UNIT - I

Definition and concept of Entrepreneur, Qualities of Entrepreneur, Skill required for

Entrepreneurs, functions of Entrepreneur.

Entrepreneur – Meaning and Definition

An entrepreneur is one who innovates, raises money, assembles inputs, chooses

managers and sets the organisation going with his ability to identify them. Innovation
occurs through

(a) The introduction of a new quality product,

(b) A new product,
(c) A discovery of a fresh demand and a fresh source of supply, and
(d) By changes in the organisation and management.
An entrepreneur in a developing economy is one who starts an industry, undertakes
risk, bears uncertainties and also performs the managerial functions of decision-making and
coordination.
A most appropriate definition of entrepreneur is that, ―he is a man who detects and evalu-
ates a new situation in his environment and directs the making of such adjustments in the
economic systems as he deems necessary‖.
An entrepreneur performs one or more of the following
(i) Perceives opportunities for profitable investments,
(ii) Explores the prospects of starting a manufacturing enterprise,
(iii) Obtains necessary industrial licenses,
(iv) Arranges initial capital,
(v) Provides personal guarantees to the financial institution,
(vi) Promises to meet the shortfalls in the capital, and
(vii) Supplies technical know-how.
In actual practice the term ―entrepreneur‖ is attributed to all small industrialists,
small businessmen, and traders. All people who are gainfully engaged in work of
manufacturing, distribution or service and other sectors are called entrepreneurs.
As a catalytic agent the entrepreneur has to change the mindset of the workers so
that they accept radical changes in system structure and processes which the organisation is
contemplating to introduce in order to complete the rivals. The most important is to change
the key value, beliefs and norms established and accepted by the workers.

These changes are necessary in the organisation to stress on productivity, quality,

speed, innovation, customer orientation and empowerment. For this purpose an
entrepreneur is expected to play a pivotal role in developing among the employees requisite
knowledge, skills and suitable attitudes, and improve their performance.
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 Entrepreneur is an organizer and speculator of a business enterprise. Entrepreneur
lifts economic resources out of an area of lower to an area of higher productivity and greater
yield.

Entrepreneur is often associated with a person who starts his own new small
business.

Entrepreneur – Concept

To trace the genesis of the word entrepreneur it would be prudent to look at word
‗entrepredre‘ in French which literally means ―between-taker‖ or ―go- between.‖ The
theoretical growth of the concept of entrepreneurship has taken place side by side with
growth of term itself.

Entrepreneur refers to individuals who were ‗undertakers‘, meaning those who

―undertook‖ the risk of new enterprise.

In several literature reviews, it has been observed that as early as in the sixteenth
century the Frenchmen who use to organize and lead military expeditions were referred to
as entrepreneurs.

In the early 18th century French economist Richard Cantillon used the term
entrepreneur to business. Entrepreneur was a dealer who purchases the means of production
for combining them into marketable products. Since then the word entrepreneur refers to
one who takes the risk of starting a new organization or introducing a new idea, product or
service.

Entrepreneur is the most important factor in the process of economic development.

He occupies the central place in the growth process because he initiates development in a
society and carries it forward. As a change agent, the entrepreneur is the first and foremost a
catalyst for change.

The function that is specific to entrepreneur is the ability to take the factors of
production—land, labour and capital and use them to produce new goods or services. The
entrepreneur perceives opportunities. He works as an originator of a new business venture
and also tries to improve an organisation unit by initiating productive changes.

The word entrepreneur is derived from the French word ‗enterprendre‘ and its literal
meaning is ―to undertake.‖ It was applied to leaders of military expeditions in the early 16th
century. However, around 1790 A.D., it was used in the context of other types of
adventures like architects and contractors of public works.

