions of an entrepreneur who is a
person always in search of something new and exploits such ideas
into gainful opportunities by accepting the risk and uncertainty with
the enterprise.
Enterprise
 An entrepreneur is a person who starts an enterprise.
 The entrepreneur is the actor and entrepreneurship is the act. The
outcome of the actor and the act, is called the enterprise.
 An enterprise is the business organization that is formed and which
provides goods and services, creates jobs, contributes to national
income, exports and contributes to the overall economic
development.
Concept of Entrepreneurship
 Characteristics of Entrepreneurship
Economic and dynamic activity
 Entrepreneurship is an economic activity because it involves the
creation and operation of an enterprise
 To create value or wealth by ensuring optimum utilisation of
scarce resources.
Innovation
 Entrepreneurship involves a continuous search for new ideas.
 Entrepreneurship compels an individual to continuously evaluate
the existing modes of business operations.
 Efficient and effective systems can be evolved and adopted.
Risk bearing
 The essence of entrepreneurship is the ‘willingness to assume risk’
arising out of the creation and implementation of new ideas.
 New ideas are always tentative and their results may not be
instantaneous and positive.
 Entrepreneur vs Entrepreneurship
Entrepreneur
 An entrepreneur is a person who bears the risks, unites various factors
of production and carries out creative innovations.
 Individual or one of a group of individuals who try to create something
new.
 Attempting to bring about change in terms of factor proportions,
which is known as innovation.
Entrepreneurship
 Entrepreneurship is the set of activities performed by an entrepreneur.
 Process of identifying opportunities in the market place and
identifying the resources required
 Role of Entrepreneurs in Economic
Development
Need for Entrepreneurship Development
 Economic development essentially means a process of upward change
whereby the real per capita income of a country increases over a period
of time.
 The number and competence of entrepreneurs affect the economic
growth of the country.
 The economic history of the presently advanced countries like USA,
Russia and Japan supports the fact that economic development is the
outcome for which entrepreneurship is an inevitable cause.
 Widely accepted fact that active and enthusiastic entrepreneurs can only
explore the potentials of the countries availability of resources such as
labour, capital and technology.
 Role of Entrepreneurs
Wealth Creation and Sharing
 By establishing the business entity, entrepreneurs invest their own
resources and attract capital from investors, lenders and the public.

 Improves public wealth and allows people to benefit from the success of
entrepreneurs and growing businesses.

 Results in wealth creation and distribution is one of the basic imperatives

and goals of economic development.

 Converts the resources like land, labor and capital into national income
and wealth in the form of goods and services.

 Increases per capita income in the country.

Generation of Employment

 Entrepreneur generate employment both directly and indirectly.

 By starting their business they present an opportunity to others for
work by offering jobs.
 Become an entrepreneur, there is one less job seeker in the economy,
and then you provide employment for multiple other job seekers.

 Govt. of India has launched initiatives such as StartupIndia to

promote and support new startups, and also others like the Make in
India initiative to attract foreign companies and their FDI(Foreign
Direct Investment ) into the Indian economy.

 All this in turn creates a lot of job opportunities, and is helping in

augmenting our standards to a global level.
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

