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Introduction to EntrepreneurshipChapter-1 Introduction to Entrepreneurship Author: Alpana Trehan
Define EntrepreneurshipEntrepreneurship is about taking risks and the behaviour of the entrepreneur reflects a kind of person who wishes to put his career and financial security on the line and take risks in the name of an idea, spending much time as well as capital on an uncertain venture. --- H. Knight and Peter Drucker Entrepreneurship is doing things in a better way and decision-making under the condition of uncertainty. ---D.C. McClelland © 2011, Dreamtech Press :: Chapter 1
Significance of EntrepreneurshipGenerating Employment Developing the Economy of a Country Improving Standard of living Facilitating proper utilization of resources Creating new market Fuelling technological innovations Increasing productivity © 2011, Dreamtech Press :: Chapter 1
Theories of EntrepreneurshipDiscovery Theory Emphasizes on identification of opportunities by individuals Assumes that different individuals has different ability of identifying opportunities Assumes that risk bearing is an essential part of the entrepreneurial process Creation Theory Focuses on entrepreneurs and the creation of enterprises Assumes that opportunities are not recognized by individuals, but created by them Assumes that individuals bear uncertainty not risk © 2011, Dreamtech Press :: Chapter 1
Models of Entrepreneurship DevelopmentPsychological Model This model signifies that psychological factors are responsible for the development of entrepreneurial behavior in individuals. Major contributors are McClelland and D. G. Winter. Sociological Model This model considers societal factors responsible for the development of entrepreneurial behavior in individuals. Major contributor is Frank W. Young. Population-Ecology Model This model analyzes the determinants of entrepreneurship development. Major Contributors are Hannan and Freeman. © 2011, Dreamtech Press :: Chapter 1
© 2011, Dreamtech Press :: Chapter 1Define Entrepreneur An entrepreneur searches for change, responds to it and exploits opportunities. Innovation is the specific tool of an entrepreneur. --- Peter F. Drucker An entrepreneur is a businessman who assumes the risk of bringing together the means of production including capital, labor and material and receives his reward in profit from the market value of his product.--- Encyclopedia Americana © 2011, Dreamtech Press :: Chapter 1
© 2011, Dreamtech Press :: Chapter 1Great Entrepreneurs Henry Ford of Ford Motor Company Akio Morita of Sony Corporation Bill Gates of Microsoft Walt Disney of The Walt Disney Company Soichiro Honda of Honda Motor Company Ltd. Harland David Sanders of Kentucky Fried Chicken Ray Kroc of McDonald`s Corporation © 2011, Dreamtech Press :: Chapter 1
Traits and Characteristics of a Successful EntrepreneurCreativity Innovation Leadership Dynamism Decision-Making Ability Self-Motivation Self-Confidence Time Management Vision Persistence Technical Knowledge Problem-Solving Skills Flexibility © 2011, Dreamtech Press :: Chapter 1
Functions of an EntrepreneurIdentifying business opportunity Making customers aware of the products and services offered Bearing risks involved in establishing a new enterprise or starting a new business venture Arranging finance for setting up the enterprise Employing individuals with the required skill-sets for operating in the different functions of the organizations © 2011, Dreamtech Press :: Chapter 1
Types of Entrepreneurs : On the basis of functional characteristicsInnovative Entrepreneurs Entrepreneurs who continuously strive to introduce new products in the market, new technologies, and new markets to do business. Imitative Entrepreneurs Entrepreneurs who imitate techniques and technologies innovated by others to start their own enterprise. Fabian Entrepreneurs Entrepreneurs who are cautious and skeptic about bringing any change in their modus operandi or enterprises. Drone Entrepreneurs Entrepreneurs who believe in status per quo. © 2011, Dreamtech Press :: Chapter 1
Types of Entrepreneurs: On the basis of nature of businessManufacturing Entrepreneurs Entrepreneurs who are involved in producing goods, and mobilizing resources and supplies to sell those products. Service Entrepreneurs Entrepreneurs who are involved in producing and rendering services. Trading Entrepreneurs Entrepreneurs who are involved in trading activities only. Private Entrepreneurs Entrepreneurs who establish and operate private enterprises free from the control of the government. State or Public Entrepreneurs Entrepreneurs who are involved in enterprises that are owned and controlled by the state government. Joint Entrepreneurs Entrepreneurs who establish and operate enterprises in partnership. © 2011, Dreamtech Press :: Chapter 1
Types of Entrepreneurs: On the basis of developmental angleLarge-Scale Entrepreneurs Entrepreneurs who are involved in entrepreneurial activities at large scale. Small-Scale Entrepreneurs Entrepreneurs whose activities are limited to local markets only. Satellites Entrepreneurs who start as suppliers and moves towards a productive enterprise. Managers Entrepreneurs who do not initiate expansion and are satisfied just in managing and staying in business. Minor Innovators Entrepreneurs who participate in the economic progress by finding the making the better use of the existing resources. © 2011, Dreamtech Press :: Chapter 1
Types of Entrepreneurs: On the basis of personality traitsAdvisors Entrepreneurs who provide an extremely high level of assistance and advice to customers. Administrators or Organizers Entrepreneurs who manage various events and processes. Builders or Creators Entrepreneurs who are involved in building or creative works. Communicators or Trainers Entrepreneurs who provide information services. Caretakers Entrepreneurs who have helping personalities and are involved in taking care of people and property. © 2011, Dreamtech Press :: Chapter 1
