MODULE – 1

ENTREPRENEURSHIP

Meaning

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. It is the process of starting a business, a startup company or other organization.
The entrepreneur develops a business plan, acquires the human and other required resources, and is fully
responsible for its success or failure. Entrepreneurship operates within an entrepreneurship ecosystem.

Entrepreneurship is the ability to create and build something from practically nothing.

“Entrepreneurship is the investing and risking of time, money and effort to start a business and make it
successful.

Characteristics of Entrepreneurship

Entrepreneurship is characterized by the following features:

1. Economic and dynamic activity

Entrepreneurship is an economic activity because it involves the creation and operation of an enterprise with
a view to creating value or wealth by ensuring optimum utilization of scarce resources. Since this value
creation activity is performed continuously in the midst of uncertain business environment, therefore,
entrepreneurship is regarded as a dynamic force.

2. Related to innovation

Entrepreneurship involves a continuous search for new ideas. Entrepreneurship compels an individual to
continuously evaluate the existing modes of business operations so that more efficient and effective systems
can be evolved and adopted. In other words, entrepreneurship is a continuous effort for synergy (optimization
of performance) in organizations.

3. Profit potential

“Profit potential is the likely level of return or compensation to the entrepreneur for taking on the risk of
developing an idea into an actual business venture.” Without profit potential, the efforts of entrepreneurs
would remain only an abstract and a theoretical leisure activity.

4. 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.An entrepreneur has to have patience to see his efforts bear fruit. In the intervening period (time gap
between the conception and implementation of an idea and its results), an entrepreneur has to assume risk. If
an entrepreneur does not have the willingness to assume risk, entrepreneurship would never succeed.

5. Skillful management

Entrepreneurship involves skillful management.The basic managerial skill is the most important characteristic
feature of entrepreneurship. Foreffective management of an enterprise,the role of an entrepreneur is to
initiate and supervise design of organization improvement projects in relation to upcoming opportunities is
very much important.

6. Accepting challenges

Entrepreneurship means accepting challenges amidst risk and uncertainty.While accepting entrepreneurship
as a career the entrepreneur accepts the challenges of all odds and puts his efforts to convert the odds into
viable business opportunities by pooling together the resources of building and running the enterprise.

7. Goal-oriented Activity

The entrepreneur who creates and operates enterprises seeks to earn profits through satisfaction of needs of
consumers; hence, entrepreneurship is a goal-oriented activity. Entrepreneurship emphasizes results,
achievements and targets achieved. It is work done not imaginary plans or paper decisions. Hence
entrepreneurship is a goal-oriented activity.

8. Value Creation

Next, we find that the process of creating value is a characteristic in describing entrepreneurship. Through
entrepreneurship, new products, services, transactions, approaches, resources, technologies, and markets are
created that contribute some value to a community or marketplace. We can also see value created when,
through entrepreneurship; resources are transformed into outputs such as products or services. During this
transformation process, value is created because the entrepreneur is fashioning something worthwhile and
useful. Drucker says, “Until entrepreneurial act, every plant is a seed and every mineral just another rock.

9. Dynamic Process

Entrepreneurship is a dynamic function. Entrepreneur thrives on changes in the environment, which bring
useful opportunities for business. An entrepreneur deals proactively with changing markets and environment.
He looks at the changes as the source of market advantages, not as a problem. Uncertainties are market
opportunities for him. He capitalizes on fleeting market anomalies.

10. Uniqueness

Other characteristic found in entrepreneurship is that of uniqueness. Entrepreneurship involves new

combinations and new approaches with which entrepreneurs are willing to experiment. Through
Entrepreneurship unique products are created and unique approaches are tried. Entrepreneurship isn’t merely
imitating what others have done. It’s doing something new, something untested and untried – something
unique.

11. Interest and Vision

The first factor for entrepreneurial success is interest. Since entrepreneurship pays off according to
performance rather than time spent on a particular effort, an entrepreneur must work in an area that
interests her. Otherwise, she will not be able to maintain a high level of work ethic, and she will most likely
fail. This interest must also translate into a vision for the company’s growth. Even if the day-to-day activities of
a business are interesting to an entrepreneur, this is not enough for success unless she can turn this interest
into a vision of growth and expansion. This vision must be strong enough that she can communicate it to
investors and employees.

12. Risk and Rewards

Entrepreneurship requires risk. The measurement of this risk equates to the amount of time and money you
invest into your business. However, this risk also tends to relate directly to the rewards involved. An
entrepreneur who invests in a franchise pays for someone else’s business plan and receives a respectable
income, while an entrepreneur who undertakes ground breaking innovations risks everything on an
assumption that something revolutionary will work in the market. If such a revolutionary is wrong, she can
lose everything. However, if she is right, she can suddenly become extremely wealthy.

