ENTREPRENEURSHIP DEVELOPMENT
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Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad
An entrepreneur is a person who starts an
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enterprise. He searches for change and responds to it. A number of definitions have been given of an entrepreneur. The economists view him as a fourth factor of production along with land labour and capital. The sociologists feel that certain communities and cultures promote entrepreneurship like for example in India we say that Gujaratis and Sindhis are very enterprising. Still others feel that entrepreneurs are innovators who come up with new ideas for products, markets or techniques. Mr.Raghavendra, Asst. Professor, IIMC,Hyderabad
An entrepreneur is regarded as an agent who
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buys factors of production at certain price in order to combine them into a product with a view to sell at an uncertain price in future. He is the person who takes decision in a state of uncertainty and he does things in a new and better way. He always dreams of innovation through various opportunities in the environment. To put it very simply an entrepreneur is someone who perceives opportunity, organizes resources needed for exploiting that opportunity and exploits it. Mr.Raghavendra, Asst. Professor, IIMC,Hyderabad
FEATURES OF ENTREPRENUER1. Calculated risk taker 2. Emphasis on innovation where new products, new methods of production is decided. 3. Organizing skill 4. Creative thinking and decision making 5. A man of self-confidence 6. He must have human relation ability 7. Desire for high achievement 8. Enough courage to face adversities in future4 Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad
FUNCTIONS OF ENTREPRENUER Entrepreneur discharges a number of functions which
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are primarily discussed on the basis of the following headings. i. Organizational functions consisting of organization building, risk taking and innovation. ii. Managerial functions consisting of discovery of idea, detailed investigation, establishment of departments and responsibilities ,assembling of requirements and financing the proposition. iii. Commercial functions consisting of Investment and Financing of capital and other funds. iv. Administrative functions representing production, finance marketing, accounting and personnel, Recruitment, selection, placement etc Mr.Raghavendra, Asst. Professor, IIMC,Hyderabad
QUALITIES OF GOOD ENTREPRENUERAll entrepreneurs are not successful in undertaking an assignment. Only a few of them becomes successful entrepreneur. A successful entrepreneur is one who possesses the following characteristics i. He must have sound knowledge on the organization. ii. He should be a man with administrative ability. iii. Ability to secure operation and judge people iv. Ability to listen and social sensibility6 Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad
ENTREPRENUERSHIP Entrepreneurship is the tendency of a person to
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organize the business of his own and to run it profitably, using all the qualities of leadership, decisions making and managerial caliber etc. The term entrepreneur is often used interchangeably with entrepreneurship. But conceptually they are different. In a way, entrepreneur precedes entrepreneurship. It is concerned with the development and co-ordination of entrepreneurial functions. Entrepreneurship is an abstraction and entrepreneurs are tangible persons. Well designed and controlled research studies on entrepreneurship are very few. If we view entrepreneurship as opposed to Mr.Raghavendra, Asst. Professor, IIMC, management, it becomes still more difficult to define Hyderabad entrepreneurship.
Entrepreneurship is a role played by or the task
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performed by the entrepreneur. The central task of the entrepreneur is to take moderate risk and invest money to earn profits by exploiting an opportunity. For this he must posses farsightedness to perceive an opportunity so that he can exploit it well in time. Although an entrepreneur has to perform diverse functions yet he must manifest many qualities in himself to be a good entrepreneur. Entrepreneurship can be defined as the propensity of mind to take calculated risks with confidence to achieve a pre-determined business Mr.Raghavendra, Asst. Professor, IIMC, or industrial objective. That points out the risk Hyderabad taking ability coupled with decision making.
FUNCTIONS (i) Economic Activity : Although classical
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Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad
economists like Adam Smith and many others didn't recognize entrepreneurship as an economic activity but since last few decades entrepreneurship is catching up and is primarily becoming an economic function because it involves creation and operation of an enterprise. Schumpeter's argument was that all important changes in the economy are set off by an entrepreneur and then these changes slowly work themselves through economic system, in the form of a business cycle.
