Entrepreneurship

Development
Jahid Hasan
Assistant professor
Department of IPE,SUST
 Motivating Factors to Become Entrepreneur

There are varied approaches to understanding why some individuals decide to

venture into entrepreneurship. There are no well-defined psychological attitudes
of profiles that all entrepreneurs or characteristics to which entrepreneurs
generally conform.
The National Knowledge Commission Study confirms that there is no motivating
factor that triggers the decision to become an entrepreneur. The significant
motivating factors are:
1. Independence – Freedom to do one’s own thing
2. Market opportunity
3. Family background
4. New idea
5. Challenge
6. Desire to become an entrepreneur.
• According to the study, for female entrepreneurs, the
‘Independence’ as well as the identification of 'marketable idea’ are
the most important motivators.
• Male entrepreneurs were found to be most significantly influenced
by ‘family background’ and ‘independence’. ‘Idea driven’ motivators
are more significant for entrepreneurs above the age of 35.
• ‘Market opportunity’ is a far significant motivating factor for the
below-35 age group. ‘Independence’ is the powerful motivator for
the first generation entrepreneur.
• ‘Market opportunity’ has become an increasingly significant
motivating factor since the economic liberalisation gathered
momentum. It is the most important trigger for those with more
than 10-year work experience.
 Entrepreneurial Competencies
Competence is a combination of knowledge, skill and appropriate motives or
traits that an individual must possess to perform a given task. The entrepreneur
needs to have certan knowledge, skill and traits to plan, implement and manage
the small enterprises. All these characteristics put together is known as
competence.
Knowledge
Knowledge means the collection of information and retained facts that an
individual possess and also skills to translate that knowledge into actions.
Skill
Skill is the ability to perform functions that are related to attaining goal.
Motives and Traits
Motive is a recurrent concern for a goal which drives and directs behaviour of a
person. Trait is a quality which includes thoughts and psychological activities
related to a general category of events.
 Kinds of Competencies
Competencies are of two kinds:
1. Hard-skill competencies
2. Soft-skill competencies
Hard-skill competencies are those skills that are acquired through education
or through work experience.
Soft-skill competencies are generally inherent in an individual or developed
by him consciously. Example: Communication Skill. Both skills are necessary
to perform efficiently.
 Soft-skills
1. Initiative: Entrepreneurs should have the desire to
Initiative refers to taking action beyond the job produce work of high standard. Act to do
requirement or demands of the situation. things that meet or beat existing standards for
Entrepreneur should think before being asked excellence.
or forced to by circumstances and act to 5. Commitment:
develop the business. Commitment means making personal sacrifice
2. Persistence: or extending extraordinary effort to complete
Persistence means repeated action to a job. One should keep to the time schedule
overcome obstacles that get in the way of for delivery and satisfy the customers.
reaching goals. 6. Efficiency Orientation:
3. Information Seeking: Efficiency orientation is finding ways to do
Nobody knows everything. One will have to things faster or with fewer resources or at a
acquire knowledge and gather information low cost.
from elsewhere. Take help from experts and 7. Systematic Planning:
refer to books and journals to gain Developing and using logical step by step plan
information. to reach goals is referred to as systematic
4. Concern for High Quality of Work: planning. One should plan by breaking up a
large task into sub-tasks, develop plans that
anticipate obstacles, evaluate alternatives and
take a logical and systematic approach to
 8. Problem Solving: 11. Persuasion:
Problem solving attitude and not Persuasion is convincing someone to
avoiding attitude develop competency. buy a product or service, provide
9. Seek Confidence: finance or do something that he
would like that person to do.
One should have strong belief in
oneself and his own abilities. Express 12. Use of Influence Strategies:
confidence in your own ability to Use a variety of strategies to influence
complete a task or meet challenge. others. Developing business contacts,
10. Assertiveness: using influential people to accomplish
objectives, limiting information given
Assertiveness means confronting to others, etc., are influence
problems with others directly. You strategies.
must tell others what they have to do
and discipline those failing to perform
as expected.
