Entrepreneurship Unit 1 PDF

B.B.A 5th Semester UNIT 1 Entrepreneurship Development ANKIT AGARWAL, Department of Business...

B.B.A 5th Semester UNIT 1 Entrepreneurship Development ANKIT AGARWAL, Department of Business Administration, D.S. College, Aligarh Entrepreneurship Entrepreneurship refers to all those activities which are to be carried out by a person to establish and to run the business enterprises in accordance with the changing social, political and economic environments. Entrepreneurship includes activities relating to the anticipation of the consumers likes and dislikes, feelings and behaviors, tastes and fashions and the introduction of business ventures to meet out all these expectations of the consumers. Entrepreneurship is the ability of entrepreneurs to assess the risks and establish businesses which are risky but at the same time suits perfectly to the changing scenarios of the economy. What is Entrepreneurship? There are many meanings of the term entrepreneurship. After attentively discussing all the available ones, we can conclude that entrepreneurship is a system of operating business in which opportunities existing within the scope of a market are exploited. Self-employment necessitates that any available opportunities within the economic system should be utilized in the creation and functioning of new organizations. A potential entrepreneur should show the interest to seek out investment opportunities in the market, so that they can run the enterprise successfully based on the identifiable opportunities. Thus, going through the above responsibilities of an entrepreneur, the term entrepreneurship has been finally defined as a function which covers multiple functions such as: Building organizations. Providing self-employment Utilization of available resources Innovation applied to the novel concept Bringing together multiple factors of production in a tangible manner. Identifying and exploiting business opportunities within the available market. The definition of entrepreneurship has been debated among scholars, educators, researchers, and policy makers since the concept was first established in the early 1700„s. The term 1 ―entrepreneurship comes from the French verb ―entreprendre and the German word ―unternehmen, both mean to ―undertake. Bygrave and Hofer in1891 defined the entrepreneurial process as -involving all the functions, activities, and actions associated with perceiving of opportunities and creation of organizations to pursue them. Joseph Schumpeter introduced the modern definition of entrepreneurship in 1934. According to Schumpeter, ―the carrying out of new combinations we call enterprise, and ― the individuals whose function it is to carry them out we call entrepreneurs. Schumpeter tied entrepreneurship to the creation of five basic new combinations namely: introduction of a new product, introduction of a new method of production, opening of a new market, the conquest of a new source of supply and carrying out of a new organization of industry. Peter Drucker proposed that entrepreneurship is a practice. What this means is that entrepreneurship is not a state of being nor is it characterized by making plans that are not acted upon. Entrepreneurship begins with action, creation of new organization. This organization may or may not become self-sustaining and in fact, may never earn significant revenues. But, when individuals create a new organization, they have entered the entrepreneurship paradigm. The entrepreneurial process It is useful to break the entrepreneurial process into five phases: idea generation, opportunity evaluation, planning, company formation/launch and growth. These phases are summarized in this table, and the Opportunity Evaluation and Planning steps are expanded in greater detail below. 1. Idea Generation: every new venture begins with an idea. In our context, we take an idea to be a description of a need or problem of some constituency coupled with a concept of a possible solution. (A characterization of this phase is still work in process on this site.) 2. Opportunity Evaluation: this is the step where you ask the question of whether there is an opportunity worth investing in. Investment is principally capital, whether from individuals in the company or from outside investors, and the time and energy of a set of people. But you should also consider other assets such as intellectual property, personal relationships, physical property, etc. 3. Planning: Once you have decided that an opportunity, you need a plan for how to capitalize on that opportunity. A plan begins as a fairly simple set of ideas, and then becomes more complex as the business takes shape. In the planning phase you will need to create two things: strategy and operating plan. 2 4. Company formation/launch: Once there is a sufficiently compelling opportunity and a plan, the entrepreneurial team will go through the process of choosing the right form of corporate entity and actually creating the venture as a legal entity. 