Unit 1

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Unit -1 Entrepreneurship:

Unit -1 Entrepreneurship

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Content: Meaning and Concept of Entrepreneur Who is an Entrepreneur ? Characteristics of Entrepreneur Qualities/ Skills of an Entrepreneur Functions of Entrepreneur Features of Entrepreneur Types of Entrepreneur

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Intrapreneur meaning and concept Difference between Entrepreneur and Intrapreneur Comparison between male and female Entrepreneur. Meaning of Entrepreneurship Comparison between Entrepreneur and Entrepreneurship Classification of Entrepreneurship Entrepreneurship Development

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The term ' Entrepreneur ' has been derived from a French word ' Entreprendre ' meaning to undertake certain activities. Normally, entrepreneur has to perform two types of functions Organization Function Risk Bearing Functions

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Factors of production viz. land, labour and capital are scattered at different places. All these factors have to be assembled together. This work is done by enterprise through entrepreneur. This is an 'Organization Function'. Organization function is the work of bringing the required factors together and making them work harmoniously.

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Entrepreneur has to bear risks and uncertainties. For facing uncertainties he may get profit or may incur loss. This is the 'Risk Bearing Function' and entrepreneur is the risk bearer.

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According to A Schumpeter “The entrepreneurship is essentially a creative activity or it is an innovative function”.

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Entrepreneur: An entrepreneur is an innovative person who maximizes his profits by following new strategies or venturing into new products or services. A good entrepreneur is one who is capable of inspiring confidence in people, and has the ability to motivate them. He undertakes: introduction of a new quality in a product, introduction of a new product, discover fresh demand and fresh source of supply, changes in the organization and management.

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WHO IS AN ENTREPRENUER • He is a person who develops and owns his own enterprise • He is a moderate risk taker and works under uncertainty for achieving the goal. • He is innovative • Reflects strong urge to be independent.

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Determined but patient • Exhibits sense of leadership • Also exhibits sense of competitiveness • Takes personals responsibility • Oriented towards the future. • Tends to persist in the face to adversity • Convert a situation into opportunity.

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The characteristics of an unique entrepreneur are : - Need for achievement - High need for power - Independence - Propensity to take risk - Personal modernity - Support - Leadership

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Qualities / Skills of an Entrepreneur Ability to organize : He should be able to organize various factors effectively. He has to understand all the aspects of the business. Professional approach : He should be objective and professional in approach. Risk bearer : He should be risk taker. He should be ready to bear risk and uncertainties.

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Innovative : Organizer should be innovative. He should adopt modern techniques of production. He should not be reluctant to changes. Decision Making : One has to take right decision at a right time by showing his promptness. Quick decisions are expected but hasty decisions shouldn't be taken. Delay in decisions may increase cost of project and reduce the profits.

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Negotiation skills : Businessman regularly comes into contact with various persons like consumers, workers, government officials, etc. so he should communicate tactfully.

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Functions of Entrepreneur 1.Entrepreneur initiates the business activity He has to start the business activity by preparing a proper plan. The plan should deal with the type of goods or service to be produced, sources of raw material and credit, type of technology to be used, the markets where the products can be sold, etc. The plan should be detailed one covering all the aspects of the business.

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2. Entrepreneur organizes the factors of production The entrepreneur has to collect all the other factors of production and combine them in the right proportion. 3. Entrepreneur is a decision maker Business involves variety of decisions to be taken. The entrepreneur has to decide about the nature of product, technology, price policy, advertisement strategy, employment of labour , etc. A proper strategy has to be adopted by him to take the right decision.

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4. Entrepreneur co-ordinate things effectively A business firm consists of a number of departments. He has to co-ordinate various units effectively by having proper communication channels and supervision. 5. Entrepreneur tries to introduce innovations According to Prof. Schumpeter, the true function of an entrepreneur is introducing innovations. Innovations imply introduction of a new product, discovering a new product, introduction of a new technology or new method of production etc.

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Innovation involves risk. The entrepreneur may get profit or may incur loss. Hence, few entrepreneurs try to introduce innovations. By innovating, they contribute to technological process of the economy and accelerate the growth and development.

