ENTRPRENUERSHIP

Concept of Entrepreneurship
Entrepreneurship is the ability and readiness to develop, organize and run a business enterprise,
along with any of its uncertainties in order to make a profit. The most prominent example of
entrepreneurship is the starting of new businesses.

In economics, entrepreneurship connected with land, labour, natural resources and capital can
generate a profit. The entrepreneurial vision is defined by discovery and risk-taking and is an
essential p a r t o f a n a t i o n ’ s c a p a c i t y t o s u c c e e d i n a n e v e r -changing a n d m o r e
competitive global marketplace.

Meaning of Entrepreneur
The entrepreneur is defined as someone who has the ability and desire to establish, administer
and succeed in a startup venture along with risk entitled to it, to make profits. The best
example of entrepreneurship is the starting of a new business venture. The entrepreneurs are
often known as a source of new ideas or innovators, and bring new ideas in the market by
replacing old with a new invention.
It can be classified into small or home business to multinational companies. In economics, the
profits that an entrepreneur makes is with a combination of land, natural resources, labour
and capital.
In a nutshell, anyone who has the will and determination to start a new company and deals
with all the risks that go with it can become an entrepreneur.

What are the 4 Types of Entrepreneurships?

It is classified into the following types:
Small Business Entrepreneurship-
These businesses are a hairdresser, grocery store, travel agent, consultant, carpenter, plumber,
electrician, etc. These people run or own their own business and hire family members or local
employee. For them, the profit would be able to feed their family and not making 100 million
business or taking over an industry. They fund their business by taking small business loans
or loans from friends and family.
Scalable Startup Entrepreneurship-
This start-up entrepreneur starts a business knowing that their vision can change the world.
They attract investors who think and encourage people who think out of the box. The
research focuses on a scalable business and experimental models so, they hire the best and the
brightest employees. They require more venture capital to fuel and back their project or
business.
Large Company Entrepreneurship-
These are huge companies with defined lifecycle. Most of these companies grow and sustain
by offering new and innovative products that revolve around their main products. The change
in technology, customer preferences, new competition, etc., build pressure for large
companies to create an innovative product and sell it to the new set of customers in the new
market. To cope with the rapid technological changes, the existing organisations either buy
innovation enterprises or attempt to construct the product internally.
Social Entrepreneurship-
This type of entrepreneurship focuses on producing product and services that resolve social
needs and problems. Their only motto and goal is to work for society and not make any
profits.

Characteristics of Entrepreneurship:
Not all entrepreneurs are successful, there are definite characteristics that make
entrepreneurship successful. A few of them are mentioned below:

● Ability to take a risk- Starting any new venture involves a considerable amount of
failure risk. Therefore, an entrepreneur needs to be courageous and able to evaluate
and take risks, which is an essential part of being an entrepreneur.
● Innovation- It should be highly innovative to generate new ideas, start a company
and earn profits out of it. Change can be the launching of a new product that is new to
the market or a process that does the same thing but in a more efficient and
economical way.
● Visionary and Leadership quality- To be successful, the entrepreneur should have a
clear vision of his new venture. However, to turn the idea into reality a lot of
resources and employees are required. Here, leadership quality is paramount because
leaders impart and guide their employees towards the right path of success.
● Open-Minded- In a business, every circumstance can be an opportunity and used for
the benefit of a company.
● Flexible- An entrepreneur should be flexible and open to change according to the
situation. To be on the top, a businessperson should be equipped to embrace change in a
product and service, as and when needed.
● Know your Product-A company owner should know the product offerings and also
be aware of the latest trend in the market. It is essential to know if the available
product or service meets the demands of the current market, or whether it is time to
tweak (twist) it a little. Being able to be accountable and then alter as needed is a vital
part of entrepreneurship.

Importance of Entrepreneurship:

● Creation of Employment- Entrepreneurship generates employment. It provides an

entry-level job, required for gaining experience and training for unskilled workers.
● Innovation- It is the hub(center) of innovation that provides new product ventures,
market, technology and quality of goods, etc., and increase the standard of living of
people.
● Impact on Society and Community Development- A society becomes greater if the
employment base is large and diversified. It brings about changes in society and
 promotes facilities like higher expenditure on education, better sanitation, fewer
slums, a higher level of home ownership. Therefore, entrepreneurship assists the
organisation towards a more stable and high quality of community life.
● Increase Standard of Living- Entrepreneurship helps to improve the standard of
living of a person by increasing the income. The standard of living means, increase in
the consumption of various goods and services by a household for a particular period.
● Supports r e s e a r c h a n d d e v e l o p m e n t - new p r o d u c t s a n d s e r v i c e s n e e d
t o b e researched and tested before launching in the market. Therefore, an entrepreneur
also dispenses finance for research and development with research institutions and
universities. This promotes research, general construction, and development in the
economy.