5. Growth: After launch, the company works toward creating its product or service, generating revenue and moving toward sustainable performance. The emphasis shifts from planning to execution. At this point, you continue to ask questions but spend more of your time carrying out your plans. Who is an Entrepreneur? Entrepreneurs are business people who can detect and sense the availability of business opportunities in any given scenario. They will utilize these opportunities to create new products by employing new production methods in different markets. They will also function in different ways by using various resources who will give them profit. It is important to note that although most entrepreneurial businesses start small, the owners of such businesses need not be small scale owners. They could in fact be big business owners, who first try and test the waters before investing big time in the business. Small business owners dread risk, but successful entrepreneurs are very innovative and know how to operate profitably in a business environment, even if the risk is very high. In fact, innovation is the life blood of any kind of entrepreneurs; this is one of the tools that helps them gain an advantage over established players in the market. Entrepreneurs are, thus, defined as ―individuals or groups of individuals who carry out entrepreneurship activities that are based on their innovative approaches to solving real-word problems. According to Arther H. Cole, an entrepreneur performs the following functions: 1. Determining the objectives of the enterprise and revising the objectives in the light of changed circumstances. 2. Developing an organization including efficient relations with subordinates and all employees. 3. Securing adequate finance. 4. The requisition of efficient technological equipment. 5. Developing a market for the products and devising new products to meet customers demand. 6. Maintaining good relations with public authorities and with society. Types of Entrepreneurs: Based on their working relationship with the business environment they are functioning in, various types of entrepreneurs can be found. The chief categories are these four types of entrepreneurs, i.e. 3 Innovative entrepreneurs, Imitating Entrepreneurs, Fabian Entrepreneurs, and Drone Entrepreneurs. Innovative Entrepreneurs: This type of an entrepreneur is more interested in introducing some new ideas into the market, organization or in the nation. They are drawn towards innovations and invest a lot of time and wealth in doing research and development. Imitating Entrepreneurs: These are often referred to as copy cats. They observe an existing successful system and replicate it in a manner where all the deficiencies of the original business model are addressed and all its efficiencies are retained. These entrepreneurs help to improve an existing product or production process and can offer suggestions to enhance the use of better technology. Fabian Entrepreneurs: These are entrepreneurs that are very careful in their approaches and cautious in adopting any changes. They are not prone to sudden decisions and try to shy away from any innovations or change that doesn„t fit their narrative. Drone Entrepreneurs: These are entrepreneurs who do not like a change. They are considered as old school. They want to do business in their own traditional or orthodox methods of production and systems. Such people attach pride and tradition to even outdated methods of doing business. Roles of an Entrepreneur: Entrepreneurs fulfill the following three dominant roles: 1. Economic Change 2. Social Change 3. Technological Change These are referred to as behavioral roles. All entrepreneurs have these common characteristics and decide to become an entrepreneur due to the factors or circumstances in their lives which made them think the way they do. To do their work effectively and operate a successful business, these entrepreneurs should perform certain roles. These roles are the same as the basic managerial roles. Need and importance of Entrepreneurs in the Economic Development 4 1. Employment opportunities: Entrepreneurs employ labour for managing their business activities and provides employment opportunities to a large number of people. They remove unemployment problem. 2. Balanced Regional Development: Government promotes decentralized development of industries as most of the incentives are granted for establishing industries in backward and rural areas. Thus, the entrepreneurs to avail the benefits establish industries in backward and rural areas They remove regional disparities and bring balanced regional development. They also help to reduce the problems of congestion, slums, sanitation and pollution in cities by providing employment and income to people living in rural areas. They help in improving the standard of living of the people residing in suburban and rural areas. 3. Mobilization of Local Resources: Entrepreneurs help to mobilize and utilize local resources like small savings and talents of relatives and friends, which might otherwise remain idle and unutilized. Thus they help in effective utilization of resources. 