Fundamentals of Entrepreneurship

Fundamentals of Entrepreneurship
Puspa Adhikari_BIC_2018
Entrepreneur
• Entrepreneur
• A catalyst for economic change who uses purposeful searching, careful
planning, and sound judgment when carrying out the entrepreneurial process.
• Entrepreneur possesses some characteristics among them major two are :
 Uniquely optimistic
 Creative
And have on behaviour that include,
1.Initiative taking
2.Organizing and reorganizing of social and economic mechanisms(use of money
exchanged by buyers and sellers ) to bundle resources in innovative ways, and
3.The acceptance of risk, uncertainty, and/or the potential for failure.
Entrepreneur
Entrepreneur
• are creative individual.
• have vision & inspiration to create new venture.
• they identify new business opportunities & take
advantage of it.
• they take risk.
• They lunches new venture.
• Above all they are achievement oriented individuals
driven to seek new challenge & accomplishment.
Entrepreneur
• The Economist view,
• An entrepreneur as a fourth factor of production along with
land, labour & capital.
• The sociologist view,

• Certain communities & culture promote entrepreneurship.
• Still others feel that

• Entrepreneurs are innovator who come up with new ideas for
products, markets or techniques.
Factors of Production
Entrepreneur
• Definition of Entrepreneur
• An entrepreneur is an organizer who combines various factors
of production to produce a socially viable product.- J.B.Say
• An entrepreneur is a person who starts a new venture, taking

the initiative & risk associated with it, and does so by
creating something new to provide value to customers. – David
Holt
• An entrepreneur is a visionary individual who takes risk by

starting something new through assembling and coordinating
various resources for the shake of uncertain rewards.
Fundamental of Entrepreneurship
Risk Bearer organizer Innovator
• Risk Bearer: an agent who buys factor of production at

certain price in order to combine them in to a product
with a view to selling it an uncertain prices in future.
• Organizer: An entrepreneur is one who combines the land

of one , the labor of another & the capital of yet
another, and thus , produce a product.
• Innovator: Entrepreneur is innovator.
Invention and Innovation
• Invention- creating of something new result in new
knowledge.
• Innovation- Transformation of new knowledge in to

application result in new product or process.
Fundamental of Entrepreneurship
Entrepreneur
• A dynamic agent for change.
• A catalyst
• Refers to an individual
• Is a creator.
• Is a visionary
• Is an innovator
• Is a risk-bearer
• Is a motivator
• Is an organizer
• Is a leader
Characteristics of entrepreneurs
• Achievement oriented
• Hardworking
• Desire for responsibility
• Optimistic
• Independence
• Foresight
• Preference for risk
• Innovative
• Flexible
• Good manger and leader
• Low need for status and power
• Integrity and reliability
• Seeking and using feedback
• Internal locus of control
• Realism(state of being actual/real) and sense of humor
Characteristics of Entrepreneur
• Hard Work: willingness to work hard distinguish a successful
entrepreneur from unsuccessful one.
• Desire for high achievement: strong desire to achieve high goal
in business. High achievement motive strengthened them.
• Highly optimistic: they do not disturbed by the present
problem. They are optimistic for future that the situation will
became favourable.
• Independence: do not like to guided by others.
• Foresight: can visualize the expected changes in the market.
• Good organiser: brings together all resources required for
starting up an enterprise.
• Innovative: initiate research and innovative activities to
produce goods that satisfy the customers’ changing demands for
products.
Function of Entrepreneur
• Planning: setting goal, growth, survival, profit, leadership..
• Organizing: grouping of tasks, work division, right man in a right
place, giving authority and responsibility, distribution of
resources
• Mobilizing resources: financial from bank, family, friends
Human resources- getting the right employee, technology
• Relationship management: exchange relationship- market-suppliers-
customer,
professional relationship- with employee, financial institution,
insurance, lawyers, government relationship, social relationship.
• Control: goals & objectives either achieved or not- financial,
production, management control.
Function of Entrepreneur
• Some writers point out the function of
entrepreneurs as follows.
• Idea generation and scanning of the best suitable ideas.
• Determination of the business objectives.
• Determination of form of ownership/organization.
• Completions of promotional formalities.
• Raising necessary funds.
• Procuring machine and materials.
• Recruitment of human resources.
• Undertaking the business operations.
Nature and Development of Entrepreneurship
• The word entrepreneur is driven from French enreprendre
meaning to undertake or between-taker or go between
(person acting as an agent).
• Richard Cantillon(1755) used entrepreneurs in economics.
• J.B. Say and J.A. Schumpeter explained about