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 The Oxford English Dictionary in 1887 states that ―entrepreneur simply is the
director or manager of a public musical institution; one who puts up entertainments,
especially musical performance.‖ A further revision has appeared in it in 1933 and the word
entrepreneur had a place in business and would mean ―one who undertakes an enterprise
especially a contractor acting as intermediary between capital and labour.‖

In this way, undertaking of an enterprise is regarded as entrepreneurship and one

who undertakes it—one who coordinates capital and labour for the purpose of production is
an entrepreneur. Actually, this emerging class is generally treated as the entrepreneurial
class.

Nature of Entrepreneur

The entrepreneur is expected to identify the environmental change as an opportunity

and uses the factors of production to produce new goods and services.

He is motivated to:

(i) The desire to find a private commercial kingdom,

(ii) The will to conquer and prove his superiority and,
(iii) The joy of creating, getting things done or simply of exercising one‘s energy and
ingenuity.
In this process, entrepreneur is expected to possess certain attitudes and values in
order to perform the expected entrepreneurial behaviour. The expectations regarding
entrepreneurial values and attributes were termed as entrepreneurial orientation.
Entrepreneurial orientation is prerequisite condition for an entrepreneur.
Entrepreneurial orientation consists of, (i) risk bearing propensity, (ii) change
process, (iii) ambition, (iv) long-term profit perspective, (v) positive attitudes towards
management and workers. The term ‗entrepreneur‘ may be used in connection with those
who incubate new ideas, start enterprises based on those ideas and provide added value to
society based on their independent initiative.

Thus, there are typical characteristics of a person who takes up entrepreneurial career
in preference to other opportunities. He prefers to take a risk and start his enterprise rather
than take up a job. In terms of motivation, he has a need for achievement, need for power
and need for affiliation.

Moreover, it is the profit that induces the prospective entrepreneur to get into the
business and start new activities or expand the existing activities. Profit, therefore, is a factor
which induces the entrepreneur to organise and utilise the factors of production for
development. It does not necessarily mean that entrepreneur is concerned only in the
pecuniary profits.
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 He is an innovator to bring change with certain achievement motive and that
achievement motive may also mean something more than money. ―For such entrepreneurs
to function effectively we need an appropriate social climate.‖ Social climate plays a very
important role in the industrialisation of any region.

Industrially backward areas in some cases, possess the requisite infrastructure and
availability of financial incentives yet they have not succeeded well with their efforts at
industrialisation to the desired extent only because they lack entrepreneurs with positive
attitudes, culture and values.

Views on Entrepreneurs

The word ‗entrepreneur‘ has been taken from the French language, and it originally
means an organiser of musical or other entertainments. In the early 16th century, it was
applied to those who were engaged in military expeditions. It was extended to cover civil
engineering activities such as construction in the 17th century.

It was only in the beginning of the 18th century that the word was used to refer to
economic aspects. In this way, the evolution of the concept of entrepreneur is considered
over more than four centuries old. The term ‗entrepreneur‘ is used in various ways and
views.

Broadly the three main views are:

1. Entrepreneur as a Risk Bearer:

‗Richard Cantillon‘ (Irish) was the first person who introduced the term
‗entrepreneur‘ and his unique risk-bearing function in economics in the early 18th century.
He defined entrepreneur as an agent who buys factors of production at certain prices in
order to combine them into a product with a view to selling it at uncertain prices in future.
Thus, it is a risk bearing activity.

2. Entrepreneur as an Organiser:

Jean-Baptiste say, developed the concept of entrepreneur by associating it with the

functions of co-ordination, organization and supervision. According to him an entrepreneur
is one who combines the land of one, the labour of another and capital of yet another and
thus produces a product.

By selling the product in the market, he pays interest on capital, rent on land and wages to
labourers and what remains is his/her profit. Thus an entrepreneur is an organiser.

3. Entrepreneur as an Innovator:

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 ―Joseph A. Schumpeter‖ in 1934, assigned a crucial role of ‗innovation‘ to the
entrepreneur. He considered economic development as a dynamic change brought by
entrepreneur by instituting new combinations of factors of production, i.e., innovations.

The introduction of new combination of, according to him, may occur in any of the
following forms:

(a) Introduction of new product in the market.

