Entrepreneurship PDF

Introduction Evolution of the word Entrepreneur Meaning of Entrepreneur. Definition of Entrepreneur. Internal and External factors of Entrepreneur. Characteristics of an Entrepreneur. Concept of Entrepreneurship. Importance of Entrepreneurship. Difference between Entr...

Introduction Evolution of the word Entrepreneur Meaning of Entrepreneur. Definition of Entrepreneur. Internal and External factors of Entrepreneur. Characteristics of an Entrepreneur. Concept of Entrepreneurship. Importance of Entrepreneurship. Difference between Entrepreneurship and entrepreneur. Meaning of motivation Definition of motivation Nature of motivation Types of motivation Leadership Communication Skills The word ‘entrepreneur’ is derived from French word ‘Entrependre’ which means undertaking the risk of enterprise and further it was used to designate an organizer of musical or other entertainments. Later in 16th century it was used for army leaders. It was extended to cove civil engineering activities such as construction in 17th century. But it was Richard Cantillon, an Irishman living in France who first used the termntrepreneur to refer to economic activities. According to Cantillon “A entrepreneur is a person who buys factor services at certain prices with a view to selling its product at uncertain prices”. Entrepreneur, according to Cantillon, is a bearer of risk, which is non-insurable. Schumpeter gave a central position to the entrepreneur who believed that an entrepreneur was a dynamic agent of change; that an entrepreneur was a catalyst who transformed increasingly physical, natural and human resources into correspondingly production possibilities. Since then the term entrepreneur is used in various ways and various views  Meaning of Entrepreneur : Entrepreneur is a person who tries to create something new, searches new opportunities, bears risk, unites various factors of production like land, labour and capital carries innovations and from his skill and farsightedness faces unforeseen circumstances and thereby earns profits. Entrepreneurs are the pioneers who are instrumental in the economic development, growth and development of and prosperity of a country.  There are various views about entrepreneur which are broadly classified into three groups, namely risk bearer, organizer and innovator. Entrepreneur as Risk Bear : Richard Cantilon defined entrepreneur as an agent who buys factors as production at certain prices in order to combine them into a product with a view to selling it at uncertain prices in future. He illustrated a farmer who pays contractual incomes, which are certain to land owners and labourers and sells at prices that are ‘uncertain’. He includes, merchants also who make certain payments in expectation of uncertain receipts. Hence both of them are riskbearing agents of production. F.H. Knight described entrepreneur to be a specialized group of persons who bears uncertainly. Uncertainty is defined as risk, which cannot be insured against and is incalculable. He made distinction between certainty and risk. A risk can be reduced through the insurance principle, where the distribution of outcome in a group of instance is known, whereas uncertainty cannot be calculated.  Entrepreneur as an Organizer : According to J Baptist Say “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 laborers and what remains is his/her profit”. Say mad distinction between the role of capitalist as a financer and the entrepreneur as an organizer. This concept of entrepreneur is associated with the functions of coordination, organization and supervision.  Entrepreneur as an Innovator : Joseph A. Schumpeter Peter 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 according to him, may occur in any of the following forms. (a) Introduction of new product in market (b) Use of new method production, which is not yet tested. (c) Opening of new market. (d) Discovery of new source of raw materials. (e) Bringing out of new form of organization.  Schumspeter also made distinction between inventor and innovator. An inventor is one who discovers new methods and new materials. An innovator utilizes inventions and discovers in order to make new combinations. Hence the concept of entrepreneur is associated with three elements risk bearing, organizing and innovating. Hence an entrepreneur can be defined as a person who tries to create something new, organizes production and undertakes risks and handles economic uncertainty involvement in enterprise. Core Entrepreneurial Activities Competencies Initiative Does things before asked for or forced to by events and acts to extend the business to new areas, products or services. Perceiving Identifies business opportunities and mobilizes necessary resources opportunities to make good an opportunity. Persistence Takes repeated or different actions to overcome obstacles. Information Consults experts for business and technical advice. Seeks gathering information of a client or supplier’s needs. Personally undertakes market research and make use of personal contacts or information networks to obtain