entrepreneurs in 19th century.
• In America, many view the entrepreneur as the hero of

capitalism.
• Entrepreneur is the change agent, sources of innovation and
creativity, the plotter, heart and soul of economic growth.
• Entrepreneur is a rare, peculiar person who utilize factors of

production and get profit as rewards.
• Entrepreneurs often go where other fear to tread (walk).
• Entrepreneurs are individuals who recognize opportunities where

other are in confusion.
• Entrepreneurs have been compared to Olympic athletes

challenging themselves to break new barriers.
The Changing Definition of Entrepreneur
1755 Richard Cantillon A person bearing risk
1816 Jean-Baptiste Say Agent combining all factors of production
1921 Knight Recipient of pure profits
1934 Joseph Schumpeter Ability to identify new opportunity beyond

resource controlled
1985 Howard Stevenson The relentless pursuit of opportunity
1988 William B. Gartner Actions taken to create organizations
• The questions abut who are entrepreneurs? What is
entrepreneurship? What is an entrepreneurial path and how they
impact on economy are important issues to understand
entrepreneurship & entrepreneurs.
• The development of entrepreneurship parallels to a great extent

development of term itself.
• Development of entrepreneurship can be studied with help of its

use in different time interval as:
• Early period
• Middle age
• 17th century
• 18th century
• 19th and 20th century
• Early period: Entrepreneur was understood as go-between
(person acting as an agent). The example of earliest
definition of an entrepreneur is Marco Polo, who would
signed a contract with money person to sell his goods.
• The interest rate of contract loan would cover the
insurance premium too. According to this system, while
capitalists was passive risk bearer, the merchant-
adventurer took active role in trading bearing all
physical and emotional risks. The profits were divided by
capitalists (up to 75% profit) and merchant-adventurer
(remaining 25%).
• Middle age (5th to 15th Century): In middle age, term

entrepreneur was used to describe both an actor & a
person who managed large scale production project.
• 17th Century: Richard Cantillon, a noted economists,

developed early theory of entrepreneur and regarded
as the founder of the term. Entrepreneur was viewed
as a risk taker observing that merchants, farmers,
craftsman and other sole proprietors 'buy at a
certain price and sell at an uncertain price,
therefore operating at a risk.'
• 18th Century: The entrepreneur was distinguished from

capital provider (venture capitalist, who is a
professional money manager from equity capital to
obtain high rate of return on investment). But
entrepreneurs are capital users for experimentation
of inventions in the course of technology
development.
• Oxford English Dictionary (in 1897)- the director or
a manager of a public musical institution, one who
gets-up entertainment, specially musical performance”
• 19th and 20th Century: In the late 19th and early

20th centuries, entrepreneurs were frequently not
distinguished from managers and were viewed mostly
from an economic perspective.
• Entrepreneurs were known as organizer and operator of

an enterprise for personal gain by paying current
price for materials, using land, providing employment
and arrangement of capital.
• Entrepreneurs contribute initiative and skills for

planning, organizing and administrating enterprise.
He /she also assumes chance of loss and gain to
unforeseen and uncontrollable circumstance.
• In middle of 20th century, the notion of an

entrepreneur as an innovator was established.
Definition of Entrepreneurship
• According to Hisrich & Peters "Entrepreneurship is
the process of creating something new with value by
devoting the necessary time and effort; assuming the
accompanying financial, psychic(mental, intellectual,
emotional), and social risks and uncertainties; and
receiving the resulting rewards of monetary and
personal satisfaction.“
• Entrepreneurship is a process of creating something

