Entrepreneurship: Concept & Nature

The word entrepreneur is derived from a French word that was originally used to refer to leaders of military expeditions. Early entrepreneurs provide men and materials needed by feudal lords to wage wars. The term entrepreneur for a person who bears uncertainty and risk. Entrepreneurship is meant the function of seeking investment and production opportunity, organizing an enterprise to undertake a new production process, raising capital, hiring labour,arranging the supply of raw materials, finding site, introducing a new technique, discovering new resources of raw materials and selecting top managers for day to day operations of the enterprise. An Entrepreneur as a Person who unites all the factors of production Land, Labor, Capital etc and earn profits after making payments for these factor of productions.

Entrepreneur: Refers to the person who set up his business Entrepreneurship: process of setting up own business unit.

Entrepreneurship means the functions of seeking Investment and production opportunity organizing an enterprise to undertake a New production process Raising capital Hiring labour Arranging the supply of raw-materials Funding sites Introducing new technology Discovery new source of raw materials Selecting top managers.

Enterprise: it is the outcome of entrepreneurship.

According to Joseph A. Schumpeter-An Entrepreneur as organizer or coordinator or as Innovator Introduction of a new product Introduction of a new method of production Opening of a new market Discovery of a new source of supply of raw-materials Carryout of the new firm of organization of any Industry.

An Entrepreneur should be
Hard working Desire for high achievement Highly optimistic Independence Good organizer Innovative Team spirit 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 He peruses the deviant pursuits Reflects strong urge to be independent. Persistently tries to do something better. Dissatisfied with routine activities. Prepared to withstand the hard life 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.

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

Entrepreneurship is not the proprietary quality of any caste or community. Many may possess the qualities, but are baffled with too many questions why, what and how to get about Starting new venture.

Nature of Entrepreneurship

Economic Activity: Entrepreneurship involves creation of value

and wealth leading to economic activity. Creative Activity: He recognizes the need to change and involves in innovation. Dynamic Process: Flexibility is the stick of success for entrepreneurship.

Purposeful activity Risk Element: Organization Building: Gap Filling Function: Entrepreneurial Functions: Managerial Function
Planning Organizing Staffing Directing Controlling

Promotional Functions
Identification and Selecting of Business Ideas Preparation of Business Plan or Project Report Requirement for Finance

Commercial Functions
Production/Manufacturing Marketing Accounting Accounting is the art of recording, classifying and summarizing in a significant manner and, in terms of money,trnsactions and events which are, in part at least of financial character and interpreting the result thereof. Thus accounting involves a process consisting of the following five stages: Recording the Transactions Classifying the Transactions Summarizing the Transactions Preparing the Final Accounts Analyzing and Interpreting the Results

ENTRPRENEURS AND ECONOMIC DEVELOPMENT Economic development, achieved largely through productivity growth, is very important to both developed and developing nations. However, even though we know that higher productivity leads to improved economic outcomes (for example, higher income, more choices to the consumers, better quality products,etc.), there has been no consensus among researchers about either the desired path of development or the role of state in economic development. The role of the state in economic development began to change dramatically with the advent of the Industrial Revolution.

 In the West, the resulting industrialization and economic development were based on the establishment of individual property rights that encouraged the growth of private capital. Competition and individual enterprise thrive in this environment because individuals pursue their self-interest of survival and wealth accumulation. The instinct to survive under competitive pressures yields innovation and productivity increases, which eventually lead to both increased profits for business and lower prices to consumers. Formation of Capital Optimum Utilization of Resources

Generation of Employment Improvement in Standard of living of people Balanced Regional Development

Increase in per Capita Income: National Self-reliance: Equitable Distribution Economic Power:

Formation of Capital:
Entrepreneurs by placing profitable business proposition attract investment to ensure private participation in the industrialization process. The otherwise idle savings are channelized for investment in business ventures which in turn provides return. Again the savings are invested giving a multiplier effect to the process of capital formation.

Balanced Regional Development:

The entrepreneurs always look for opportunities in the environment. They capitalize on the opportunities of governmental concessions,

subsidies and facilities to set up their enterprises in undeveloped areas. The setting up of still plant at Tata nagar, Reliance Petrochemicals at Jamnagar (Gujarat) have resulted in the development of Good Township and peripheral regional development. Thus entrepreneurs reduce the imbalances and disparities in development among regions.

General Employment:
This is the real charm of being an entrepreneur. They are not the job seekers but job creators and job providers. With the globalization process the government jobs are shrinking leaving many unemployed. In the circumstances, the entrepreneurs and their enterprises are the only hope and source of direct and indirect employment generation. Employment is generated directly by the requirement of the large enterprises and indirectly by ancilliariation and consequential development activities.