 Every new business that locates in a less developed area will

create both direct and indirect jobs, helping lift regional
economies in many ways.
Improvement in Living Standards
 Entrepreneurs set up industries which remove scarcity of essential
commodities and introduce new products.
 Production of goods on mass scale and manufacture of handicrafts,
etc., in the small scale sector help to improve the standards of life
of a common man.
 Offers goods at lower costs and increase variety in consumption.
Promotes Country's Export Trade
 Entrepreneurs help in promoting a country's export-trade, which is an
important ingredient of economic development
 Produce goods and services in large scale for the purpose earning huge
amount of foreign exchange from export
Factors affecting
Entrepreneurship
 Personality Factors
 Personality traits such as inner desire for control of their
activities, tolerance for risk, high level of tolerance to function in
adverse situations.
 Family environment, level of education, age and work history
 Individuals who are desirous of working independently
 Willing to work for long hours and assume risk
 Self-confident and hard-working are likely to be more successful
Core competencies of entrepreneurs
 Initiative (does things before being asked for)
 Proactive (identification and utilization of opportunities)
 Problem-solver (new ideas and achieves innovative solutions)
 Self-confidence (takes and sticks to his decisions)
Environmental factors
 Factors relate to the conditions in which an entrepreneur has to
work.
 If the environment that a individual is working in is unsatisfactory,
the individual will quit his job and start his own business as an
entrepreneur.
 Unsatisfied personal needs for growth and achievement in
employment conditions results in successful entrepreneurship.
Political
 Political stability in a country is absolutely essential for smooth
economic activity..
 Frequent political protests, strikes, etc. hinder economic activity
and entrepreneurship.
 Unfair trade practices, irrational monetary and fiscal policies, etc.
are a roadblock to the growth of entrepreneurship
Capital
 Capital is one of the most important factors of production for the
establishment of an enterprise.
 Increase in capital investment in viable projects results in increase in
profits which help in accelerating the process of capital formation.
 Entrepreneurship activity too gets a boost with the easy availability of
funds for investment.
Labour
 Easy availability of right type of workers also effect entrepreneurship.
 The quality rather than quantity of labor influences the emergence and
growth of entrepreneurship.
 The problem of labor immobility can be solved by providing
infrastructural facilities including efficient transportation.
Raw Materials
 The necessity of raw materials hardly needs any emphasis for
establishing any industrial activity and its influence in the emergence
of entrepreneurship.
 In the absence of raw materials, neither any enterprise can be
established nor can an entrepreneur be emerged
 It is one of the basic ingredients required for production. Shortage of
raw material can adversely affect entrepreneurial environment.
Market
 The role and importance of market and marketing is very important
for the growth of entrepreneurship.
 In modern competitive world no entrepreneur can think of surviving
in the absence of latest knowledge about market and various marketing
techniques.
 Social Factors
Caste Factor
 Certain cultural practices and values in every society which influence
the actions of individuals.
 By social mobility we mean the freedom to move from one caste to
another.
 The caste system does not permit an individual who is born a one
caste to move to a higher caste.

Family Background
 Background of a family in manufacturing provided a source of
industrial entrepreneurship.
 Occupational and social status of the family influenced mobility
 Education
 Education enables one to understand the outside world and
equips him with the basic knowledge and skills to deal with day-
to-day problems.
 In any society, the system of education has a significant role to play
in inculcating entrepreneurial values.
 Our educational methods have not changed much even today. The
emphasis is till on preparing students for standard jobs, rather than
marking them capable enough to stand on their feet.
 Other Factors
Entrepreneurial Education
 More and more people with high academic attainments started joining the
ranks of industrialists, especially the professionals holding qualifications in
engineering, law, medicine, cost and chartered accounting.
 The technicians in particular among both old and new entrepreneurs have
entered industries in the modern sector having a bearing of their academic
qualifications.
 Many universities and institutes are nowadays offering entrepreneurship
education.
Impact of Services Sector
 Increase in per capita income leads to a greater share of the services sector in
the national economy.
 The average size of firms’ m many sections of the services sector are relatively
small.
 This in turn promotes entrepreneurial activity across a number of service
sector industries.
Increasing Demand for Variety
 Increased wealth has led to increase in the demand for variety. The
increasing demand for new products is of advantage to smaller
firms.
 A number of studies have shown the comparative advantage of
smaller firms in being innovative and coming up with new
products .
 If the products has unmet demand, it will create a market for
itself.
 The success of entrepreneurship is, therefore, dependent upon the
extent to which the product is in demand.
Internal Control System
 Entrepreneurship largely depends upon the control system
designed for controlling the business activities.
 If the control system is effective they will result in good quality
products and high profit margins.
 This will have a positive effect on the success of entrepreneurship.
 Creativity and Innovation
Creativity
 Creativity is the characteristic of a person to generate new ideas,
alternatives, solutions, and possibilities in a unique and different way.
 Must be expressive, exciting and imaginative.
 Mirror of how beautifully a person can think in any given circumstance.
Innovation
 Innovation is an act of application of new ideas to which creates some value
for the business organization, government, and society as well.
Introduction of….
 New technology
 New product
 New method of production
 Improvement in the existing product.
Comparison Chart
 Principles of Creativity
Creativity of every individual is composed of three main components
Expertise
 Intellectual knowledge, procedural knowledge, technical knowledge all
combined together.
 Discusses about all the knowledge a person has in a specific field.
 Creativity demand some level of expertise.
Thinking Skills
 Creative thinking is associated with how one approaches a problem or
difficult situation.
 Involves finding a unique and creative solution to any unanswered
question or problem.
 “Thinking outside the box” i.e., having a new perspective about something
routine.
Motivation
 Motivation is the driving force behind an individual.
 Pushes a person to initiate any action or behaviour or sustain
such behaviours as well.
 If a person lacks motivation, he may give up easily without
sufficient efforts.
 Principles of Innovation
 New way to do things, approach situations, interact with people
and many other things.