 Bharat Desai, Chairman, CEO and co-founder of Syntel Inc., observes the following
from his experience in the last 27 years. These could help guide prospective
entrepreneurs and lay the foundation for a successful enterprise
The Idea Planning
Having a great idea is just the first step. It needs to be This is one of the most important steps. Your business venture
combined with brilliant execution to make it a successful must be based on sound principles. Even abundant capital can
business venture. Most successful entrepreneurs aren’t those be quickly squandered without a plan based on principles of
who had a brilliant idea, but those who executed their ideas sound financial management. Your principles should reflect
better. your overall business goals and philosophy.
Abilities Leadership
When launching a business, reconcile yourself to the fact that There is absolutely no substitute for positive leadership. Your
you cannot be everything to everybody. Take a personal enterprise will encounter many challenges – and you will need
inventory, analyze your strengths and weaknesses. Building a to dig deep within yourself to be the guiding light.
successful business requires 7-10 years of non-stop effort. If
you enjoy what you’re doing and have the passion to drive it, Innovate
the odds of success go up dramatically. In addition, you’ll Innovation holds the key to continued success. The focus of an
encounter a thousand people who will tell you why your idea entrepreneur needs to move to innovation, including process
can’t succeed. You have to maintain an exceptional innovation, product innovation, management innovation and
commitment to the concept and a positive outlook. business model innovation. This will help the business stay
Research ahead of the competition and win in the market.
Understand the market for your product or service. Learn
about the industry, traits and buying habits of potential
customers, any potential government regulations and strengths
and weaknesses of the competition. It will give you a good idea
of how to position your product/service.
 What Makes a Successful Entrepreneur?
• The survival and success rate of small business is relatively poor. This
emphasises the need to gain insight into what makes a successful
entrepreneur.
Know Your Business in Depth
Before you set an industry, read every thing that relates to that industry – trade
journals, periodicals, books, research reports and learn what it takes to
succeed in it. Personal contact with customers, trade associations and others in
the same industry in another way to gain knowledge. Join trade associations
and visit trade shows to get valuable information and make contacts before
starting the business.
Develop a Sound Business Plan
Developing a sound business plan is a crucial element for business success. A
good plan provides the right direction. It allows entrepreneurs to replace
sometimes – faulty assumptions with facts before making the decision to start
the business.
Manage Financial Resources
The first step in managing financial resources effectively is to have adequate
start up capital. Many entrepreneurs begin their business with inadequate
capital. Estimate the capital requirements and it almost costs more than any
entrepreneur expects to launch a business. Management of cash is a crucial
factor. A business must have adequate supply of cash to pay its bills and
obligations. Forecasting is essential for new businesses because companies
do not generate sufficient cash to stay in the early stage of the business.
Understanding of Basic Financial Statements
Launching a successful business requires all entrepreneurs to have basic
understanding of accounting and finance. The financial statements are
reliable indicators of a firm’s health. Analysis and interpretation of financial
statements help to understand the potential problems such as declining sales,
falling profits, raising debt, etc., which require immediate attention of the
entrepreneur.
Learn to Manage People
Every business depends on a foundation of well trained and motivated
employees. Hiring and retaining a corps of quality employees is not an
easy task. The entrepreneurs must learn to attract right people and
manage them effectively.
Passion for Business
The success of the business depends on constant presence and
attention of the entrepreneur. This needs physical and mental health.
The entrepreneur must monitor his health closely. Time is the most
valuable asset. An entrepreneur must learn to manage time effectively.
All these are possible only when he has passion for his business.
 Entrepreneur and Economic Development
• Every country is very keen in promoting its economic development.
Economic development implies development of agriculture and industry
resulting in an increase in the per capita income of the country. It is clear
that economic development cannot occur spontaneously.
• The economic development largely depends on human resources. Again,
human resources alone cannot produce economic development. It requires
an agent who is nothing but a dynamic entrepreneur.
