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UNIT 1 - Entrepreneurship Development.pdf

  1. Entrepreneurship Development 5th Semester
  2. Unit 1 The Entrepreneur: Its Definition Emergence of Entrepreneurial Class Theories of Entrepreneurship
  3. 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.
  4. 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.
  5. To be an Entrepreneur- one shouldhave, "Creativity& Idea" Inventor​ Entrepreneur​ Promoter​ Manager​ Administrator​ HIGH LOW HIGH Managerial Skill
  6. 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.
  7. Entrepreneurship? • Involves creationof value through fusion of capital, risk taking, technology and human talent
  8. 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
  11. 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
  12. 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
  13. 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
  14. 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.
  15. 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
  16. 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
  17. Types of Entrepreneur Danhofhas classified entrepreneursin to FOUR categories: 1. Innovating Entrepreneurs 2. Adoptive / ImitativeEntrepreneurs 3. Fabian Entrepreneurs 4. Drone Entrepreneurs
  18. 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
  19. 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.
  20. 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
  21. 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.
  22. 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.
  23. 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.
  24. 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.
  25. 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.
  26. 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.
  27. 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.
  28. 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.
  29. 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
  30. • 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.
  31. •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.
  32. • 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:
  33. 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
  34. 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.
  35. Schumpeter'sTheoryof INNOVATION Contd... CRITICS : Relevant to Developing countries like INDIA, where innovative functions are encouraged. Too much emphasis on Innovative functions.
  36. 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
  37. 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
  38. 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
  39. 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.
  40. • 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.
  41. Peter Druckers's Principle of Innovations
  42. 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
  43. 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.
  44. 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.
  45. 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.
  46. 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.
  47. 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.
  48. ➢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.
  49. • 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.
  50. 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.
  51. 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.
  52. Diversification • Ayurvedic Centers for: • Panchkarma • Dhara and Kerala massage • Ayurvedic health Resorts – Delhi and US Island of Saipan
  53. 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”