Improvement in Standard of Living of people

Entrepreneurial initiative through employment generation leads to increase in income and purchasing power which is spent on consumption expenditure. Increased demand for goods and services boost up industrial activity. Large scale production will result in economies of scale and low cost of production. Modern concept of marketing involves creating a demand and then filling it. New innovative and varying quality products at most competitive prices making common mans life smoother, easier and comfortable are the contribution of entrepreneurial initiative.

Increase in per Capita Income:

Entrepreneurs convert the latent and idle resources like land, labor and capital into goods and services resulting in increase in the national income and wealth of a nation.

 The increase in national income is the indication of increase in net national product and per capita income of the country.

National Self-reliance:
Entrepreneurs are the corner stores of national self-reliance. They help to manufacture indigenous substitutes to imported products which reduce the dependence on foreign countries. There is also a possibility of exporting goods and services to earn foreign exchange for the country. Hence, the import substitution and export promotion ensure economic independence and the country becomes self-reliance.

Equitable Distribution Economic Power:

The modern world is dominated by economic power. Economic power is the natural outcome of industrial and business activity. Industrial development may lead to concentration of economic power in few hands which results in the growth of monopolies. The increasing number of entrepreneurs helps in dispersal of economic power into the hands of many efficient managers of new enterprises. Hence setting up of a large number of enterprises helps in weakening the evil effects of monopolies. Thus, the entrepreneurs are key to the creation of new enterprises that energies the economy and rejuvenate the established enterprises that make up the economic structure

Mr.Rana Kapoor (President)

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) is one of the apex trade associations of India. The

organization represents the interests of trade and commerce in India, and acts as an interface between industry, government and other relevant stakeholders on policy issues and initiatives. The goal of this organization is to promote both domestic and international trade, and reduce trade barriers while fostering conducive environment for the growth of trade and industry of India.

Early introduction of Goods and Services Tax and Direct Taxes Code will help revive the sagging economic growth which declined to a decade low of 5 per cent last fiscal, newly elected Assocham President Rana Kapoor said. The vision for a sustainable and equitable growth model can be actualized by directing our collective efforts towards achieving: Economic Security of India as also the underlying issues of Livelihood Security, Energy Security, Ecological Security and National Security which form part of Pragatisheel Bharat ki Paanch Chunautiyaan.To address these five important challenges, there is a need for concerned collaborative approach by the Government in partnership with private entrepreneurs to drive economic transformation to address Indias social and economic challenges. LIVELIHOOD SECURITY-Broad-basing the benefits of economic growth; ensuring basic livelihood facilities such as education, food, health and employment to the citizens of India. ECONOMIC SECURITY-Opening growth avenues by slashing subsidies decontrol of petroleum prices, GST and DTC implementation, attracting capital flows etc. ENERGY SECURITY-Intervening with timely reformist measures needed to ensure fuel linkages, price decontrol, building alternative/sustainable sources of energy etc. ECOLOGICAL SECURITY-Achieving sustainable growth implementing action plans and fast-track clearance of key projects. by

NATIONAL SECURITY-Modernizing Indias air, land and sea defence facilities-an issue of prime importance for India considering the geopolitical constraints.

FACTORS AFFECTING ENTREPRENEURIAL GROWTH 1. ECONOMIC FACTORS

 Lack of adequate overhead facilities: Profitable innovations require basic facilities like transportation, communication power supply etc. They reduce cost of production and increase profit. Non availability of capital Inventions are capital oriented. In less developed countries most capital equipment have to be imported which involves foreign exchange which acts as a difficult problem. Great risk Risk is high in case of less developed countries as there is lack of reliable information, markets for good and services is small etc. Non availability of labor and skills Though there is abundant labor supply there is generally scarcity of skills. 2. Non-Economic Factors Social Mobility: It involves the degree of mobility, both social and geographical, and the nature of mobility channels within a system. The opinion that the social mobility is crucial for entrepreneurial emergence is not unanimous Some hold the view that a high degree of mobility is conducive to entrepreneurship.

Marginality: Social marginality is the designation of a person or

group as peripheral to the main group or groups of society; the status of being part insider and at the same time part outsider in a society or social group.

 A group of scholars hold a strong view that social marginality also promotes entrepreneurship. They believe that individuals or group on the perimeter of a given social system or between two social systems provide the personnel to assume the entrepreneurial roles. They may be drawn from religious, cultural, ethnic, or migrant, minority groups, and their marginal social position is generally believed to have psychological effects which make entrepreneurship particularly attractive for them. Psychological factors: Need Achievement-To the best of our knowledge, the best known of primarily psychological theories is David McClellands (1961) theory of need achievement. According to David McClelland, a constellation of personality characteristics which are indicative of high need achievement is the major determinant of entrepreneurship development. Therefore, if the average level of need achievement in a society is relatively high, one would expect a relatively high amount of entrepreneurship development in that society.