4. Optimization of Capital: Entrepreneurs aim to get quick return on investment. They act as a stabilizing force by providing high output capital ratio as well as high employment capital ratio. 5. Promotion of Exports: Entrepreneurs reduce the pressure on the country‟s balance of payments by exporting their goods they earn valuable foreign exchange through exports. 6. Consumer Demands: Entrepreneurs produce a wide range of products required by consumers. They meet the demand of the consumers without creating a shortage for goods. 7. Social Advantage: Entrepreneurs help in the development of the society by providing employment to people and paves for independent living. They encourage democracy and self- governance. They are adept in distributing national income in more efficient and equitable manner among the various participants of the society. 8. Increase Per Capita Income: Entrepreneurs help to increase the per capita income of the country in various ways and facilitate development of backward areas and weaker sections of the society. 9. Capital formation: A country can attain economic development only when there is more amount of investment and production. Entrepreneurs help in channelizing their savings and savings of the public to productive resources by establishing enterprises. They promote capital formation by channelizing the savings of public to productive resources. 10. Growth of capital market: Entrepreneurs raises money for running their business through shares and debentures. Trading of shares and debentures by the public with the help of financial services sector leads to capital market growth. 11. Growth of infrastructure: The infrastructure development of any country determines the economic development of a country, Entrepreneurs by establishing their enterprises in rural and backward areas influence the government to develop the infrastructure of those areas. 5 12. Development of Trader: Entrepreneurs play an important role in the promotion of domestic trade and foreign trade. They avail assistance from various financial institutions in the form of cash credit, trade credit, overdraft, short term loans, secured loans and unsecured loans and lead to the development of the trade in the country. 13. Economic Integration: Entrepreneur reduces the concentration of power in a few hands by creating employment opportunities and through equitable distribution of income. Entrepreneurs promote economic integration in the country by adopting certain economic policies and laws framed by the government. They help in removing the disparity between the rich and the poor by adopting the rules and regulation framed by the government for the effective functioning of business in the country. 14. Inflow of Foreign Capital: Entrepreneurs help to attract funds from individuals and institutions residing in foreign countries for their businesses. Functions of an Entrepreneur An entrepreneur is expected to perform the following functions. 1. Risk Absorption The entrepreneur assumes all possible risks of business. A business risk also involves the risk due to the possibility of changes in the tastes of consumers, techniques of consumers, techniques of production and new inventions. Such risks are not insurable. If they materialise, the entrepreneur has to bear the loss himself. Thus, Risk-bearing or uncertainty-bearing still remains the most function of an entrepreneur. An entrepreneur tries to reduce the uncertainties by his initiative, skill and good judgment. 2. Formulate Strategic Business Decisions The entrepreneur has to decide the nature and type of goods to be produced. He enters the particular industry which offers from he best prospects and produces whatever commodities he thinks will pay him the most employs those methods of production which seem to him the most profitable. He effects suitable changes in the size of the business, its location techniques of production and does everything that is needed for the development of his business. 3. Execute Managerial Functions The entrepreneur performs the managerial functions though the managerial functions are different from entrepreneurial functions. He formulates production plans, arranges finance, purchased, raw material provides, production facilities, organises sales an assumes the task of personnel management. In a large establishment these management functions are delegated to the paid managerial personnel. 4. Adopt Innovation Function 6 An important function of an entrepreneur is ―Innovation‖. He conceives the idea for the improvement in the quality of production line. He considers the economic inability and technological feasibility in bringing about improve quality. The introduction of different kinds of Electronic gadgets is an example of such an innovation of new products. Innovation is an ongoing function rather than once for all, or possibly intermittent activity Characteristics of Entrepreneur 1. Facilitating Character An entrepreneur must build a team, keep it motivated, and provide an environment for individual growth and career development 2. Self-Confidence Entrepreneurs must have belief in themselves and the ability to achieve their oils. 3. Work with Vision and Mission An entrepreneur must be committed to the project with a time horizon of f vie to seven years. No ninety-day wonders are allowed. 