(b) Use of a new production technology.
(c) Opening of a new market.
(d) Discovery of a new source of supply of raw materials.

Characteristics of an Entrepreneur
An entrepreneur is a person who is action-oriented and highly motivated to take a
risk and to achieve such a goal dot brings about a change in the process of generating goods
or services or re-initiates progress in the advent of creating new organizations.
Therefore, experts have nine characteristics for the entrepreneur from different
conceptual viewpoints.

9 characteristics of an entrepreneur are

1. Entrepreneur is an agent.
2. Entrepreneur is a risk-taker.
3. Entrepreneur is a profit maker.
4. Entrepreneur is an achievement motivator.
5. Entrepreneur is a capital provider.
6. Entrepreneur is the determinant of the nature of the business.
7. Entrepreneur is an innovator.
8. Entrepreneur is a reward receiver.
9. Entrepreneur is a challenge taker.
The characteristics that encompass the concept of the entrepreneur are discussed below:
1. Entrepreneur is an agent
An entrepreneur is perceived as an economic agent who assembles materials for
producing goods at a cost that ensures profits and re-accumulation of capital.
He is also understood as a change agent who brings about changes in the structure
and formation of the organization, market and the arena of goods and services.

2. Entrepreneur is a risk-taker
Many experts – old and new, have emphasized this characteristic. Back I955,
Redlich pointed out that an entrepreneur is a person who identifies the nature of risk and
takes a decision.
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 Later on, Burch, Meredith and other experts have agreed that an entrepreneur is a
risk-taker while undertaking a venture.

3. Entrepreneur is a profit maker

An entrepreneur is an individual who establishes and manages the business for the
principal purpose of profit and growth.

4. Entrepreneur is an achievement motivator

David C. McClelland has initiated this concept of the entrepreneur by calling him
―as per sun with a strong desire for achievement.‖
Later on, Meredith and others have expressed the same concept while they termed
―entrepreneurs are action-oriented, highly‘ motivated individuals.‖

Therefore, entrepreneurs have to have a deep-rooted need for achieving their goals.

5. Entrepreneur is a capital provider

Entrepreneur a person who operates a business by investing his or her capital. Abbett
first pointed out this characteristic in 1967.

It supported by Nadkami (l97S) and Sharma (1981). They perceived entrepreneur as

the founder of an enterprise who assembles necessary resources for the operation of the
enterprise.

6. Entrepreneur is the determinant of the nature of the business

This characteristic /concept of the entrepreneur was promoted by Evans in 1957 It

says that an entrepreneur is the person or group of persons who perform the task of
determining the kind of business to the operated.

Therefore, entrepreneurs promote diversified and distinct types of business in society.

7. Entrepreneur is an innovator

Joseph A. Schumpeter {1934) characterized entrepreneur as an innovator of a new

combination in the field of production Later on Robinson (1962) and Hagen (1962) have
described entrepreneurs as a person who lakes a small venture to the edge of success by his
efforts, innovation and motivation.

Innovation is perceived by Schumpeter as an action that introduces a product, a new

quality, a new method of production, a new market and a new organization.Therefore, an
entrepreneur innovates something that brings about disequilibria in the industry.

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8. Entrepreneur is a reward receiver

An entrepreneur is a person who creates something new of value by devoting time

and efforts and in tum receives monetary and personal rewards. Max Weber, Hartman,
Hisrich and Peters have recognized this distinct phenomenon of entrepreneurs.

9. Entrepreneur is a challenge taker

It perceives an entrepreneur as a person who accepts challenges for developing and

exercising vigilance about success and failure to take a risk and to generate products.

The above-mentioned characterizes an entrepreneur show‘ that an entrepreneur is a

dynamic person who promotes society and civilization by taking ventures that give an
enormous variety of goods and organizations to bring about changes in the arena of
industrial activity.