Types of Entrepreneurs: Some othersEntertainers/Hosts The entrepreneurs who thrive on being with people and are involved in hospitality or service industries. Investors/Owners The entrepreneurs, who invest money to generate profits. They invest their capital in stocks, real estate, or businesses. Sellers The entrepreneurs who make profits in the form of commissions acquired on purchases by customers. Technologists The entrepreneurs who provide technological services. For example, software developers and engineers. © 2011, Dreamtech Press :: Chapter 1
Factors Influencing EntrepreneursInternal Factors The factors that take place inside the organization and affect the way the entrepreneur operates. External Factors The factors that take place outside the organization and are beyond the control of entrepreneurs. © 2011, Dreamtech Press :: Chapter 1
Professional Vs. Family EntrepreneursThey are usually involved in firms that are larger in size. They are engaged in family-owned businesses that are comparatively of small size. They are open to new ideas and thoughts. They lack open mindedness. They are ready to adopt new things. They avoid experimenting on new things. They do not show partiality in managing the human resource. They employ their relatives or friends in responsible positions. They are organization oriented. They give first priority to their family concerns and interests. The decision making process involves the participation of all the employees. They make the decisions themselves or with the help of family members. © 2011, Dreamtech Press :: Chapter 1
Entrepreneurial Leaders Vs. ManagersThey are their own bosses. They are salaried employees. They bear all the risks and the uncertainties involved in the business. They need not bear any risk. Their objective is to introduce innovations and act as change agents. Their objective is to supervise and create routines as well as implement entrepreneur’s plans and ideas. Their income is not fixed and depends on the performance of the enterprise They get fixed salaries and rewards for performing well They believe in experimenting new ideas. They put efforts to avoid mistakes. They take own decisions. They execute the decision of the owner. © 2011, Dreamtech Press :: Chapter 1
Entrepreneurs Vs. IntrapreneursThey work inside as well as outside the enterprise. They are bound to perform within the enterprise. They generate ideas. They adopt the idea generated. They employ intrapreneurs and pays them in exchange of their services. They are paid for using their creative thinking. They work overtime to run his/her own business. They work overtime helping to run someone’s else business. The rewards of entrepreneurs depend on the success and profit margins of the enterprise. An intrapreneur is a person employed by an organization whose compensation is fixed. © 2011, Dreamtech Press :: Chapter 1
Entrepreneurial Process1 Deciding to become an entrepreneur 2 Identifying and evaluating the opportunity 3 Developing a business plan 4 Determining the required resources 5 Converting the idea to an enterprise © 2011, Dreamtech Press :: Chapter 1
Entrepreneurial MotivationNeed for Achievement (nAch) An independent motive of an individual to gain excellence, beat competition, achieve personal goals, and overcome problems. Need for Power (N-Pow) The motivation of an authority oriented individual. Need for Affiliation (N-Aff) The interpersonal need of an individual. © 2011, Dreamtech Press :: Chapter 1
Entrepreneurial Motivational FactorsRisk-Taking Ability Tolerance for Ambiguity Locus of Control Self-Efficacy Goal Setting Independence Egoistic Passion © 2011, Dreamtech Press :: Chapter 1
Entrepreneurial BarriersEconomic Barriers Capital Labor Raw Materials Non-Economic Barriers Social Social Norms Practical Values Emotional Blocks Personal Lack of Sustained Motivation Unclear or Ambiguous Ideas Lack of Vision Lack of Clear Perception © 2011, Dreamtech Press :: Chapter 1
Women as an EntrepreneurA woman entrepreneur can be defined as a confident, innovative, and creative woman capable of achieving self-economic independence individually or in collaboration, generates employment opportunities for others through initiating, establishing, and running the enterprise by keeping pace with the personal, family, and social life. --- Kamal Singh When women moves forward, the family moves, the village moves, and the nation moves. --- Pandit Jawaharlal Nehru © 2011, Dreamtech Press :: Chapter 1
Barriers to Women EntrepreneursFinancial Barriers An women entrepreneur have difficulty in mobilizing enough fund to run and grow the enterprise. Marketing Barriers An women entrepreneur have difficulty in marketing the products or services. Socio-Cultural Barriers There are number of constraints and barriers imposed on women entrepreneurs by the society. Lack of Confidence There are multiple personal problem of women entrepreneurs. © 2011, Dreamtech Press :: Chapter 1
© 2011, Dreamtech Press :: Chapter 1recap Entrepreneurship is an act of bearing risks, bringing innovation, generating employment, and mobilizing resources. The development of entrepreneurship requires proper attention and supervision by the entrepreneur. An entrepreneur is a person, who undertakes risks, mobilizes resources, and generates employment by establishing and running an enterprise. An entrepreneur alone cannot make the enterprise successful; he/she needs a number of individuals to make the enterprise run smoothly. Women entrepreneurship has been recognized as an important, untapped source of economic growth. © 2011, Dreamtech Press :: Chapter 1
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