• The entrepreneur really acts as a hero in the drama of economic
development. The crucial role being played by entrepreneurs in the
economic development of a country can be studied under the following
heads:
1. Coordinating Role:
The essential function of an entrepreneur is to coordinate the various factors of
production. Coordination involves selection of the right type of factors,
employment of each factor in the right quantity, use of the best technology,
division of labour, etc. He must also see that the best combination of factors is
made available for the production process. Schumpeter feels that economic
development will be a reality if new combinations of factors of production are
undertaken. In the absence of this coordinating role, the factors of production
will remain idle in the country. Thus, entrepreneurs enhance economic growth
by coordinating and integrating the resources available in the country.
2. Agent's Role:
Entrepreneurs are aptly called ‘Agents of change.’ Entrepreneurs act as catalyst
or agent of economic development by perceiving opportunities and putting
them into action. Entrepreneurs, seizing opportunities, set up business
undertakings and industries and thereby make economic transformation. Thus,
economic development is an effect for which entrepreneurship is the cause.
• 3. Role of Innovation:
Innovation is a key to entrepreneurship. Innovation implies the commercial application of an
invention. As an innovator, the entrepreneur assumes the role of a pioneer and an industrial
leader. Entrepreneurs have contributed many innovations in developing new products and in
the existing products and services. All these have resulted in economic development by
providing more employment, more income, etc. In fact, the innovational activity raises the
productive efficiency of the economy resulting in greater output and income. Schumpeter finds
the secret of economic development in this rising productivity. Thus, innovative
entrepreneurship can alter the production function of nations and bring about rapid
development. In their absence, many scientific inventions would have remained as they were.
4. Risk Assumption Role:
The most important function of an entrepreneur is the assumption of risk. Every productive
venture involves risks and production cannot take place if people do not come forward to bear
risks. The economic reward for risk bearing is profit. The quantum of profit depends upon the
quantum of risks undertaken. Profit leads to saving of wealth which ultimately goes to capital
formation which is the basic ingredient for economic development. Thus, entrepreneurs
promote economic development by coming forward to assume risks of productive ventures.
5. Imitating Role:
Entrepreneurs in developing countries take the role of “imitators” who generally
copy the innovations introduced by the “innovative” entrepreneurs of the developed
countries. They copy the organisation, technology and the products of innovation
from other developed regions. They are capable of adopting the innovative
technology to the local conditions prevailing in the country and establish business
enterprises. Imitative entrepreneurship seems to be the best medicine for
underdeveloped countries to overcome their entrepreneurial ills and bring about
substantial economic development. They constitute the main spring of development
of underdeveloped regions.
6. Capital Formation Role:
Entrepreneurs promote capital formation by mobilising the idle savings of the
public. Again, the profits they earn lead to saving of wealth which ultimately goes to
capital formation. Entrepreneurs have been referred to as the human agents needed
to “mobilise capital to exploit natural resources, to create markets and to carry on
trade.” Without capital formation, economic development would remain static
7. Balancing Role:
Developing countries like India aims at decentralised industrial structure to remove
the regional imbalances in the levels of economic development. Entrepreneurs play a
dominant role to achieve balanced regional development by starting small-scale
industries. Small-scale industries provide immediate large-scale employment, ensure
a more equitable distribution of national income and thus, facilitate balanced
regional development. Moreover, it should be noted that from small enterprises,
entrepreneurs get inspiration to start large units which have a wider impact on the
economy as a whole.
8. Status Transformation Role:
Entrepreneurs create wealth, generate employment and income and thereby they
increase the standard of living of the people. People are able to have a better
standard of living by getting improved products and comforts provided by
entrepreneurs. Increase in the standard of living automatically promotes and
stimulates economic development and it has the effect of reducing the wide disparity
in income levels. It also helps to reduce the concentration of economic power.
• 9. Employment Generation Role:
Entrepreneurs with high achievement motivation come forward to establish
business and industry ventures which provide immediate large-scale
employment. Thus, entrepreneurs help to reduce the unemployment problem
in the country. In fact, unemployment problem is the root cause of all socio-
economic problems.
• 10. Export Promotion Role:
Entrepreneurs also promote a country’s export trade which is an important
ingredient to economic development. Thus, the entrepreneur is always on the
lookout of making the economic system at its dynamic best. They stimulate
progress by means of their entrepreneurial activities and act as mainspring of
economic development. They have the potential of transforming their
underdeveloped economies into developed one.