new and assuming risk and rewards.
Definition of Entrepreneurship
• Entrepreneurship is the process of creating new
venture.
• It begins with an innovative ideas.
• It identifies opportunities and mobilizes and invest
resources to exploit those opportunities
• It involve innovation.
• It assumes risk to reap rewards.
• It creates employment for self and others.
Differences between Entrepreneur and Entrepreneurship
Entrepreneur Entrepreneurship
• Refers to an individual •Refers to a process
• Is a creator. •Is creation
• Is a visionary •Is a vision
• Is an innovator •Is innovation(application
• Is a risk-bearer of new knowledge)
• Is a motivator • Is motivation
• Is an organizer • Is organization
• Is a leader • Is leadership
Entrepreneur Entrepreneurship
• An individual who starts • The efforts of individual to
business. start a business
• Person who looks for • Devotion for creating some
advancement. thing new
• An agent for economic • Ability to take risk of
development/ project. business failure
• Key persons who introduce new • Strong desire for
techniques to create independence, satisfaction
opportunity. and profit through operation.
Different between Entrepreneur and Manager
Entrepreneur Manager
•Independence & achievement • Leadership & power
oriented
• Working in existing organization
•Create new venture
• Owner • Employee
• Bears all risks • Fulfilling responsibility
• Reward- Profit highly uncertain • Gets salary rendering services
which is certain and fixed.
• Creative, technical knowledge,
experience and farsightedness • Knowledge of management theory and
• Possess qualities and practical experience
qualification like high • Need to possess distinct
achievement motive, foresight, qualification in terms of sound
risk bearing ability … knowledge in management theory and
practice.
Skills required in Entrepreneurship
• Technical skills: Writing, communication &
listening, monitoring, technological.
• Business management & marketing skills: Planning,

decision making, marketing, staffing, finance,
accounting, control, venture lunching and growth
strategy.
• Personal entrepreneurial skills: Risk taker, inner

control/ discipline, creativity, managing change/
change oriented.
Qualities of Entrepreneur
• Recognize & take advantages of opportunities
• Ability to get along with people
• Imaginative
• Creative
• Visionary
• Independent thinker
• Versatile knowledge of product, market & technology
• Ability to influence others
• Initiative
• Flexibility
• Intelligence
• Risk taking attitude
• Leadership and Orientation to achieve goals
Entrepreneurship is combination of
Innovative idea
Risk taking habit
Exploitation of opportunities
Allocation of resources
Different from ordinary course of action
Unlimited energy and passion

Role of Entrepreneurship in Economic Development
• Capital formation: Economic development implies
sustainable increase in quality of life.
Entrepreneurs stimulate investment interest in new
venture to mobilize idle saving of public.
• Industrialization: Entrepreneurial efforts are
sources of industrialization.
• Employment creation: New ventures create employment
opportunity for self and others. It reduces
unemployment rate.
Role of entrepreneurship in economic development
• Increase productivity: Productivity is increased
through effective utilization of resources by
entrepreneurs.
• Balance development: Enterprise are establish in
different region of country which supports balance
development.
• Equitable distribution of wealth: Establishment of
enterprise supports for equitable distribution of
wealth, income & political/regional power.
Role of entrepreneurship in economic development
• Export promotion: Entrepreneurs create the need of
foreign market & export the product. It is sources
of foreign currency.
• Industrial relation: Entrepreneurs support to
establish good relation between management and
workers.
Contribution to Society
1. Easily available of goods and services
2. Civilization of society
3. Social harmony: is peaceful interaction of human