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(ii) Innovative Activity : According to Schumpeter, entrepreneurship is essentially a creative and an innovative activity. There are five ways of being innovative. (a) The introduction of a new good ; (b) The introduction of a new method of production ; (c) Opening of a new market ; (d) The conquest of a new source of supply of rawmaterial ; (e) The creation of a new organization of an Mr.Raghavendra, Asst. Professor, IIMC, industry. Hyderabad
(iii) A Function of High
Achievement : McClelland identified two features of entrepreneurship, (a) doing things in a different and better way; (b) decision making under uncertainty. People having high need for achievement are more likely to succeed as entrepreneurs. Psychological theories assert that people's capacity for entrepreneurship is decisively influenced by the way they are characterized for their zeal for achievement.Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad
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(iv) Creative and Purposeful
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Activity : Entrepreneurship is virtually a creative, and purposeful activity. Entrepreneurship is a creative response to the changing environment. Earning profit may not be the sole objective but introduction of something creative and new is the purpose of entrepreneurship. The benefit of this creativity must be enjoyed by people at large. (v) Entrepreneurship : An Organizing Function : As J.B. Say says : The entrepreneurs function is to combine the productive factors, to bring them together. According to him, an entrepreneur is one, who combines the land of one, the labour of another, and capital of yet another, and thus, produces a product. By selling the product in the market, he pays interest on capital, rent on land, wages to labourers Mr.Raghavendra, Asst. Professor, IIMC, and what remains is his profit. Thus, J.B. Say clearly Hyderabad distinguishes between the role of a capitalist as a
(vi) Entrepreneurship : A function of Risk-
Bearing : Richard Cantillon, an Irishman living in France, defined entrepreneur who buys factors of production with a view to sell it at uncertain prices in future. Cantillon concerned of an entrepreneur as a bearer of non-insurable risk. Thus, Cantillon introduces elements of direction and speculation into the function of entrepreneurship.
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Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad
PROBLEMS 1. No Policy at the National Level. Though
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Government of India is fully aware about the importance of entrepreneurial development, yet we do not have a national policy on entrepreneurship. It is expected that the government will formulate and enforce a policy aimed at promoting balanced regional development of various areas through promotion of entrepreneurship. 2. Problems at the Pre training Phase. Various problems faced in this phase are identification of business opportunities, finding & locating target Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad group, selection of trainee & trainers etc.
3. Over Estimation of Trainees. Under EDPs it
is assumed that the trainees have aptitude for self employment and training will motivate and enable the trainees in the successful setting up and managing of their enterprises. These agencies thus overestimate the aptitude and capabilities of the educated youth. Thus on one hand the EDPs do not impart sufficient training and on the other financial institutions are not prepared to finance these risky enterprises set up by the not so competent entrepreneurs.15 Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad
4. Duration of EDPs. An attempt is made during the
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conduct of EDPs to prepare prospective entrepreneurs thoroughly for the various problems they will be encountering during the setting up and running of their enterprises. Duration of most of these EDPs varies between 4 to 6 weeks, which is too short a period to instill basic managerial skills in the entrepreneurs. Thus the very objective to develop and strengthen entrepreneurial qualities and motivation is defeated. 5. Non Availability of Infrastructural Facilities. No prior planning is done for the conduct of EDPs. EDPs conducted in rural and backward areas lack Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad infrastructural facilities like proper class room suitable
6. Improper Methodology. The course contents
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are not standardized and most of the agencies engaged in EDPs are themselves not fully clear about what they are supposed to do for the attainment of pre-determined goals. This puts a question mark on the utility of these programmes. 7. Mode of Selection. There is no uniform procedure adopted by various agencies for the identification of prospective entrepreneurs. Organisations conducting EDPs prefer those persons who have some project ideas of their own and thus this opportunity is not provided to Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad all the interested candidates.
8. Non Availability of Competent Faculty. Firstly
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there is problem of non availability of competent teachers and even when they are available, they are not prepared to take classes in small towns and backward areas. This naturally creates problems for the agencies conducting EDP. 9. Poor Response of Financial Institutions. Entrepreneurs are not able to offer collateral security for the grant of loans. Banks are not prepared to play with the public money and hence they impose various conditions for the grant of loans. Those entrepreneurs who fail to comply with the conditions are not able to get loan and hence their dream of setting up their own enterprises is shattered. Mr.Raghavendra, Asst. Professor, IIMC, Helpful attitude of lending institutions will go a long Hyderabad way in stimulating entrepreneurial climate.