10 Qualities of a Successful Entrepreneur

The Top Qualities of a Successful Entrepreneur
1. Disciplined
Successful entrepreneurs are focused on making their businesses work.
They eliminate all hindrances and distractions to their goals and outline tactics to
accomplish them. They focus on the day-to-day operations of their business without
disregarding their long-term goals.
Entrepreneurs have a plan in place and look to follow the plan. Sometimes this
means looking internally for help, or externally. One of the biggest hinderances many
entrepreneurs face is writing plans, proposals, etc. Finding a professional business plan
writing service can be essential to an entrepreneur and their business. Ultimately, successful
entrepreneurs are disciplined enough to take steps every day toward the achievement of
their goals and objectives.

2. Confident
One quality of a successful entrepreneur that people quickly notice is their confidence. They
are confident with the knowledge that they will make their businesses succeed. They show
that confidence in everything they do.

3. Open Minded
Entrepreneurs realize that every event and situation is a business opportunity. Ideas are
constantly being generated about workflows and efficiency, people skills and potential new
businesses. They are constantly looking for new ways to improve the current systems and
processes. Entrepreneurs have an uncanny ability to envision a product that will solve a

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problem, even though it may not currently seem possible. They have the ability to look at
everything around them and focus it toward their goals.

4. Self-starter
Self-starters tend to be more successful because of their innate ability to manage their time
and control their performance. If something needs to be done, entrepreneurs know they
should start it themselves. They set project parameters and are proactive, not waiting for
someone to give them permission. Entrepreneurs look for solutions to make starting their
business less complicated and other processes that can reduce complications in the
workplace.

5. Competitive
Many companies are formed because an entrepreneur knows that they can do a job better
than another. An entrepreneur will highlight their own company‘s track record of
success. To excel in business, entrepreneurs have the ability to explore all of their options
and remain aggressive in pursuing their goals. They are willing to accept any challenges that
may come their way in order to excel even more.

6. Creative
A successful entrepreneur is creative and always looks at the big picture. Their creativity
and vision often lead to the invention and discovery of new things. These traits require an
entrepreneur to take their ideas and dreams into a physical form. One facet of creativity is
being able to make connections between seemingly unrelated events or situations.
Entrepreneurs often come up with solutions which are the synthesis of other items. They
will repurpose products to market them to new industries. They must also be willing to step
outside their comfort zone in order for their ideas to come to fruition. Sometimes these
inventions result in new technologies and advancements that can create breakthroughs in
industries.

7. Determined
Entrepreneurs look at defeat as an opportunity for success. They are determined to make all
of their endeavors succeed, so they will try and try again until it does. Successful
entrepreneurs do not believe that something cannot be done. Therefore, one quality of a
successful entrepreneur is determination. They possess the determination to persevere
through all of the ups and downs of business in order to achieve their goals and dreams.

8. Strong people skills

Entrepreneurs use strong communication skills to sell products and motivate employees.
Most successful entrepreneurs know how to motivate their employees so the business grows
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overall. They are very good at highlighting the benefits of any situation and coaching others
to their success.

9. Strong work ethic

Highly-successful entrepreneurs are always willing to put in the necessary effort. They are
leaders that set a strong example to others, especially in the sense of urgency and
responsibility. The successful entrepreneur will often be the first person to arrive at the office
and the last one to leave. They will come in on their days off to make sure that an outcome
meets their expectations. Their mind is constantly on their work, whether they are in or out
of the workplace.

10. Passion
One of the most important qualities of a successful entrepreneur is passion. They genuinely
love their work. They are willing to put in those extra hours to make the business succeed
because there is a joy their business gives which goes beyond the money. The successful
entrepreneur will always be reading and researching ways to make the business better. They
are willing to put in their time and effort to learn new techniques or applications in order to
stay ahead of their competitors. They make sure that they are always learning new things
about their industry to keep abreast of new developments and be as efficient as possible.
Successful entrepreneurs want to see what the view is like at the top of the business
mountain. Once they see it, they want to go further. They know how to talk to their
employees, and their businesses soar as a result.