dynamics among members of a social group.
Contribution to government
1. Provide revenue
2. Provide foreign currency
3. Provide information
4. Support in economic development
5. Support in policy formulation
6. Innovation of new technology, product and methods
of production
Benefits to Entrepreneur
• Opportunity to create your own identity
• Opportunity to make difference
• Opportunity to reach to full potential
• Opportunity to reap profit
• Opportunity to contribute to society and be
recognized for your efforts
• Opportunity to do what you enjoy and have fun at
it.
Potential drawbacks of entrepreneurship
• Uncertainty of income
• Risk of losing entire investment
• Long hour and hard work
• Lower quality of life until the business gets
established
• High level of stress
• Discouragement
Types of Entrepreneurs
A. On the basis of Innovation
B. On the basis of Behavior
C. On the basis of Focus Group
A. On the basis of Innovation:
1. Innovative – totally new technology, product,
production techniques/ method.
2. Imitative – replication of existing Production
techniques in new settings
3. Fabian – are very skeptic about taking a step unless
and until they are definite it would be a loss, if not
steps are not taken in time.
4. Drone – continue existing situation, traditional way of
operation, no change
5. Forced – created by circumstances.
6. Empire Builder – promote new ventures one after another
B. On the basis of Behavior
1. Solo operators – start from oneself and self
managed
2. Active Partners- all partners participate
actively,
3. Inventors- competent to invent new product
4. Challengers– love challenging venture timely
5. Buyers – Do not like to initiate new one better to
continue existing business,
6. Life timers- as a part of life, small business for
their livelihood. Puspa Adhikari_BIC_2018
C. On the basis of Focus Group
1. Women – initiate and managed by women
2. Minority – entrepreneur from minority caste / race.
3. Immigrant – initiate business in foreign country
4. Part time - job in one hand and business is in another hand run
simultaneously, ‘moonlighting entrepreneur’
5. Home based- Run office / small production unit in own home
6. Family Business – Business run and control by the members of the
family
7. Corpreneur- Husband and wife equally contribute to run the
enterprise
8. Intrapreneur - Start new venture under the well established
corporation. Puspa Adhikari_BIC_2018
The myths of Entrepreneurship
1. Entrepreneurs Are Born, Not Made
2. Entrepreneurs Are Doers, Not Thinkers
3. Entrepreneurs Are Always Inventors
4. Entrepreneurs Are Academic and Social Misfits
5. Entrepreneurs Must Fit the Profile
6. All Entrepreneurs Need Is Money
7. All Entrepreneurs Need Is Luck
8. Entrepreneurship Is Unstructured and Chaotic
9. Most Entrepreneurial Initiatives Fail
10.Entrepreneurs Are Extreme Risk Takers… The Gamblers.
Entrepreneurial Process
The process of starting a new venture is embodied (alive) in
the entrepreneurial process. An entrepreneur must find,
evaluate and develop an opportunity by overcoming the
forces that resist the creation of something new. The
entrepreneurial process has four distinct phases:
Identify and evaluate the opportunity
Develop a business plan
Determine the resources required
Manage the enterprise
Opportunity identification and evaluation is important and difficult
task. Good business opportunity do not suddenly appear, but rather
result from an entrepreneur's alertness to possibilities.
Although most entrepreneurs do not have formal mechanisms for
identifying business opportunities, some sources e.g. consumers,
business associates, members of distribution channel & technical
people would help for identifying business opportunities.
The cause of opportunity are technical changes, market , government

regulations & competitors.
Whether the opportunity is identified, each opportunity must be

carefully screened & evaluated.
Estimating length of opportunity: The market size and
length of window of opportunity form the primary basis for
determining risk and reward.
Real and perceived value of opportunity: The real value of
opportunity may differ with perceived value. So, it should
be understood in terms of reality.
Risk and return of opportunity: The risk reflects market,
technology, competition and amount of capital involved. The
return & reward of opportunity need to be viewed in light of
any possible subsequent opportunity.
Opportunity versus personal skill and goals: Entrepreneur
should invest time & efforts to make the venture succeed.
The evaluation of opportunity is assessed with help of

following questionnaires.
What market need does it fill?

What observation have you experienced with regard to
market need?
What social condition underlines this market need?
What market data can be used to describe the need?
What conclusion exists in the market?
What does the market look like?
Where is the money to be made in this activity?
Develop a Business Plan
A good business plan must be developed to exploit the
defined opportunity. An entrepreneur has to develop
business plan to identify opportunity as well as to
determine the resource required. The plan is helpful to
obtain resources and to manage the resulting venture.
A business plan includes introductory part of business

and founders. The description of business,
organizational structure, marketing programs, financial
issues, production /operational activities & technical
factors are the components of business plan. The plan
supports to estimate the resources and provides
guidelines for efficient operation.
Develop a Business Plan
• Title Page
 Table of Contents
 Executive Summary
 Major Section
 Description of Business
 Description of Industry
 Technology Plan
 Marketing Plan
 Financial Plan
 Production Plan
 Organization Plan
 Operational Plan
 Summary
 Appendixes
Determine the resource required
Existing resources, resources gap and accessing resources
are important efforts under this section.
The resources needed for opportunity must be determined.