Entrepreneurship Development

Today, Entrepreneurship Development has gaining increasing significance in developing economy also.
Entrepreneurial development along with management has o come to be recognized globally as the key to
rapid and suitable economic development as well as the welfare and progress of mankind. With the growing
emphasis on the role of micro, small and medium enterprise in view of their contributions to employment
generation, capital creation, industrial development, diversification in products, product lines, raising standard
of living, regional development and economic growth, the entrepreneurship development movement round
the world received significant attention.

The field of entrepreneurship as an academic discipline draws from various fields of study. Today
entrepreneurship as a discipline has gained one of the most important places in the business world. These
notes cover several important areas of entrepreneurship from its meaning importance to the qualities and
competencies of an entrepreneur, and then challenges, opportunities and rewards to the various stages in the
setting up and growth of an enterprise.

Difference between Entrepreneur and Intrapreneur

Entrepreneur Intrapreneur
An entrepreneur is independent in his An intraprenuer is dependent on the
operations entrepreneur i.e. the owner.
An entrepreneur himself raises funds The Intrapreneur does not raise funds.
required for the enterprise.
Entrepreneur bears the risk involved in An intrapreneur does not fully bear the
the business. risk involved in the enterprise.
An entrepreneur operates from outside. On the contrary,an intrapreneur
operates from within the organization
itself.
An entrepreneur begins his business An intrapreneur sets up his enterprise
with a newly set up enterprise. after working someone else’s
organization.
As an entrepreneur establishes new An intrapreneur establishes his business
business, so he does not posses any after gathering experiences through
experience over the business. working in the other organization.
Entrepreneurs may find it difficult to get Intrapreneurs have their resources
resources readily available to them.

Entrepreneurs are found anywhere Intrapraneurs work within the confines

their vision takes them. of an organization.

Entrepreneurs know the business on a Intrapreneurs are highly skilled and

macro scale. specialized.

Difference between an Entrepreneur and a Manager

Basis of Difference Entrepreneur Manager
1. Motive The main motive of an But, the main motive of a
entrepreneur is to start a manager is to render his services in
venture by setting up an an enterprise already set up by
enterprise. someone else i.e., entrepreneur.
2. Status An entrepreneur is the A manager is the servant in the
owner of the enterprise. enterprise owned by the
entrepreneur.
3. Risk Bearing 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.
uncertainty involved in run-
ning the enterprise.
4. Rewards The reward an A manager gets salary as reward for
entrepreneur gets for the services rendered by him in the
bearing risks involved in the enterprise. Salary of a manager is
enterprise is profit which is certain and fixed.
 highly uncertain.
5. Innovation Entrepreneur himself thinks A manager simply execute the plans
over what and how to prepared by the entrepreneur. Thus,
produce goods to meet the a manager simply translates the
changing demands of the entrepreneur’s ideas into practice
customers. Hence, he acts
as an innovator also called a
‘change agent’
6. Qualifications An entrepreneur needs to On the contrary, a manager needs
possess qualities and to possess distinct qualifications in
qualifications like high terms of sound knowledge in
achievement motive, origi- management theory and practice.
nality in thinking, foresight,
risk -bearing ability and so
on.
7. Focus An entrepreneur is A manager is typically concerned
someone who is concerned with sustainability, and has to focus
primarily with the on what can be done within the
necessary components to framework of what he has been
start up a business given to work with in an existing
enterprise.

8. Growth An entrepreneur begins A business manager is focused on

with the idea of the engendering growth based on
business from its inception available resources. A manager
and its potential for growth must get employees to perform at
in the long run. An analysis optimal levels, and must make use
of the market and available of non-human resources to create
resources in relation to the additional growth beyond basic
original idea plays a primary sustainability
role in his business
decisions.
9.Objective Entrepreneur’s objective is Manager’s objective is to supervise
to innovate and create and and create routines. He implements
he acts as a change agent. the Entrepreneur’s plans and ideas.
Entrepreneur Vs. Entrepreneurship

Entrepreneur Entrepreneurship

Entrepreneur is a person. Entrepreneurship is a process.

Entrepreneur is an organizer. Entrepreneurship is an organization.

Entrepreneur is an innovator. Entrepreneurship is an innovation.

Entrepreneur is a risk bearer. Entrepreneurship is risk bearing.

Entrepreneur is a motivator. Entrepreneurship is motivation.

Entrepreneur is a creator. Entrepreneurship is a creation.

Entrepreneur is a visualizer. Entrepreneurship is a vision.

Entrepreneur is a leader. Entrepreneurship is leadership.

Entrepreneur is an imitator. Entrepreneurship is an imitation.