useful information. Concern for State desire to produce or sell a better quality product or service. quality work Compares his performance favourably with that of others. Commitment to Makes a personal sacrifice or expands extraordinary effort to contractual complete a job, accepts full responsibility in completing a job obligations contract on schedule, pitches in with workers or work in their place to get the job done and shows atmost concern to satisfy the customer. Efficiency Finds ways and means to do things faster, better and orientation economically. Planning Various inter-related jobs are synchronized according to plan. Problem solving Conceives new ideas and finds innovative solutions. Self-confidence Makes decisions on his own and sticks to it in spite of initial setbacks. Experience Possesses technical expertise in areas of business, finance, marketing etc. Self-critical Aware of personal limitations but tries to improve upon by learning from his past mistakes or experiences of others and is never complacent with success. Monitoring Develops a reporting system to ensure that work is completed and quality norms.  CHARACTERISTICS OF AN ENTREPRENEUR An entrepreneur should possess all such characteristics with the help of which he can perform various responsibilities successfully. The following characteristics are :- 1. Innovator Schumpeter differentiates between an inventor and innovator. An inventor discovers new methods and new materials and an innovator is the one who utilizes those discoveries and inventions. Not only this, the entrepreneur further exploits the inventions commercially and thus produces newer and better goods which give him profit and satisfaction.  Innovation may occur in the following forms : (i) The introduction of new goods. (ii) The introduction of new methods of production. (iii) The opening of a new market. (iv) The conquest of a new source of supply of raw- material. (v) The carrying out of the new form of organization of any industry.  Risk-taker Risk means the condition of not knowing the outcome of an activity or decision. A risk situation occurs when one is required to make a choice between two or more alternatives whose potential outcomes are not known and must be subjectively evaluated. A risk situation involves potential gain or loss. The greater the possible loss, the greater is the risk involved. An entrepreneur is a calculated risk-tasker. He enjoys the excitement of a challenge but he does not gamble. An entrepreneur avoids low-risk situation because there is a lack of challenge and he avoids high-risk situation because he wants to succeed. He likes achievable challenges.  Organiser An entrepreneur has to bring together various factors of production, minimize losses and reduce the cost of production. Initially, he may take all the decisions but as the enterprise grows, he starts delegating the authority. He produces that best results as an organizer. Not only this, it is the entrepreneur who has to pick or select the right piece of land, choose the right person and opt for the finance. He must be able to inspire loyalty and hard work amongst the workers to raise productivity and efficiency. In order to expand the business, he must have willingness to delegate authority and trust his sub-ordinates and managers although shaping of long-run policies of the enterprise would remain in his hands.  Creative Creatively, as field knowledge, seeks to explain how humans, either individually or collectively, reach solutions that are both novel and useful. Innovation means the effort to create purposeful. Harry Nystrom states that innovation may be defined as radical discontinuous change and creativity is the ability to devise and successfully implement such changes. Successful innovations depend on creativity and one of the most important requirements of an entrepreneur is to be creative as creativity may be taken as the cause and successful innovation as the effect.  Motivator McClelland explicitly introduces the need for achievement motivation as a psychological motive and implicitly emphasised the need for achievement as the most directly relevant factor for explaining economic behaviour. Achievement motivation is a drive to overcome challenges, to advance and to grow. An entrepreneur is an achievement-oriented person, not ‘money hungry’. He works for his desire for challenge, accomplishment and service to others. Achievement concerns refers to the accomplishment of excellent, innovative and risk involving tasks. The organizational goal of entrepreneur can be boosted by inculcating in him the need for achievement.  Self-confident It is necessary for an entrepreneur to be self- confident. He should have faith in himself only then he can trust others. In an expand business, delegation of authority is a must and only a self-confident entrepreneur can delegate his authority. He can seek cooperation of his staff and inculcate a sense of team work in them.  