4. High Degree of Endurance Success of an entrepreneur demands the ability to work long hours for sustain period of time 5. Trouble Shooting Nature An entrepreneur must have an intense desire to complete task or solve a problem. Creativity is an essential ingredient 6. Initiative and Enterprising Personality An entrepreneur must have initiative, accepting personal responsibility for a makegood use of resources. 7. Goal Setter An entrepreneur must be able to set challenging but realistic goals. 8. Calculated Risk-Taking Ability An entrepreneur must be a moderate risk-taker and learn from any failures. 7 Distinguish Between The Terms Entrepreneur And Entrepreneurship: 8 Unemployment in India 9 What is Unemployment? Unemployment occurs when a person who is actively searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy. The most frequent measure of unemployment is the unemployment rate, which is the number of unemployed people divided by the number of people in the labor force. National Sample Survey Organization (NSSO) defines employment and unemployment on the following activity statuses of an individual: 1. Working (engaged in an economic activity) i.e. 'Employed'. 2. Seeking or available for work i.e. 'Unemployed'. 3. Neither seeking nor available for work. The first two constitutes labour force and unemployment rate is the percent of the labour force that is without work. Unemployment rate = (Unemployed Workers / Total labour force) × 100 Types of Unemployment in India Disguised Unemployment: It is a phenomenon wherein more people are employed than actually needed. It is primarily traced in the agricultural and the unorganised sectors of India. Seasonal Unemployment: It is an unemployment that occurs during certain seasons of the year. Agricultural labourers in India rarely have work throughout the year. Structural Unemployment: It is a category of unemployment arising from the mismatch between the jobs available in the market and the skills of the available workers in the market. Many people in India do not get job due to lack of requisite skills and due to poor education level, it becomes difficult to train them. Cyclical Unemployment: 10 It is result of the business cycle, where unemployment rises during recessions and declines with economic growth. Cyclical unemployment figures in India are negligible. It is a phenomenon that is mostly found in capitalist economies. Technological Unemployment: It is loss of jobs due to changes in technology. In 2016, World Bank data predicted that the proportion of jobs threatened by automation in India is 69% year-on-year. Frictional Unemployment: The Frictional Unemployment also called as Search Unemployment, refers to the time lag between the jobs when an individual is searching for a new job or is switching between the jobs. In other words, an employee requires time for searching a new job or shifting from the existing to a new job, this inevitable time delay causes the frictional unemployment. It is often considered as a voluntary unemployment because it is not caused due to the shortage of job, but in fact, the workers themselves quit their jobs in search of better opportunities. Vulnerable Employment: This means, people working informally, without proper job contracts and thus sans any legal protection. These persons are deemed „unemployed‟ since records of their work are never maintained. It is one of the main types of unemployment in India. Causes of Unemployment 1. Large population. 2. Low or no educational levels and vocational skills of working population. 3. Inadequate state support, legal complexities and low infrastructural, financial and market linkages to small/ cottage industries or small businesses, making such enterprises unviable with cost and compliance overruns. 4. Huge workforce associated with informal sector due to lack of required education/skills, which is not captured in any employment data. For ex: domestic helpers, construction workers etc. 5. The syllabus taught in schools and colleges, being not as per the current requirements of the industries. This is the main cause of structural unemployment. 11  6. Inadequate growth of infrastructure and low investments in manufacturing sector, hence restricting employment potential of secondary sector. 7. Low productivity in agriculture sector combined with lack of alternative opportunities for agricultural worker which makes transition from primary to secondary and tertiary sectors difficult. 8. Regressive social norms that deter women from taking/continuing employment. Impact 1. The problem of unemployment gives rise to the problem of poverty. 2. Young people after a long time of unemployment indulge in illegal and wrong activities for earning money. This also leads to increase in crime in the country. 