Traits/Qualities of Successful Entrepreneurs

1. Full of determination

To be a successful entrepreneur it is important to set clear goals along the way. Growing business, increasing
sales and hiring new employees require several micro-goals within them to be executed successfully.This type
of workload and challenge is enough to stop many people from pursuing the entrepreneurial career path. One
has to be determined from the beginning to be successful. If one isn’t fully determined there is a good chance
to crumble under the pressure.

2. Risk Taking

Some of the most successful entrepreneurs took major risks, and they paid off in a big way. Entrepreneurs
are risk takers ready to dive deep into a future of uncertainty. But not all risk takers are successful
entrepreneurs. Successful entrepreneurs have will to risk time and money on unknowns, but they also keep
resources, plans and bandwidth for dealing with “unknown” in reserve. When evaluating risk, a successful
entrepreneur always thinks that is this risk worth the cost of career, time and money? And, what will he do if
this venture doesn’t pay off?

3. High level of confidence

Entrepreneurs that have a high level of confidence are able to get the job done even under the most stressful
conditions. They understand that big challenges breed big rewards. This is the same mentality that allows
successful entrepreneurs to spot an opportunity when most just see a possible challenge. When most focus on
the challenge, a successful entrepreneur focuses on the finish line and the end reward.
4. Craves learning

Industries constantly change and evolve . Only those that are also growing through constant learning will stay
ahead. There will always be competitors trying to surpass . There will always be someone claiming to be the
next greatest thing.A successful entrepreneur always stay sharp,through constant learning about the
competitors and the industry.

5. Understands failure is part of the game

Failure is one of the secrets to success, since some of the best ideas arise from the ashes of a shuttered
business. A successful entrepreneur knows that failure is part of success. He will take those failures and use
them as learning experiences. Real world experience, even failing, will teach more than what one would ever
learn in a classroom.

6. Passionate

Passion fuels the drive and determination required to be successful. If one isn’t fully passionate about what
he/she is doing the added stress and obstacles will build up on shoulders and eventually be responsible for
collapse.

7. Adaptability and Flexibility

If entrepreneurs had the ability to see what was hiding around each turn it would make it much easier, but
unfortunately that is not the case. There can be surprises around every corner, even with a well thought out
plan and strategy.A successful entrepreneur is extremely adaptable and has ability to respond quickly in any
situation. It’s good to be passionate or even stubborn about what you do. But being inflexible about client or
market needs will lead to failure. Market needs are dynamic: changes are a recurring phenomenon. Successful
entrepreneurs welcome all suggestions for optimization or customization that enhances their offering and
satisfies client and market-needs.

8.Money Management

Successful Entrepreneur must have excellent money management skills. Poor financial decisions, such as
overspending or allocating funds to less important tasks can quickly ruin a business. It takes time to get to
profitability for any entrepreneurial venture. Till then, capital is limited and needs to be utilized wisely.
Successful entrepreneurs realize this mandatory money management requirement and plan for present and
future financial obligations (with some additional buffer). Even after securing funding or going fully
operational, a successful businessman keeps a complete handle on cash flows, as it is the most important
aspect of any business.

9. Networking Abilities

A large collection of business cards and a huge contact list doesn’t make an expert at networking. Building
value-based relationships that are truly meaningful is what networking is all about — these are the
relationships that lead to business opportunities and long-term relationships that are mutually beneficial.
Constantly networking with people that can not only help my business currently, but also have the potential to
help you in the future as well.

10. Ability to sell and promote

Knowing how to sell is an absolutely essential part of being a successful business owner.If you can’t express
what it is that makes your product or service a solution to a problem, you will be in for a rough ride.

11. Planning (But not Over-planning)

Entrepreneurship is about building a business from scratch while managing limited resources (including time,
money and personal relationships). It is a long-term commitment, and attempting to plan as much as possible
at the beginning is a noble impulse. In reality, however, planning for everything and having a ready solution for
all possible risks may prevent you from even taking the first step. Successful entrepreneurs have a mindset
and temperament to capable of dealing with unforeseen possibilities.

12.Creativity and Persuasiveness

Successful entrepreneurs have the creative capacity to recognize and pursue opportunities. They possess
strong selling skills and are both persuasive and persistent. Are you willing to promote your business tirelessly
and look for new ways to get the word out about your product or service?

13. Interpersonal Skills

Entrepreneurs are always comfortable while dealing with people at all levels. During the course of their
action,they come across a cross section of individuals with whom they have to deal. They interact with raw
material suppliers, customers,bankers etc. for different activities.As successful entrepreneurs,they should be
persons who like working with others possessing the much needed quality of interpersonal skill to deal with
people.

14. Time orientation

Entrepreneurs anticipate future trends basing upon their past experience and exposure.They stick to the
timepragmatically while doing their jobs.