Optimistic: An entrepreneur should approach his task with a hope of success and optimistic attitude. He attempts any task with the hope that he will succeed rather than with a fear of failure. Such a hope of success enhances his confidence and drives him towards success. Blessed with Mental Ability Mental ability that contributes to the success of an entrepreneur consists of overall intelligence, i.e. IQ, creative thinking ability and analytical thinking ability. An entrepreneur must be intelligent, adaptable, creative and he must be able to engage in analysis of various problems and situations in order to deal with them.  Communication Ability An entrepreneur must possess the quality of communicating effectively in written and oral communications. Good communication also means that both the sender and the receiver understand and are being understood. Decision-Making An entrepreneur must be clear and creative when it comes to decision-making. He must believe in himself and should be possessing ability to take decisions effectively. Decisions taken should be based on quantitative facts. Decisions which effect organisaton’s future and are likely to be irreversible must be taken with great care.  Here are some tips to become a good decision- maker (1) Define the problem, (2) Collect information and relevant data, (3) Begin with a brain storming session and discuss the problem with each other, (4) Never criticize or reject any solution suggested during the brain storming session, (5) Encourage group members to come up with potential solutions, (6) Reduce the number of alternatives to three or four after discussion, (7) Consider each alternative extensively and determine the best to meet your needs and (8) Implement decisions  Courage to Face Adversities Entrepreneurs face the adversities boldly and bravely. They refuse to be beaten and become tougher during adverse situations. They have faith in themselves and attempt to solve the problems even under pressure. Every unpredictable situation is a challenge before them which they overcome and survive through.  Leadership – An essential trait of the entrepreneur: Leadership is the process of influencing and supporting others to work enthusiastically towards achieving objectives. It is a critical factor that not only helps an entrepreneur to identify his goals but also motivates and assists him in achieving the stated goals. Without leadership, an organisation would be only a confusion of people and machines, just as an orchestra without a conductor would be only musicians and instruments. Leadership is one of the primary traits of an entrepreneur by which he can influence others to voluntarily seek defined objectives. Leadership, thus, is the catalyst that transforms potential into reality, problems into opportunities, heading towards the achievement of objectives.  This role is often seen dramatically when a small scale unit transforms itself into medium-scale and finally it turns into a giant organization. Leadership is equally important in all sizes of organization – be it small, medium or large Wrarren Bennis, the leadership guru, says that effective leadership can’t exist without the full inclusion, initiatives, and the co-operation of employees. Since a small industry is as labour- intensive industry, the entrepreneur must have leadership qualities to influence his workers or employees.  Traits of Leadership :- The path to leadership that one takes differs from individual to individual. However, there are a few key traits we can focus on : High level of personal drive The desire to lead Personal integrity Self-confidence Cognitive (Analytical) ability Business Knowledge Charishma Creativity Personal Warmth  LEADERSHIP Participative and Human Relations: These includes supportive interpersonal communication and team building. ii) Competitiveness and Control: which include being assertive and gaining power and influence. iii) Innovativeness and Enterpreneurship: includes creative problem solving. iv) Maintaining Order and Rationality: includes managing self, stress, conflicts, and time; and doing rational decision making.  Model of Personal Leadership Skills Developing Self Awareness Managing Stress and Time Solving Problems creativity Managerial Skills a. Technical Skill: Ability to use knowledge, methods, techniques and equipment necessary for the performance of specific tasks acquired from experience education, and training. They increasingly depend on the technical skills of their subordinates and in many cases never practice some of the technical skills that ' they supervise.  