Entrepreneurship Skills

The importance of entrepreneurship has been a prominent concept discussed

throughout many Youth Employment Conventions. Enterpreneural skills should be
integrated in the education system as it helps the young students to engage themselves in the
economic development of the country.

To gain insight into this idea we need to understand why entrepreneurship is

important in the first place. Entrepreneurship is a key driver of our economy as a high
majority of jobs are created by and through what started as a small idea. By integrating
entrepreneurship in the education system, young people can build the confidence to see
value in their own ideas. They can then make enterprising choices that are transferable into
the workplace. Technical skills, managerial skills and entrepreneurial skills are needed for
entrepreneurship.

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Let us discuss about these skills in details

(I) Soft skills Soft Skills include the following:

Communication
Interpersonal relations
Environmental Observation
Coordination
Specific operation Technology

Communication

It is a process of exchanging information among people. It needs effective language,

presentation skill, environment etc. The figure below explains how to communicate
effectively.

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Interpersonal relations

It is a skill to communicate with each other. It is used not only in offices but in our
day to day social life. People with good interpersonal skills are perceived as confident, calm
and charismatic.

Environmental Observation

Environmental observation is one of the technical skills. This skill helps in

understanding job objective and current scenario of the society with respect to the business
that one wants to start.

Coordination

It is a skill that helps in understanding other people and work together to achieve the
set goal. Coordination must exist among the team members in order to achieve best possible
results.

Specific operation Technology

Sometimes specific technology is required for achieving specific goal. For example if
you want to develop a software for web designing then you require knowledge of some
specific technology like HTML, CSS, JAVA SCRIPT etc.

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(II) Managerial skills

Managerial Skills include the following:

Planning
Motivation
Marketing
Accounting
Negotiating

Planning

It is a basic management method involving formulation of one or more detailed plan

to achieve the best result. The planning process is to identify goal, formulate strategy and
decide the process to be followed to achieve the goal on the same strategy

Motivation

Motivation is defined as goal oriented behaviour. It is frequently used to describe

why a person is interested in doing a particular work.

Following points help us to stay motivated:

Surround yourself with positivity

Create a vision board
Make smart goals
Reward yourself
Believe in yourself
Acknowledge your positive attributes
Recognize your progress
Visualize accomplishing your goals
Be kind to yourself
Don‘t compare yourself to others

Marketing

It is an ability through which you sell something or create awareness about

something e.g. any product. For example T.V. commercials are a part of marketing. It tries
to satisfy needs of clients. It includes the coordination of product, price, place and
promotional strategy. These are known as 4 P‘s of marketing. You have to follow the points
mentioned below to ensure maximum sale of your product/service:

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Identify the product
Determine its price
Reach the customer
Implement the of promotional strategy
Accounting
It is a process of keeping financial record or preparing financial record. It includes
analysis, verification and reporting of records.

Negotiating

It is a process through which people settle all the problems which occur between two
or more parties. Parties try to reach at mutual beneficial outcome through negotiation.
Process of negotiation includes following stages:

Preparation
Discussion
Goal clarification
Arriving at mutual beneficial points
Agreement
Implementation of strategy
(III) Entrepreneurial skills
It includes the following:

Innovation
Persistency
Visionary
Flexibility
Innovation and Risk Taking Ability
It is a process of translating new ideas into services that create value. An idea must
be replicable at economical cost and satisfy customer‘s need. Innovation is synonymous
with risk taking. An organization that creates new idea, takes great risk of implementing a
new market.

Persistency
In this skill, you continue to do something even though it is difficult or even if other
people are against it. This skill requires lot of patience and determination.

Visionary
Someone who can visualize the future and take action according to that is visionary.
A visionary has clear ideas about what should happen and what strategy can be formed to
achieve best possible results.

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Flexibility
Flexibility is willingness to change as per the changing environment, for betterment.
One should not be stringent about his/her way of working; rather should be able to adapt
new ways easily.

