Entrepreneurship
Development
5th Semester

Unit 1
The Entrepreneur:
Its Definition
Emergence of Entrepreneurial Class
Theories of Entrepreneurship

Entrepreneur
- Definition
• Founder of a business
• Bears all financial risk and uncertainty
• An individual who creates a new business
• Plays an active role in its operations
• Enjoys most of its success.
• An entrepreneur is someone who identifies a
need for a new product, process, or service
and builds a business around that need.

How it Works?
• A new, innovative product that fits a
market need
• An improved and expanded service
• A cheaper or better product than what
is already on the market
• An entrepreneur is a person who sets
up a business with the aim to make a
profit.

To be an Entrepreneur- one shouldhave,
"Creativity& Idea"
Inventor​ Entrepreneur​
Promoter​
Manager​
Administrator​
HIGH
LOW
HIGH
Managerial Skill

Entrepreneurs- elements
1) Organizer
2) Capitalist
3) Innovative
4) Change Agent
5) Risk taker
6) Opportunist
7) Decision Maker
8) Visionary
9) Leader
10) Dreamer
11) Solver
12) High Achiever
13) Soft Skills
14) Communication Skills
15) Self Confident
This Photo by Unknown author is licensed under CC BY-SA-NC.

Entrepreneurship?
• Involves creationof value
through fusion of capital, risk
taking, technology and human
talent

Entrepreneurship
This is the process that involves all actions of an entrepreneur
undertakes to establish an ENTERPRISE to give reality to his business
ideas.
According to JohnKaso & Howard Stevenson :
This is the attempt to create value through recognition of business
opportunity, the management of risk taking, and to mobilize human,
financial, material resources that are necessary for the projects.
In other words, Entrepreneurshipis the ATTITUDE of MIND to seek
opportunities,take calculated risks and derive benefits by setting up a
VENTURE

10 "D" of Entrepreneurship
1. DREAMS
2. DECISIVENSS
3. DOERS
4. DETERMINATION
5. DEDICATION
6. DEVOTION
7. DETAILS
8. DESTINY
9. DOLLORS
10. DISTRIBUTE

BECOMING AN ENTREPRENEUR

Myths of Entrepreneurship
Entrepreneurs, like leaders, are born, not made:
Entrepreneurs are academic and socially misfits:
To be an entrepreneur, one needs money only:
To be an entrepreneur, a great idea is the only ingredient
One wants to be an entrepreneur as having no boss is great fun
Entrepreneurs are Risk takers
Entrepreneurs are Gamblers

ENTERPRISE
• A person WHO Starts a Business
• Is the Actor
Entrepreneur
• Process of CREATION of IDEAS
• Is the ACT
Entrepreneurship
• The OUTCOME of ACTOR & ACT is called as Enterprise
• So, Enterprise is a business organizationthat is formed and to provide goods & services,
creates jobs, contributes to NATIONAL INCOME, and for the overall ECONOMIC
DEVELOPMENT of the Country
ENTERPRISE

Nature / Characteristics of
Entrepreneurship
1. Economic Activity
2. Creative responses to environment
3. Purposeful activity
4. Dynamic process
5. Risk element
6. Creator of organization
7. Gap gilling services
8. Optimum use of resources

Differencebetween Entrepreneur and Manager
S.No Basis Entrepreneur Manager
1 Venture Creation New Venture and runs it Runs only on existing unit
2 Innovation New creativity,new products & new method Employee of the
organization.Obey order
3 Risk Taking Self-employedand have right to take decisions Less risk.
4 Status He is responsible for all his financial loss,
failure
Day to day activities only to
be done by managers.
5 Reward Motivatedby profits earned Motivatedby rewards and
incentives.
6 Change Responsive to external environments and is
always prepared to change
May not receptive for
changes.