Functions of an Entrepreneur
Functions of an Entrepreneur – Risk Bearing, Administrative, Decision-Making and
Distributive Functions
An entrepreneur frequently has to wear many hats. He has to perceive opportunity, plan,
organize resources, and oversee production, marketing, and liaison with officials. Most
importantly he has to innovate and bear risk.

The main functions of an entrepreneur are grouped in three categories:

1. Risk bearing functions,

2. Administrative and decision-making functions, and

3. Distributive functions (responsibility of the organizer).

1. Risk Bearing Functions:

It is the most important and specific function of an entrepreneur. Every business involves
some amount of risk. The production of goods and services is always related to future
demands. The future demand is uncertain and unpredictable, because it is influenced by the
changes in fashion or taste and liking of the consumers.

The price structure, value of money, climatic conditions and government policies are some
other important factors that affect the demand of a commodity. All these factors are variable
and as such an exact estimation of future demand is a difficult exercise to work:

Since this unpredictable task is undertaken by the entrepreneur, he has to bear the risk. If his
estimations prove to be wrong, then in the entire business sphere, no other factor of
production shares the loss incurred by the entrepreneur.

It is the main reason why the entrepreneur becomes entitled for the surplus that is remaining
with him from the sale proceeds of the product, after distributing the shares to other factors.
This surplus is termed as profit of the business.

2. Administrative and Decision-Making Functions:

i. Conceiving the Idea of Business:

The entrepreneur conceives the idea of a particular business which suits his nature, skill and
resources. He makes a thorough (intensive and extensive) study of the condition of market
and business prospects. After making a thorough study of economic viability, he decides the
business that he has to start

ii. Estimation of Details of Business and Implementation of the Same:

After arriving at a conclusion about the nature of business, the entrepreneur works out the
details of business, i.e., what, how and when to produce and from where the resources are to
be arranged. With all these estimations, he makes an all-out effort to give a practical shape to
his plans, organizes various factors of production and sets them to function in proper
harmony.

iii. Supervision and Control of Business Activities:

The entrepreneur has to supervise and control the day-to-day business activities to
accomplish the business objectives. For this he properly coordinates between various factors
of production. As the risk (success or failure) of business operations directly affect his
economy, he keeps a vision and control on the business affairs and avoids unnecessary
expenditures. He is required to take a numerous decisions and has to get these decisions
properly implemented.

iv. Innovation:
Innovation is one of the most important functions of an entrepreneur. An entrepreneur uses
information, knowledge and intuition to come up with new products, new methods of
reducing costs of a product, improvement in design or function of a product, discovering new
markets or new ways of organization of industry. Through innovation, an entrepreneur
converts a material into a resource or combines existing resources into new and more
productive configurations.

It is the creativity of an entrepreneur that results in invention (creation of new knowledge)

and innovation (application of knowledge to create the new products, services or processes).

3. Distributive Functions:
The entrepreneur organizes different factors of production and sets them to work. It,
therefore, becomes his responsibility to make proper allocation of funds for each factor of
production, i.e., each factor of production must be properly remunerated.

The remuneration here refers to an important decision as to what should be the share of each
factor of production in the sale proceeds of the entire product. The remuneration should be
just and equitable and the payment to each factor should be commensurate, so that each factor
is fully satisfied.
If the factors of production remain dissatisfied, they will not be able to deliver their best to
the entrepreneur. So, it is the entrepreneur, who has to ultimately suffer. Hence, it is very
essential for the entrepreneur to perform distributive functions with extreme care and caution.

barriers to entrepreneurship
Economic innovation and job formation is stalled throughout the world. Entrepreneurs can
change all that. To do so, entrepreneurs must overcome eleven barriers facing them.