Functions of an Entrepreneur
1. Innovation:
Innovation means doing the new things or the doing of things that are already being
done in a new way. This innovation is the process of doing new things. However, there is
distinction between creativity and innovation. Creativity is the ability to bring something
new into existence.

Practically, it is the ability, not the activity of bringing something new into existence.
It is possible for a person to conceive of something new and envision how it will be useful
but not necessarily take the necessary action to make it a reality.

It is also possible that ideas generated in the mind of a man have little value until
they are converted into new products, services or processes. But ―innovation is the
transformation of creative ideas into useful applications but creativity is a prerequisite to
innovation.‖

Entrepreneurs need search purposefully for the sources of innovation, the changes
and their symptoms that indicate opportunities for successful innovation. They need to
know and to apply the principles of successful innovation. Thus, innovation is the
development process. It translates an idea into an application. It requires entrepreneur to
work out the detail of product design or service analytically, to develop marketing, obtain
finance and plan operations.

2. Risk-Taking:

The risk is the condition of not knowing the outcome of an activity or decision.
Nevertheless, risk is capable of being evaluated for relative probabilities. Risk bearing means
provision for capital in order to enable the entrepreneur to establish and operate the
business.

Economists like Cantillon. J.B. Say and others stressed risk taking as the specific
function of an entrepreneur. Entrepreneur is required to reduce uncertainty in his
investment strategies by initiating expansion and diversification programmes in the
enterprise. In this connection, Drucker observed that entrepreneurial behaviour is risky
because so few of the so-called entrepreneurs know what they are doing.

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 They lack the methodology. They violate elementary and well-known rules. So,
entrepreneur should try to reduce the level of uncertainty by analysing the problem in proper
perspective.

Actually, ―business game consists of great risks and rewards are also great when risks
are successfully covered. The ability to perform services and the risks involved are
inseparable. Therefore, for successfully covering the risks, highest order of ability is
required. A successful entrepreneur would be one who has trait, patience, sagacity, power of
observation and wisdom and ability of discrimination. He should be mentally alert, gifted
with discernment, practically acute-minded, shrewd and an exceptionally intelligent
person.‖

Thus, entrepreneurs are required to perform this function—risk taking as well as risk
bearing at the same time. They are the owner as well as executor of the business enterprise.

3. Organisation and Management:

The process of organisation and management includes planning of an enterprise

coordination, control and supervision. Prof. Alfred Marshal recognised this function as an
important function of an entrepreneur.

Entrepreneurs often fall into the trap of thinking that just because their business is
small, they do not really need a comprehensive system of organisation and management.
They may rationalise that by designing an effective organisational and management control
system or they cannot improve their capabilities because of their limited knowledge about
possible methods of effective control.

But entrepreneur are expected to develop an effective organisation and management

system in the organisation. They have to interact directly with employees and exchange
information about what is going on in the firm. They tend to be directly involved in their
organisation‘s operational activities to ensure effective control. They are expected to
formulate plans, production strategies, and financial management and develop marketing
channels and management of personnel.

4. Business Decisions:

Arther H. Cole described an entrepreneur as a decision maker. The decisions with

regard to what to produce, how to produce and for whom to produce are to be taken by the
entrepreneur himself. In this connection, he has to implement his innovative process.

Prof. Cole described the functions of an entrepreneur as:

(i) The determination of those objectives of the enterprise and the change of those objectives
as conditions required or made advantageous;
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(ii) The development of an organisation including efficient relations with subordinates and
all employees;

(iii) The securing of adequate financial resource, the relations with existing and potential
investors;

(iv) The requisition of efficient technological equipment and the revision of it as new
machinery appeared;

(v) The development of a market for products and the devising of a new product to meet or
anticipate consumers demand;

(vi) The maintenance of a good relations with public authorities and with society at large.
Thus, the entrepreneur is an institution himself and he performs various functions related
with organisation development and management control. He is supposed to bear the risk,
manage, innovate, organise and take decisions with regard to his business empire.

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