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6.Entrepreneur handles budget of his business The entire budgeting process is the responsibility of the entrepreneur. He has to mobilize resources for the implementation of the business plan. All other factors have to be paid contractual payments. He gets the residual income, he has to make provision for future investments for expansion and diversification. He has to maintain a balance between income and expenditure.

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7. Entrepreneur bears risk and uncertainty This function distinguishes the entrepreneur from other functions while other factors need not bother about risk and uncertainties, entrepreneur has to bear risks and uncertainties while risks are insurable, uncertainties cannot be insured.

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E.g. risk like fire, theft, etc. can be insured. Uncertainties like changes in tastes, fashions, cannot be insured. While facing these uncertainties entrepreneur may get profit or may incur loss. Thus, risk and uncertainty bearing is one of the unique function of an entrepreneur.

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Features of Entrepreneurship 1. Scare human resource Entrepreneurship is a very scarce human factor as it involves specific talent, organizational capacity, innovative sprit and boldness to bear risk which is not found in every person. In developing countries like India lack of entrepreneurship is a major impediment to development.

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2. Heterogeneous factor Entrepreneurship is a heterogeneous factor of production because efficiency, talents, organizing skills, ability to bear risk, foresights and innovating capacities, etc. vary from entrepreneur to entrepreneur. The nature of enterprise varies with various forms of business organizations like sole trading, partnership, co-operatives, Joint Stock Company and public undertakings.

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In a small business, the same person may work as an entrepreneur, manager and capitalist.

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3. Indispensable factor In modern business entrepreneur is a very important factor of production as he organizes production of goods & services by coordinating the other factors in an optimum way. He is an organizer & owner of the firm. Production is impossible in his absence.

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4. Intangible factor Entrepreneurship is an abstract phenomenon. It is intangible. Entrepreneurial efforts cannot be measured in quantitative terms while we can measure in terms of hours of work and number of days. We can calculate the number of individual workers and their contribution to the firm but it is not possible to measure entrepreneurship as the firm itself is the enterprise.

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5. Highly mobile Of all factors entrepreneur possess a higher degree of mobility as he can easily move from one industry to another or from one region to another. An entrepreneur's ability to move from one industry to another depends upon his knowledge, experience and specialization.

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6. Cannot be Bought & Sold Land labour and capital can be bought and sold in factor markets but it is not possible to deal with entrepreneurs in a factor market. Since enterprise is an intangible factor, it cannot be bought and sold. Hence, like land, labour and capital market there is no entrepreneurial market where entrepreneurship can be bought and sold. Transaction is not possible in case of enterprise.

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7. Residual reward Entrepreneurship is a reward in terms of profit which is a residual reward, i.e. an income which is left after meeting all business expenses from the total sales revenue.

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Types of Entrepreneur 1.Idealist The idealist entrepreneur is the most common type of entrepreneur shown above. He/She likes innovation and enjoys working on something new or creative or something personally meaningful.

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2.Optimizers The optimizer entrepreneur comes in a close second and is content with the personal satisfaction of simply being a business owner.

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3.Hard Workers The hard workers entrepreneur category includes persons who enjoy putting in long hours to build a larger more profitable business. They like the challenge it presents and of course reap the most rewards if the business turns out to be a multi-million dollar enterprise.

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Hard work comes with all businesses but as we now see not everyone works hard for the business to grow as this group of entrepreneurs does.

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4.Jugglers The juggler entrepreneur likes the concept that the business gives them a chance to handle everything themselves. They are usually people with lots of energy and exist on the pressure of meeting deadlines, paying bills and of course making payroll.

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5.Sustainers The sustainers entrepreneur category consists of people who like the thought of balancing work and a personal life. Most often they do not wish the business to grow too large where it will cut into their personal life too much.

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Intrapreneur Coined in the 1980s by management consultant Gifford Pinchot, intrapreneurs are used by companies that are in great need of new, innovative ideas. Today, instead of waiting until the company is in a bind, most companies try to create an environment where employees are free to explore ideas. If the idea looks profitable, the person behind it is given an opportunity to become an intrapreneur.