3. Unemployed persons can easily be enticed by antisocial elements. This makes them lose faith in democratic values of the country. 4. It is often seen that unemployed people end up getting addicted to drugs and alcohol or attempts suicide, leading losses to the human resources of the country. 5. It also affects economy of the country as the workforce that could have been gainfully employed to generate resources actually gets dependent on the remaining working population, thus escalating socioeconomic costs for the State. For instance, 1 percent increase in unemployment reduces the GDP by 2 percent Steps Taken by Government 1. Integrated Rural Development Programme (IRDP) was launched in 1980 to create full employment opportunities in rural areas. 2. Training of Rural Youth for Self-Employment (TRYSEM): This scheme was started in 1979 with objective to help unemployed rural youth between the age of 18 and 35 years to acquire skills for self-employment. Priority was given to SC/ST Youth and Women. 3. RSETI/RUDSETI: With the aim of mitigating the unemployment problem among the youth, a new initiative was tried jointly by Sri Dharmasthala Manjunatheshwara 4. Educational Trust, Syndicate Bank and Canara Bank in 1982 which was the setting up of the “RURAL DEVELOPMENT AND SELF EMPLOYMENT TRAINING INSTITUTE” with its acronym RUDSETI near Dharmasthala in Karnataka. Rural Self Employment Training Institutes/ RSETIs are now managed by Banks with active co-operation from the Government of India and State Government. 5. By merging the two erstwhile wage employment programme – National Rural Employment programme (NREP) and Rural Landless Employment Guarantee Programme (RLEGP) the Jawahar Rozgar Yojana (JRY) was started with effect from April, 1, 1989 on 80:20 cost sharing basis between the centre and the States. 6. Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA): It is an employment scheme that was launched in 2005 to provide social security by 12  guaranteeing a minimum of 100 days paid work per year to all the families whose adult members opt for unskilled labour-intensive work. This act provides Right to Work to people. 7. Pradhan Mantri Kaushal Vikas Yojana (PMKVY), launched in 2015 has an objective of enabling a large number of Indian youth to take up industry-relevant skill training that will help them in securing a better livelihood. Start Up India Scheme, launched in 2016 aims at developing an ecosystem that promotes and nurtures entrepreneurship across the country. Stand Up India Scheme, launched in 2016 aims to facilitate bank loans between Rs 10 lakh and Rs. 1 crore to at least one SC or ST borrower and at least one women borrower per bank branch for setting up a greenfield enterprise. Self-employed vs. Entrepreneurship Self-employment: When one works for himself. Maybe as a contractor or running your business. Entrepreneurship: Process of setting up a business, taking on financial risk, in hope of getting profits in return. Differences: 1. Being self-employed, you have people working for you. Being an entrepreneur, you have people working with you. 2. As a self-employed person, you hire people to work for you. The vision and goal is set by you and it solely depends on you. As an entrepreneur, you have people working with you. You and your team work together on setting and achieving the company goals. 3. Self-employed people are the face of their business. If their absenteeism is constant, their business will significantly go down. This is not the case for an entrepreneur. The business will keep running even if the boss is absent because the employees understand the vision of the business. 4. For self-employed, if the business owner retires or passes away, the business will also die. But if the business owner passes away, the business will still continue. It is not dependent on him to exist. For example: Even after the demise of Steve Jobs, Apple still continues its business. Or even after Jack Ma retired, Alibaba continues its operations. 5. Self-employed is reserved in his thinking. He does not want to go big. He is just concerned about paying off bills. Entrepreneurs are open minded. They are global thinkers. They understand the advantages of catering to people‟s needs on a large scale. 13  6. A self-employed person is not a risk taker. He fears change. An entrepreneur is a risk taker. He has the zest to explore new opportunities and believes that he can manage and control risk. They understand that with great risk comes great returns. 7. A self-employed person tries to do everything on his own because he thinks he is the best and nobody is better than him. An entrepreneur on the other hand understands and accepts that he can‟t everything on his own. He delegates the right work for the right people so that there is efficiency in the work done. 8. Self-employment does not have many requirements and restrictions. Entrepreneurs must deal with a wide range of legal requirements including business registration, insurance requirements and filing taxes. 14 Protect pdf from copying with Online-PDF-No-Copy.com