INFLUENCING ENTERPRENURESHIP The emergence of entrepreneurs in a society depends upon closely interlinked social, religious, cultural, psychological, and political and economic factors. FAMILY TRADITION: Individuals who for some reason, initiate, establish maintain and expand new enterprises generate entrepreneurship in society. It is observed that entrepreneurs grow in the tradition of their families and society and accept certain values and norms from these sources. RELIGIOUS, SOCIAL AND CULTURAL FACTORS:

Religious, social and cultural factors also influence the individual taking up an entrepreneurial career, in some countries there is religious and cultural belief that high profit is unethical. This type of belief inhibits growth of entrepreneurship. PSYCHOLOGICAL FACTORS: The psychological factors like high need for achievement, determination of unique accomplishment, self confidence, creativity, vision, leadership etc, promote entrepreneurship among individuals. On the other hand psychological factors like security, conformity and compliance, need for affiliation etc restrict promotion of entrepreneurship. POLITICAL FACTORS: The political and also the political stability of country influence the growth of entrepreneurship. The political system, which promotes free market, individual freedom and private enterprise, will promote entrepreneurship. ECONOMIC POLICIES: The economic policies of the government and other financial institutions and the opportunities available in a society as a result of such policies play a crucial role in exerting direct influence on entrepreneurship. In view of the haphazard development of economic zones, Government is encouraging the entrepreneurs to establish their business in backward and tribal areas. This is primarily to arrest the migration of people from the villages to cities and to create employment opportunities locally. Government is promoting such development by giving incentives like tax holidays (both sales and income), subsidized power tariff, raw materials, transportation cost etc.

Difference between an Entrepreneur and a Manager

Qualities for an Entrepreneur

Entrepreneurial Competencies

 A competency may be defined as underlying characteristics of a person which results in effective performance of a job. It may be include such motives, traits.skills.aspects of ones selfimage or a body of knowledge which one uses in the practical life. Only knowledge can not ensure success. Success depends upon the ability or skills of using the acquired knowledge for achieving desired results. Skills refer to practical application or use of the knowledge. Thus, performance depends upon both knowledge and skills. The personality of the person making use of knowledge and skills important in this context. Personality represents the, whole person, concept. It includes perception, learning and motivation.

Elements of Entrepreneurial Competencies

Knowledge Skills Motives and traits

KNOWLEDGE
Innovation is possible only through knowledge. In simple words, knowledge means collection of information and retention of facts an individual store in some parts of his brain. Creative process provides imagination, germinates ideas, nurtures them and develops them successfully But innovation is the development process which translates an idea into an application.

 It requires persistence in analytical working out the details of product design or service, and to develop marketing, obtain finances and plans operations.

SKILLS Skill is ability to demonstrate a system and sequence of behaviours that are functionally related to attaining a goal. An Entrepreneur is required to have certain skills which are as follows:

Anticipatory
environment.

Skills-foresight

into

constantly

changing

Visioning Skills-inducing a group to act in accordance with the

leaders purposes or the shared purposes of larger group.

Value Congruence Skills-the need to be in touch with employees

economic,safety,psychological,spiritual,swxual,aesthetic and physical needs in order to engage people on the basis of shared motives, values and goals.

Empowerment Skills-the willingness to share power and to do so

effectively.

Self Understanding Skills-introspective or self knowledge skills as

well as framework within which leaders understand both their needs and goals and those of their employees.

MOTIVES AND TRAITS Motives deals with current concern for a goal, state or condition appearing in fantasy which drives, directs and select behaviour of Individual. In simple words, motive represents thoughts related to a particular goals or state. Trait may be defined as a disposition or characteristic way in which a person responds to a set of stimuli.

Such responses represent intelligence, enthusiasm, strength, bravery, integrity and self-confidence. An entrepreneur provides leadership to his enterprise and so he must possess the leadership traits. He/She should be Adaptable to situations faced Alert to social environment Ambitious and achievement oriented Assertive Co-operative Decision maker Dependable Dominant Energetic Self-confident Tolerant of stress Willing to assume responsibility. TYPES OF ENTREPRENEURIAL COMPETENCIES

Behavioural competencies
Initiative Creativity and innovation Risk-taking and risk management Problem solving and decision-making

 Persistence-----faith of the Entrepreneur to the system with confident. Quality of work performance Information seeking Systematic planning Persuasion competency-mobilizes the resources