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Comparison between Male and Female Entrepreneur. Difference between Entrepreneur and Intrapreneur

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Entrepreneurship: Entrepreneurship means "the process of the entrepreneur". It is an attempt to create value through recognition of business opportunity. It is basically communicative and management functions to mobilize financial and material resources.

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Entrepreneur Entrepreneurship Refers to a Person Refers to a Process visualiser Vision Creator Creation Organiser Organisation Decision maker Decision

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Classification of Entrepreneurs Entrepreneurs are generally classified based on expertise, business and motivation levels.

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Based on Expertise Based on Motivation Level Based on Type of Business Technical entreprises Pure entrepreneur Business entrepreneur Non- Technical entreprises Induced entrepreneur Trading entrepreneur Professional entreprises Spontaneous entreprises Industrial entrepreneur, Corporate and Agriculture.

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a) Entrepreneurs based on expertise Technical entrepreneurs: Develop improved quality of goods because of craftsmanship. The greatest strength of technical entrepreneur is skill in production technique. Improve goods/services by using innovative technology and concentrate more on production than marketing.

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Non-technical entrepreneurs: Not concerned with the technical aspects of the product produced. Focus more on marketing and distribution strategies and less on production.

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Professional entrepreneurs: Focus more on establishing a business but not in managing or operating it. Sell out the running business and start another venture with the sales proceeds. Conceive new ideas to develop alternative projects.

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b) Entrepreneurs based on motivation levels Pure entrepreneurs: Motivated by psychological and economic rewards. Undertake an entrepreneurial activity for his personal satisfaction in work, ego or status.

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Induced entrepreneurs: Induced to take up an entrepreneurial task due to the policy measures of the government like assistance, concessions and necessary overhead facilities to start a venture.

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Motivated entrepreneurs: Influenced by the desire for self fulfillment. They come into being because of the possibility of making and marketing of some new product for the consumer

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Spontaneous entrepreneurs: Start the business by natural talents. Self motivation makes them to undertake entrepreneurial activity.

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c) Entrepreneurs based on type of business Business entrepreneurs: Conceive an idea for a new product or service. Utilize both production and marketing resources to develop a new business opportunity.

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Trading entrepreneurs: Undertake trading activities but not concerned with the manufacturing work. Identify potential markets, stimulate demand for its product line and creates a desire and interest among buyers.

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Industrial entrepreneurs: Essentially manufacturers who identify the potential needs of the customers and tailors a product or service to meet the marketing needs.

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Corporate entrepreneurs: Demonstrate the skill in organizing and managing corporate undertaking. Follow the regulations and requirements of the corporate.

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Agricultural entrepreneurs: Undertake agricultural activities like raising and marketing of crops, fertilizers and the inputs of agriculture.

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ENTREPRENEURIAL DEVELOPMENT The process of starting a new venture is embodied in the entrepreneurial development process. The process has four distinct phases. 1) Identification and evaluation of the opportunity 2) Development of the business plan 3 ) Determination of the required resources 4) Management of enterprises

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1. Identification and Evaluation of the Opportunity: The process by which an entrepreneur come up with the opportunity for new venture. Each opportunity must be carefully screened and evaluated. It is important for the entrepreneur to understand the cause of opportunity. It may be technological change, market shift, government regulation or competition. Opportunity analysis focus only on the opportunity but not the entire venture .

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2.Development of the Business Plan: A good business plan must be developed in order to exploit the defined opportunity. A good business plan is not only important on developing the opportunity but also essential in determining the resources required and obtaining these resources and successfully managing the resulting venture.

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3.Determination of the Required Resources: The resources needed for the opportunity must also be determined. This process stars with an appraisal of the entrepreneur's available resources. Any resources that are critical must then be distinguished from those are just helpful.

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4.Management of Enterprises: After resources are identified, the entrepreneur must employ them through the implementation of the business plan. A control system must be established so that problem areas can be carefully monitored.

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GLOSSARY 1.Entrepreneur : Innovative and risk taking person. 2.Entrepreneurship : Process of the entrepreneur. 3.Entrepreneurial Management: Techniques of managing enterprises.

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