Functions of Entrepreneur
1. Scouting of Entreprenurial opportunities.
Here, sensing the Entreprenurial opportunities is a
process of perceiving the needs and problems of
people and society and arriving at certain solutions.
Example:
Nirma Detergent Powder was introduced to eet the
demands of the lower income groups, who could not
afford expensive detegrnts likw SURF and ARIEL

Functions of Entrepreneur
• 2. Generation of business ideas
• 3. converting idea into reality
• 4. arranging resources
• 5. supply of capital
• 6. establishment of enterprise
• 7. managing the enterprise
• 8. Growth & development

Types of Entrepreneur
Danhofhas classified entrepreneursin to FOUR categories:
1. Innovating Entrepreneurs
2. Adoptive / ImitativeEntrepreneurs
3. Fabian Entrepreneurs
4. Drone Entrepreneurs

OtherCategories
of Entrepreneurs
Individual Entrepreneur
Institutional Entrepreneur
Entrepreneur by inheritance
Trading Entrepreneur
Industrial Entrepreneur
Corporate Entrepreneur
Agriculture Entrepreneur
Technical Entrepreneur
First generation Entrepreneur
Women Entrepreneur

Innovating Entrepreneur
• Innovating entrepreneurs are those persons who take an interest in
innovative activities.
• In other words, when an entrepreneur propounds or uses any new
commodity, a new method of production, a new organizational
system, and a new market, etc. Then he is called the innovator.
• Innovating entrepreneur introduces the improvement in the method
of production or works for bringing a revolution in that, by executing
some new invention.

If the entrepreneur performs any of the following functions, he is regarded as an
innovating entrepreneur:
To produce any new commodity.
To use the new method of production.
To develop new markets.
To identify new resources of raw materials, semi-finished products, and energy.
To direct the new Organisation in any industry.
To do any other likewise activities of innovation.
Innovating Entrepreneur – continued

2. Adoptive / Imitative Entrepreneur
• Referred to as ‘COPY CATS’.
• Imitative entrepreneur is also known as adoptive entrepreneur.
• 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.
• Adaptive entrepreneurs adopt successful models (business models) from developing
countries or other countries.

Fabian Entrepreneur
These are entrepreneurs that are very careful in their approaches and
cautious in adopting any changes.
They don’t feel comfortable with the latest techniques
Feels that the present technologies are enough for staying ahead of the
competition.
They are also known with the name of old generation entrepreneurs.

Characteristic of Fabian Entrepreneur
They never take the decision as quickly as modern entrepreneurs and
take time to see how things work for others.
Try to avoid risks to a larger level and follow a rigid approach.
According to them, old school techniques are best to enjoy quality
results.
These entrepreneurs believe in the philosophy of skepticism ( means
questioning attitude) for the company’s operations.

Advantages of Fabianentrepreneur
• This type of entrepreneurship knows how to use imitating investors
brilliantly.
• Make all the decisions with a skeptical mind that help in avoiding tons
of mistakes in a few cases.
• These individuals make a change after having a clear scenario about
all the things.
• Some may call them the old school approach, but it has benefited
many organizations.

Notable examples of Fabian entrepreneurs
A notable example is Kodak Company, which doesn’t need any sort of
introduction.
➢They were once a top brand for manufacturing analog cameras.
➢They didn’t adopt modern technologies nor make any notable modifications to
their products.
➢The company was too late to introduce digital cameras as other brands used this
opportunity.
➢Many other companies with a similar approach, including Panasonic, lost their
position due to this form of entrepreneurship.

Drone Entrepreneur
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.

Characteristic of Drone entrepreneur
• They are conservative and don't go for innovative ideas.
• They are reluctant to adopt new technologies.
• They are adamant to follow only their own set of principles.
• They are orthodox.

Difference between Fabian and Drone
Entrepreneurs
DRONE:
➢ Who NEVER ALLOWs any changes in their production or styling method of business.
➢ Never Explore any NEW.
➢ They are called as " LAGGARDS" ( meaning SLOWLY Performing)
FABIAN:
➢ Very cautious / Lazy / Conservative in nature.
➢ Neither introduce any new methods nor adopts any methods introduce by others.

Theoriesof
Entrepreneurship
Richard Cantillion's Theory of RISK BEARING
Knight's theory of UNCERTAINITY
Schumpeter's theory of INNOVATION
McClelland's Theory of Achievement
Peter Druckers's theory of OPPOUTUNITY
Leibenstein’s X-Efficiency Theory

• Richard Cantillion's Theory of RISK BEARING
• The word "entrepreneur" has been traced back to Richard Cantillon, an Irish banker with
French roots writing in the early 1700s, before Adam Smith.
• He defined ENTREPRENEUR as an "AGENT".
• Buys Factors of Production at CERTAIN PRICES in order to combine them into a
PRODUCT with a view to selling them at UNCERTAIN PRICES IN FUTURE.
• Example: Farmer, who pays out a contractual incomes, which are certain to the landlords
and laborer's ( LEASE PATTERN) and sells his produce at prices that are uncertain.