15. Leadership

Entrepreneurs should posses the quality of leadership.Leadership is the ability to exert interpersonal influence
by means of communication towards the achievement of goals.Entrepreneurs as the leaders should provide
the necessary spark to motivation by guiding,inspiring,assisting and directing the members of the group for
achievement of unity of action,efforts and purpose.

16. Internal Locus of Control

Successful entrepreneurs believe in themselves.They do not believe that the success or failure or their venture
will be governed by fate,luck or similar forces.They believe that their accomplishments and setbacks are within
their own control and influence and that they can affect the outcome of their actions.

17. Tolerance for Ambiguity

Star up entrepreneurs face uncertainty compounded by constant changes that introduce ambiguity and stress
into every aspect of the enterprise. Setbacks and surprises are inevitable.A tolerance for ambiguity exists
when the entrepreneur can deal with the various setbacks and changes that constantly confront him or her.

18. Integrity and Reliability

Integrity and reliability are the glue and fiber that bind successful personal and business relationships and
make them strong.Integrity and reliability help build and sustain trust and confidence among
investors,partners,customers and creditors.Small business entrepreneurs in particular find these two
characteristics crucial to success.

19. Tolerance for Failure

Successful Entrepreneurs use failure as a learning experience.In adverse and difficult times they look for
opportunity.

Importance of Entrepreneurship

1. Development of managerial capabilities

The biggest significance of entrepreneurship lies in the fact that it helps in identifying and developing
managerial capabilities of entrepreneurs. An entrepreneur studies a problem, identifies its alternatives,
compares the alternatives in terms of cost and benefits implications, and finally chooses the best
alternative.This exercise helps in sharpening the decision-making skills of an entrepreneur. Besides, these
managerial capabilities are used by entrepreneurs in creating new technologies and products in place of older
technologies and products resulting in higher performance.

2. Creation of organizations

Entrepreneurship results into creation of organizations when entrepreneurs assemble and coordinate
physical, human and financial resources and direct them towards achievement of objectives through
managerial skills.

3. Improving standards of living

By creating productive organizations, entrepreneurship helps in making a wide variety of goods and services
available to the society, which results into higher standards of living for the people.Possession of luxury cars,
computers, mobile phones, rapid growth of shopping malls, etc. are pointers to the rising living standards of
people, and all this is due to the efforts of entrepreneurs.

4. Means of economic development

Entrepreneurship involves creation and use of innovative ideas, maximization of output from given resources,
development of managerial skills, etc., and all these factors are so essential for the economic development of
a country.

5. Job Creation

We know that job creation is vital to the overall long-term economic health of communities, regions, ad
nations. Entrepreneurial ventures play very important role in it. Small business create more jobs than large
business do. During economic recession, when large companies are on their way to retrenchment of their
work force, individuals whose jobs are eliminated find employment with small business. The creation of jobs
by small businesses is expected to continue into the future as new firms start small and grow.

6. Innovation

Innovating is a process of creating, changing, experimenting, transforming and revolutionizing. Innovation is

one of the key distinguishing characteristics of entrepreneurial activity. The passionate drive and intense
hunger of entrepreneurs to forge new directions products and processes and to take risks set in motion a
series of decisions that lead to the innovations that are important for economic vitality. Without these new
ideas, economic, technological, and social progress would be slow indeed. The “creative destruction” process
of innovating leads to technological changes and employment growth. Entrepreneurial firms act as these
“agents of change” by providing an essential source of new and unique ideas that might otherwise go.

7. Other Contribution

 Entrepreneurship in small businesses helps in distribution of products of large business. They, thus,
support the large business houses.
 It offers business avenues to women and minorities. Women and minorities are allowed the benefit of
financial independence and a chance to exhibit the ability to manage business enterprises.
 Dispersal of economic activities to different sectors of economy and identifying new avenues of
growth.
 Improvement of the standard of living of different weaker sections in the society.
 Bring socio political change in the society.
 Develop technological know-how.
 Improve culture of business and expand commercial activities.
 Entrepreneurship acts as a change agent to meet the requirements of the changing markets and
customer preferences.
 Develop a culture of achievement orientation.
 It helps in bringing about change and development of the civilization through change in trade,
comment be and industrialization.
  It arouses the need for achievement in individuals, which brings about a change in the economic
scenario through economic development and growth.
 It results in exploitation of economy’s resources, such as labour, capital and technology to the fullest
extent.

Entrepreneurial Process
Roles of Entrepreneurship in Economic Development of a Country

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. This is why the 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 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.

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

4. GDP and Per Capita Income: India’s MSME sector, comprised of 36 million units that provide employment
for more than 80 million people, now accounts for over 37% of the country’s GDP. Each new addition to these
36 million units makes use of even more resources like land, labor and capital to develop products and
services that add to the national income, national product and per capita income of the country. This growth
in GDP and per capita income is again one of the essential goals of economic development.

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.