Introduction to Entrepreneur PDF

INTRODUCTION TO ENTREPRENEUR 1.1 Evolution of the word Entrepreneur The word entreprencur' 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...

INTRODUCTION TO ENTREPRENEUR 1.1 Evolution of the word Entrepreneur The word entreprencur' 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 cover civil engineering activities such as construction in 17h century. But it was Richard Cantillon, an Irishman living ìn France who first used the term entrepreneuro refer to gconomic activitics. According to Cantillon fFAn entrepreneur is aperson who buysfactor services at ceclain orices with aview to selling its product at uncertain prices". Entrepreneur, according to Cantillon, is a bearer of risk, which is non-insurable. Schum peter 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. 1.2 Meaning of Entrepreneur Entrepreneur is a person who tries to crçate 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 cams profits. Entrepreneurs are the pioneers who are instrumental in the economic development, growth and development of and prosperity of a country. 1.3 Definition of Entrepreneur 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 aproduct with aview o 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 risk bearing agents of production. F.H. Knight described entrepreneur to be a specialized group of persons who bears uncerainly. 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 made distinction between the role of capitalist as a financer and 11  the entrepreneur as an organizer. This concept of entrepreneur is associated with the functions of coordination, organization and supervision. Entreprencur as an Innovator : Joseph A. Schumpater Peter in 1934 assigned a crucial role of 'innovation' to the entreprencur. 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. Schums Peter 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. Some more important definitions of entrepreneur 1,According to FA. Walker : "Entrepreneur is one who is endowed with more than average capacities in the task of organizing and coordinating the factors of production, i.e. land, labour capital and enterprises". 2. Marx regarded entrepreneur as social parasite. 3,According to Gilbraith : An entrepreneur must accept the challenge and should be willing hard to achieve something". Peter F. Drucker defines an entrepreneur as one who always searches for change, responds to it and exploits it as an opportunity. Innovation is the basic tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or service. 5 According toE.E. Hagen : "An entrepreneur is an economic man who tries to maximize his profits by innovation, involve problem solving and gets satisfaction from using his capabilities on attacking problems". 6. According to Mark Casson : "An entrepreneur is a person who specializes in taking judgement decision about the coordination of scarce resources". 7. Frank Young defined entrepreneur as a change agent. 12  & According to Max Weber : "Entrepreneurs are a product of particular social condition in which they are broughtup and it is thesociety which shapes individuals as entrepreneurs". International Labour Organization (1LO) defines "entrepreneurs as those people who have the abiliy to see and evaluate business opportunities, together with the necessary resources to take advantage of them and to initiate appropriate action to ensure success". 10. Akhouri describes "entrepreneur as a character who combincs innovativess, readiness to take risk, sensing opportunities, identifying and mobilizing potential resources, concern for excellence and who is persistent in achieving the goal". 1.4 INTERNAL AND EXTERNAL FACTORS OF ENTREPRENEUR Entrepreneur is a person of telescopic faculty drive and talent who perceives business opportunities and promptly seizes them for exploitation. Entrepreneur needs to possess competencies to perfom entrepreneur activities. Personal entrepreneurialcharacteristics Core Competencies Entrepreneurial Activities 1. Initiative Does things before asked for or forced to by events and acts to extend the business to new areas, products or services. 2, Perceiving opportunities ldentifies business opportunities and mobilizes necessary resources to make good an opportunity. 3. Persistence Takes repeated or different actions to overeome obstacles. 4. Information gathering Consults experts for business and technical advice. Seeks 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. 5. Concern for quality State desire to produce or sell a better quality product or service. Compares Work his performance favourably with that ofothers. 6. Commitment to Makes a personal sacrifice or expands extraordinary effort to complete a job, contractualobligations accepts full responsibility in completing a job 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. 7. Efficiency orientation Finds ways and means to do things faster, better and economically. 8. Planning Various inter-related jobs are synchronized according to plan. 9. Problem solving Conceives new ideas and finds innovative solutions. 10 Self-confidence Makes decisions on his own and sticks to it in spite of initial setbacks. 11. Experience Possesses technical expertise in areas of business, finance, marketing etc. 12. Self-critical Aware of personal limitations but tries to improve upon by lea rning from his past mistakes or experiences of others and is never complacent with success. 13 Persuasion Persuades customers and financers to patronize his business. 14. Use of influences Develops business contracts, retains influential people as agents and restricts strategies dissemination of information in his possession. 1s. Assertiveness Instructs, reprimands or disciplines for failing to perform 16. Monitoring Develops a reporting system to ensure that work is completed and quality norms. 13 17, Credibility Demonstrates honesty in dealing with employees, suppliers and customers even if it means a loss of business. 18. Concern for employee Express concern for employees by responding promptly to their grievances. welfare 19. Impersonal relationship Places long-term goodwill over short-term gain in a business relationship 20. Expansion of capitalbaseReinvests a greater portion of profits toexpand capital of the firm. 21. Building product image Concerned about the image of his products among consumers and does everything possible to establish aniche for his products in the market. 1.5 CHARACTERISTICS OF AN ENTREPRENEUR Anentrepreneur 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: The introduction of new goods. (i) The introduction of new metheds of production. (iiü) The opening of a new market. (iv) The conquest of a new source of supply of raw-material. (v) The carrying out of the newform oforganization of any industry. The entrepreneur locates ideas and puts them into effect in the process of economic development. According to Baumol, an entrepreneur is a Schumpetarian innovator and something more than a leader. 2. 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 acalculated 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. 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