•Knight's Theory of UNCERTAINITY
• He defines Entrepreneurs " To be a specialized group of persons who bear
UNCERTAINITY.
• UNCERTANITY is : a Risk which cannot be measured or insured against and is
INCALCULABLE.
• He made a difference between " Ordinary Risk" and " UNCERTAINITY".
• A RISK can be recued by the insurance principle , where the distribution of the
outcomesin a group is KNOWN.
• UNCERTAINITYis a Risk WHICH CANNOT BE CALCULATED.
• According to Knight, An Entrepreneur is an economic functionary , who
undertakes such responsibility of Uncertainty, which cannot be measured /
insures / capitalized.

• Schumpeter's Theory of INNOVATION
• In 1934, Joseph A. Schumpeter, assigned a crucial role of
INNOVATION to the Entrepreneur in his " Theory of Economic
Development".
• He considered economic development as a Discrete dynamic
change brought by entrepreneur by a new combinations of
PRODCUTIONS ie INNOVATIONS.
The new Combinations of innovations may occur by one of the
following given:

Schumpeter's Theory of INNOVATION
Contd...
1. Introduction of new product in the market
2. Instituting new product technology
3. Opening of a new market, where product is not introduced
4. To discover new source of supply of raw material
5. Making new of organization by way of the MONOPOLY

Schumpeter's Theory
of INNOVATION
Contd...
• He made a difference Inventor and Innovation
also:
• INVENTOR: Who discovers new methods and
new materials.
• INNOVATION: Utilizes such inventions and
discoveries to make NEW Combinations.

Schumpeter'sTheoryof INNOVATION
Contd...
CRITICS :
Relevant to Developing
countries like INDIA,
where innovative
functions are
encouraged.
Too much emphasis on
Innovative functions.

McClelland's Theory of Achievement
He developed an “ AN ACHIEVEMENT MOTIVATION
THEORY”
According to this theory:-
An Individual’s NEED for Achievementsrefers to the
Need for PERSONAL ACCOMPLISHMENTS.
The characteristics of entrepreneurhas two features –
1) Doing things in a new and better way and
2) Decision making under uncertainty

McClelland's
Theory of
Achievement
contd..
McClelland emphasizes achievement orientation as most
important factor for entrepreneurs.
Individuals with high achievementorientationare not influenced
by considerations of money or any other external incentives.
Profit and incentives are merely yardsticks of measurementof
success of entrepreneurs with high achievement orientation.
People with high achievement (N-Ach) are not influenced by
money rewards as compared to people with low achievement.
The latter types are prepared to work harder for money or such
other external incentives.
On the contrary, profit is merely a measure of success and
competency for people with high achievement need

McClelland's Theory of Achievement
contd..
• According to him a person acquires three types of
needs as a result of one’s life experience.
These three needs are:
1) Need for Achievement. A drive to excel, advance
and grow.
2) Need for Power. A drive to dominate or influence
others and situations.
3) Need for Affiliation. A drive for friendly and close
inter-personal relationship

McClelland's Theory of Achievement
contd..
The individual with high levels of need achievement is a
potential entrepreneur.
The specific characteristics of a high achiever (entrepreneur)
can be summarized as follows:
(i) They set moderate realistic and attainable goals for them.
(ii)They take calculated risks.
(iii)They prefer situations wherein they can take personal
responsibility for solving problems.
(iv) They need concrete feedback on how well they are doing.
(v) Their need for achievement exist.

• Peter Druckers's Theory of OPPOUTUNITY
He defines entrepreneur is the,
One, who is always looking for a change, and responds it, and exploit the
opportunities.
He emphasis that entrepreneur should always learn to practice the systematic
innovation.
Then, What is Systematic Innovation?
It is, consisting of purposeful and organized search for changes.