This process starts with an assessment of entrepreneur's
present resources. The rationalize risk associated with
insufficient /inappropriate resources should be assessed.
Acquiring needed resources in a timely manner is next step

in entrepreneurship process. An entrepreneur should strive
(attempt) to maintain as large ownership position, in start-
up stage.
Determine the resource required
Determine resources needed.
Determine existing resources.
Identify resource gaps and available suppliers.
Develop access to needed resources.
Managing the enterprise
Management style, key variables of success,
identification of problems and implementation of
control system are the components of managing
enterprise.
After resources are acquired, the entrepreneur must

employ them through the implementation of business
plan. The operational problems of the growing
enterprise must also be examined. This involves
implementing a management style and structure, as
well as determining the key variables for success.
Managing the enterprise
A control system must be identified so that any problem
areas can be carefully monitored. Some entrepreneurs have
difficulty managing and growing the venture they created.
This is one difference between entrepreneurial and
managerial decision making.
 Develop management style and structure.

 Understand key variables of success.
 Identify problems and potential problems.
 Implement control systems.
 Develop growth strategy.
Ethics and responsibilities of entrepreneurs
Ethics is about morally correct behavior.
CSR is about responsibility to all stakeholders and not just
shareholders.
The word “ethics” is from the Greek ethos, meaning custom and usage.
While ethics refers to the “study of whatever is right and good for
humans.”
Business ethics can be defined as written and unwritten codes of

principles and values that govern decisions and actions within a
company.
Business ethics concerns itself with the investigation of business

practices in the light of human values.
Ethics and Responsibilities of Entrepreneurs
• Business ethics is the study of behavior and morals
in a business situation.
• While we are talking about the business ethics,
there are three things that need consideration:
1. Avoid breaking criminal law in one’s work related

activity.
2. Avoid action that may result in civil law suits
against the company.
3. Avoid actions that are bad for the company image.
Ethics and responsibilities of entrepreneurs
The life of an entrepreneur is not easy. Entrepreneur
faced with the daily stressful situations and other
difficulties. So he/she has to consider ethics and
social responsibilities while taking business decision.
1. Leaders set the example:

2. Ethics is a core value: a key element of their
corporate culture.
3. Employees feel safe to share concern: organization
should be ethics-driven where every member can report
wrongdoing.

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Fundamentals of Entrepreneurship

• The sociologist view,

• Still others feel that

• An entrepreneur is a person who starts a new venture, taking

• An entrepreneur is a visionary individual who takes risk by

• Risk Bearer: an agent who buys factor of production at

• Organizer: An entrepreneur is one who combines the land

• Innovator: Entrepreneur is innovator.

• Innovation- Transformation of new knowledge in to

• Richard Cantillon(1755) used entrepreneurs in economics.

• J.B. Say and J.A. Schumpeter explained about

• In America, many view the entrepreneur as the hero of

• Entrepreneur is a rare, peculiar person who utilize factors of

• Entrepreneurs often go where other fear to tread (walk).

• Entrepreneurs are individuals who recognize opportunities where

• Entrepreneurs have been compared to Olympic athletes

1816 Jean-Baptiste Say Agent combining all factors of production

1921 Knight Recipient of pure profits

1934 Joseph Schumpeter Ability to identify new opportunity beyond

1985 Howard Stevenson The relentless pursuit of opportunity

1988 William B. Gartner Actions taken to create organizations

• The development of entrepreneurship parallels to a great extent

• Development of entrepreneurship can be studied with help of its

• Middle age (5th to 15th Century): In middle age, term

• 17th Century: Richard Cantillon, a noted economists,

• 18th Century: The entrepreneur was distinguished from

• 19th and 20th Century: In the late 19th and early

• Entrepreneurs were known as organizer and operator of

• Entrepreneurs contribute initiative and skills for

• In middle of 20th century, the notion of an

• Entrepreneurship is a process of creating something

• Business management & marketing skills: Planning,

• Personal entrepreneurial skills: Risk taker, inner

Risk taking habit

Different from ordinary course of action

Unlimited energy and passion

3. Social harmony: is peaceful interaction of human

The cause of opportunity are technical changes, market , government

Whether the opportunity is identified, each opportunity must be

The evaluation of opportunity is assessed with help of

What market need does it fill?

A business plan includes introductory part of business

The resources needed for opportunity must be determined.

Acquiring needed resources in a timely manner is next step

After resources are acquired, the entrepreneur must

 Develop management style and structure.

Business ethics can be defined as written and unwritten codes of

Business ethics concerns itself with the investigation of business

1. Avoid breaking criminal law in one’s work related

1. Leaders set the example:

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