Human Skills: This is the ability to interact and work effectively with people and to build team work. This skill which includes an understanding of motivation and an application of effective leadership is very important for middle level managers who must lead others. Without a solid understanding of such behavioural areas as interpersonal communication, motivation, counselling and directing, rniddle level managers would be ineffective in leading their subordinates  Conceptual Skills: This skill becomes increasingly important in higher managerial jobs. This skill is the ability to understand the complexities of the overall organisations and covers many activities, from formulating organisational objectives, policies and procedures, to developing techniques for handling office work flow. The leaders place in the hierarchy determines the degree of managerial skill he or she must have. As leaders prove their effectiveness and begin moving up the higher levels in organisation need to learn and use more human and conceptual skills to be effective less technical skill tend to be needed as one advances from lower to higher levels in the organisation Processing Paper work Exchanging Routine Information d) routine financial reporting and Answering routine procedural questions bookkeeping b) Receiving and disseminating requested e) General desk work information efficiency d) Giving or receiving routine information 6) Exchanging Routine Information over the phone a) Processing mail I e) Staff meetings of an informational b) Reading reports, in-box nature C) Writing reports, memos, letters. etc MontoringJControlling Performance 1 8) Motivating reinforcing Motivatinglreinforcing a) Inspecting work a) Inspecting work b) Walking around and checking things b) Walking around and checking things out, touring out, touring Allocating formal organisational rewards c) Monitoring performance data (e.g. b) Asking for input, participation computer printouts, production, c.) Conveying apprecition, compliments financial reports) d) Preventive maintenance  Negotiations Negotiation is a crucial skill of entrepreneurship, as it involves reaching agreements, resolving conflicts, and making decisions that can significantly impact the success of a business. Preparation: Entrepreneurs need to thoroughly prepare for negotiations by understanding their goals, the needs of the other party, and the market conditions. Preparation also involves knowing the strengths and weaknesses of both sides and anticipating potential objections.  Flexibility: Successful negotiation often requires flexibility. Entrepreneurs should be open to adjusting their demands and finding creative solutions that satisfy both parties. Flexibility helps in adapting to changing circumstances and discovering mutually beneficial agreements. Effective Communication: Clear and effective communication is essential in negotiations. Entrepreneurs should be able to articulate their needs, listen actively to the other party, and address concerns in a constructive manner. Problem-Solving Approach: A problem-solving mindset focuses on finding solutions rather than winning a debate. Entrepreneurs should approach negotiations with the goal of solving problems and creating value for all parties involved.  Strategic Thinking: Entrepreneurs should use strategic thinking to align negotiation outcomes with their long-term business goals. This involves considering how each negotiation fits into the broader business strategy and its potential impact on future opportunities. Confidence: Confidence in one's position and abilities can positively influence negotiations. Entrepreneurs should be self-assured without being overbearing, as confidence can help in asserting their needs and negotiating effectively. Decision-Making: Entrepreneurs need to make informed decisions during negotiations. This involves evaluating offers, considering trade-offs, and determining the best course of action based on the available information.  Ethics in entrepreneurship involves principles and standards that guide behavior and decision-making to ensure fairness, integrity, and responsibility. Here are some key characteristics of ethical behavior in entrepreneurship: Integrity: Acting with honesty and maintaining consistency between words and actions. Entrepreneurs should be truthful in their communications, commitments, and business dealings. Transparency: Being open and clear about business practices, decisions, and processes. Transparency helps build trust with stakeholders and avoids misleading or deceptive practices. Accountability: Taking responsibility for one’s actions and decisions. Entrepreneurs should own up to mistakes, address issues promptly, and ensure that their actions align with ethical standards.  Confidentiality: Protecting sensitive information and respecting privacy. Entrepreneurs should handle confidential data responsibly and ensure it is not misused or disclosed without consent. Compliance: Adhering to laws, regulations, and industry standards. Compliance involves understanding and following legal requirements and ethical norms relevant to the business. Responsibility: Acknowledging the impact of business decisions on society, the environment, and various stakeholders. Ethical entrepreneurs consider the broader consequences of their actions and strive to make positive contributions. Empathy: Understanding and considering the feelings and experiences of others. Empathy helps in making decisions that are considerate of the impact on employees, customers, and the community. Sustainability: Committing to practices that promote long-term environmental, social, and economic health. Sustainability involves making decisions that support the well-being of future generations.