Peter Druckers's Principle of
Innovations

S.No Do's Don't
1 Purposeful systematic innovation
begins with an analysis
A firm should not be try to too
CLEVER
2 Innovation is both conceptual and
practical
Do not diversify
3 An innovation to be EFFECTIVE,it must
be simple and always focused
Do not try to innovate for
FUTURE. But, Do it for
PRESENT.
4 A successful innovation aims at
LEADERSHIP

Leibenstein’s
X-Efficiency
Theory:
X-efficiency is the degree of "inefficiency in the
use of resources within the firm".
It measures the extent to which the firm fails to
realize its productive potential.
According to Leibenstein,
When an input is not used effectively the
difference between the actual output and the
maximum output attributable to that input is a
measure of the degree of X-efficiency.

Leibenstein’s X-
Efficiency Theory
– contd...
X-efficiency arises, either because
the firm’s resources are used in the
wrong way or because they are
wasted, that is, not used at all.
The role of entrepreneur is to
improve the flow of information in
the Market.

Leibenstein’s X-
Efficiency Theory
– contd...
An entrepreneur has to act as GAP FILLER and an INPUT
COMPLETER , if there are imperfections in markets.
According to him there are two types of entrepreneurship.
(i) Routine entrepreneurship:
Deals with normal business functions like coordinating the
business activities.
(ii) Innovative entrepreneurship:
wherein an entrepreneur is innovative in his approach.
It includes the activities necessary to create an enterprise
where not all the markets are well established or well defined.

CASE STUDY – Shahnaz Hussain ( Women
Entrepreneur)
• Discusses the growth of Shahnaz Hussain Group.
• One of the largest producers of Ayurveda and herbal
products in the world.
• Her idea of producing and marketing Ayuvedic
products as a substitute for chemical cosmetics.
• She believes that chemical cosmetics are harmful to
health.
• The factors that are focus on the cases: -
• 1) what are the products?
• 2) To examine the Shahnaz style of business.
This Photo by Unknown author is licensed under CC BY-NC-ND.

The Making
of an
Entrepreneur
➢Belongs to Royal Muslim Family.
➢Migrated from Samarkhand to India
and later held high positions in the
princely kingdoms of Bhopal and
Hyderabad before India's
independence.
➢Schooling in an Irish convent.
➢Her father, Chief Justice N.U. Beg.
➢She developed a love for poetry and
English Literature.

➢She was married at the age of 15 and was a mother
by the next year.
➢ When her husband was posted in Teheran, Iran,
she developed an interest in beauty treatments
and decided to study cosmetology.
➢To support the expenses of the training financially,
she wrote articles for the Iran Tribune on various
topics under different names.
➢ In the course of her studies, she learnt of the
harmful effects of chemicals on the human body.

• After leaving Teheran, she trained
extensively in cosmetic therapy for 10
years in some of the leading institutes
of London, Paris, New York and
Copenhagen.
• On her return to India in 1977 she set
up her own salon at her house in Delhi
with an initial investment of Rs 35000.
• In contrast to salons offering chemical
treatments, Shahnaz offered Ayurvedic
products.

Entrepreneurship
The Shahnaz Hussain Way
• Uses Ayurvedic method of treatment, which uses
natural formulations to cure ailments.
• She is the pioneer and leader of Ayurvedic beauty
products in the world offering “Natural Care and
Cure”.
• The Shahnaz Husain Group offers exclusive salon
treatmentsgeared to individual needs as well as a
number of commercial formulations for the treatment
of specific problems like acne, pimples, pigmentation,
dehydration, alopecia (hair loss), etc.
This Photo by Unknown author is licensed under CC BY-NC.

Turning Point
• Came, when she represented India at the
Festival of India in 1980.
• Her team was given a counter in the
perfumery section of Selfridges in London.
• She sold entire products in 3 days and
broke the store's record for cosmetics
sales for the year.

Diversification
• Ayurvedic Centers for:
• Panchkarma
• Dhara and Kerala massage
• Ayurvedic health Resorts – Delhi and
US Island of Saipan

Lessons
•Acquired worldwide recognition
•“ It is important to have a DREAM and to believe in the magic of
your DREAMS” - Says Shehanz.
•She used to said that :
•“ True entrepreneur is a person who ha independence of Spirit”.
•“One should be Innovative, dynamic and willing o try every
avenge towards success”