First: Corrupt and unsupportive business environment

Lack of supportive and market-augmenting governmental regulations serve as a barrier to
entrepreneurship. Russia leads all other large nations in having an unsupportive business
environment because they lack rule of law, have poorly defined contract and property laws,
enforce regulations inconsistently, allow rampant corruption and bribing, allow regulatory
authorities and inspectors to act in a predatory nature which therefore requires friendly ties
with government officials and bureaucrats to smooth the way for businesses to operate.
Employee related difficulties
Building an employee asset base for the enterprise is one of the more daunting and sometimes
overlooked tasks. Entrepreneurs must find and select the best-qualified employees who are
motivated and willing to grow with the venture. Then they must ensure the employees do not
leave. this t a s k b e c o m e s a barrier when employees’ expectations increases,
governmental regulations related to labor employment is hardened, and employee costs grow.
Employee cost is more than pay. It includes healthcare, workers’ compensation, social security
tax, and health and safety regulations.

Severe market entry regulations

Governmental rules, taxation, environmental regulations, lending requirements and licensing
are all barriers to entrepreneurship. Most countries, the United States included, proscribe or
license market entry and the creation of new firms to protect incumbents in certain industries
and professions. Entry procedures, or “red tape,” vary such that entrepreneurs need one day
to register an enterprise in one country and up to 20 weeks in another. Other barriers to
entrepreneurship are predatory tax behavior of authorities, lack of property rights and tax
disadvantages.
Shortage of funds and resources
Finding the money to start up an enterprise is a leading barrier to entrepreneurship. Without
funds, any person cannot begin to organize, train, develop and sell product.
Fifth: Lack of Entrepreneurship Opportunities
Venture creation requires existing marketplace opportunities with possibilities known to the
entrepreneur and favorable odds for success for entrepreneurial “spirit” to succeed.
Sixth: Lack of Entrepreneurial Capacity
Opportunities go untried until someone comes along with an eye for possibility and a can-do
attitude. Some cultures may discourage entrepreneurial capacity resulting in a low rate of new
firm entrance. It is like having an oil well field without knowledgeable people to mine the
wells. Entrepreneurial capacity is the existence of people with entrepreneurship qualities,
willingness and motivation to initiate new ventures.
Seventh: Lack of Adequate Entrepreneurship Training
Training and education can be a robust incubator for new ventures. This includes training in
technical skills, managerial skills, entrepreneurial skills and entrepreneurship.
eighth: Lack of Appropriate Technical and Practical Skills
People tend to use the skills they have acquired to pursue entrepreneurial initiative. Lacking
the appropriate skills and knowledge inhibits economic development.
Lack of Market Experience
The essence of leadership is first learning and doing before leading. Therefore, the capability
to start a business is propelled by previous education and work experience. Rushing into a
new market because it looks attractive and rewarding without having some experience and
background in it can be fatal. Experience in a related business before start-up is positively
correlated to the probability of success.
Fear of Failure
Entrepreneurs have to decide whether to take action so they don’t miss the boat, while
knowing that hasty action may cause them to sink the boat.
Eleventh: Aversion to Risk
A psychological barrier closely related to the fear of failure is aversion to risk. Entrepreneurs
must take initiative, create structure with a social-economic mechanism and accept risk of
failure. Entrepreneurs have to be risk takers while those who are risk averse will seek the
security if an existing establishment.

Entrepreneurs’ vs Managers

Who is an entrepreneur?
Very basically speaking, an entrepreneur is a one-man show that runs entrepreneurship.
However, such a person usually has some unique attributes that allow him to be successful in
his endeavors. He is essentially an initiator and a leader. He brings business ideas to fruition
thus starting off his venture.

A successful entrepreneur is usually a responsible person. He is accountable for the success

or the failure of his venture, and he takes this responsibility very seriously. And since he is
the only person in-charge he is automatically the leader. In fact, leadership qualities are one
of the main aspects of an entrepreneur.

Who is a manager?
A manager, on the other hand, is not an owner of an enterprise. Instead, he is the one that is
responsible for the management and administration of a group of people or a department of
the organization. His day to day job is to manage his employees and ensure the organization
runs smoothly.

A manager must possess some of the same qualities as an entrepreneur, like

leadership, accountability, decisiveness etc. He must also be a good manager of people. So
qualities such as warmth and empathy are also very important in a manager.

Now that we have a brief idea about their qualities and roles, let us take a look at
the difference between them