The first step: The idea (creating the idea)

The second step: Evaluation (choosing idea)
Step Three: Making Pattern
Step Four: Business Planning (the final arrangement with organization’s
strategy)
Step Five: Acting and performing (shipping the product to the market)
 Principles of innovation are suggested by the great visionary and
innovator Steve Jobs in his book “The Innovation Secrets of
Steve Jobs”
Do What You Love
 Steve Jobs says he truly believes that people with a true passion
can change the world for the better.
 New and creative ideas come to people who follow their passions
with hard work and persistence.
Put a Dent in the Universe
 Refers to the vision a person has about their business.
 Entrepreneurs need to widen their visions with innovation which
allows them to see the potential in things that other people
cannot see.
Kick Start your Brain
 Seek innovation and creative ideas from other industries as well.
 Innovation can flow from anywhere and at any time.
Sell Dreams, Not Products
 Idea is to make the customers feel a part of the company
 Innovate the products that facilitate people in achieving their
dreams.
Say No to Thousand Things
 Innovation by eliminating unnecessary things.
 The idea is to keep your products and their designs simple,
functional.
 Intrapreneurship
 The term intrapreneurship refers to a system that allows an
employee to act like an entrepreneur within a company or other
organization.
 Intrapreneurs are self-motivated, proactive, and action-oriented
people who take the initiative to pursue an innovative product or
service.
 An intrapreneur knows failure does not have a personal cost as it
does for an entrepreneur since the organization absorbs losses that
arise from failure.
 Intrapreneur is responsible for turning an idea or vision into a
successful finished product.
 Characteristics of Intrapreneurs
 Intrapreneurs are able to resolve specific issues such as increasing
productivity or cutting costs.
 Requires a high level of skill - leadership skills and thinking
outside the box
 Intrapreneur also takes risks and drives innovation within a
business.
 Interpret trends in the marketplace and visualize how the company
needs to evolve to stay ahead of its competition.
 Part of a company's backbone and the driving force mapping out
the organization’s future.
 Ways to spot Intrapreneurs
Problem Solvers
 When conducting interviews to hire people for your startup,
look for the candidates who are genuine problem solvers.
Characteristics
 Challenge their limits and always go beyond their conditioning
 Search for an opportunity in every problem
 Clearly define a problem (cause and effect analysis)
 Connect with other people at an emotional level
 Never create any problem for others
 Focus on prevention rather than intervention
 Expectations are reasonable
Self-starters
 Motivate yourself daily to do better than the previous day
 Motivation transforms individuals from passive participants into
active leaders.
 Intrapreneurs don’t need to be told what they should do daily.
 They prepare themselves mentally for each day and their
motivation never runs low.
Innovative
 Provide innovative solutions and also they are good at nurturing
ideas
 When sharing an intriguing idea with them, they incessantly think
about that idea and try to find out ways to make it work.
 Removes self-limiting boundaries
Growth Drivers
 They don’t wait for them to tell how to grow. They have their own
plans to succeed.
 Always ready to change their course to accommodate any sudden
change in an organization to propel the growth.
 Intrapreneurs create a growth-driven culture in an organization.