ROLE OF ENTREPRENUERSHIP IN ECONOMIC DEVELOPMENT Entrepreneurship is basically concerned with
creating wealth through production of goods and services. This results in a process of upward change whereby the real per capita income of a country rises overtime or in other words economic development takes place. Thus entrepreneurial development is the key to economic development. In fact it is one of the most critical inputs in the economic development of a region.19 Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad
It speeds up the process of activating factors of
production leading to a higher rate of economic growth, dispersal of economic activities and development of backward regions. If a region is unable to throw up a sufficient number of entrepreneurs then alien entrepreneurs usually step in to provide goods and services needed by the people. However the profits earned by these entrepreneurs are usually not ploughed back but repatriated to their place of origin.20 Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad
Entrepreneurship begets and also injects entrepreneurship
by starting a chain reaction when the entrepreneur continuously tries to improve the quality of existing goods and services and add new ones. E.g. when computers came into the market there was continuous improvement in the models, their functions etc. like first generation computers, personal computers, laptops, palmtops etc. Not only had this fostered the development of the software industry, computer education institutes, computer maintenance and stationery units etc. but also other industries like banking, railways, education, travel, films, medical and legal transcriptions, business process outsourcing [BPOs] etc. In this manner by harnessing the entrepreneurial talent a society comes out of traditional lethargy to modern industrial culture. India needs entrepreneurs to capitalize on new opportunities and to create wealth and new jobs.21 Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad
ROLE OF GOVERNMENT IN E.D. Small and Medium-sized Enterprises (SMEs) in
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market economies are the engine of economic development. Owing to their private ownership, entrepreneurial spirit, their flexibility and adaptability as well as their potential to react to challenges and changing environments, SMEs contribute to sustainable growth and employment generation in a significant manner. SMEs have strategic importance for each national economy due a wide range of reasons. Logically, the government shows such an interest in supporting entrepreneurship and SMEs. There is no simpler way to create new job positions, increasing GDP and rising standard of population than supporting entrepreneurship and encouraging and supporting people who dare to start their own Mr.Raghavendra, Asst. Professor, IIMC, business. Every surviving and successful business Hyderabad means new jobs and growth of GDP.
Therefore, designing a comprehensive, coherent and
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consistent approach of Council of Ministers and entity governments to entrepreneurship and SMEs in the form of government support strategy to entrepreneurship and SMEs is an absolute priority. A comprehensive government approach to entrepreneurship and SMEs would provide for a full coordination of activities of numerous governmental institutions (chambers of commerce, employment bureaus, etc.) and NGOs dealing with entrepreneurship and SMEs. With no pretension of defining the role of government in supporting entrepreneurship and SMEs, we believe that apart from designing a comprehensive entrepreneurship and SMEs strategy, the development of national SME support institutions and networks is one of key condition for success. There are no doubts that governments should create different types of support institutions. Mr.Raghavendra, Asst. Professor, IIMC,Hyderabad
Support by Government i) To provide information on regulations, standards,
taxation, customs duties, marketing issues; ii) To advise on business planning, marketing and accountancy, quality control and assurance; iii) To create incubator units providing the space and infrastructure for business beginners and innovative companies, and helping them to solve technological problems, and to search for know-how and promote innovation; and iv) To help in looking for partners. In order to stimulate entrepreneurship and improve the business environment for small enterprises.24 Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad
ENTREPRENEUR VS. MANAGER The terms entrepreneur and manager are many
times used interchangeably yet they are different. An entrepreneur starts a venture then a manager takes over to organize and co-ordinate continuous production. An entrepreneur is being enterprising as long as he starts something new then the routine day-to-day management of the business is passed on to the manager. The main differences between Entrepreneur and manager are listed below:Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad
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DIFFERENCES 1. An entrepreneur will start up the process. Manager
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will continue the process. 2. An entrepreneur assumes all types of risks. Manager does not bear any kind of risk except his duty. 3. An entrepreneur is driven by perception of opportunity and a Manager will be by possession of resources. 4. An entrepreneur initiates the change and the Manager has to follow the rules and regulations. 5. An entrepreneur is his own boss and a Manager has to be hired . Mr.Raghavendra, Asst. Professor, IIMC, 6. An entrepreneur gets uncertain rewards and a Hyderabad
ECONOMICS OF INFORMATION When a business manager has to take a decision
with regard to any problem that he faced, he should be able to get the information from various sources and analyze to interpret the results. In this process, he should consider only that information which is relevant for the decision making and should ignore the irrelevant information which will deviate the results from reliability. This is the concept of Economics of Information and is important for the manager to segregate the validity and usefulness of information.27 Mr.Raghavendra, Asst. Professor, IIMC, Hyderabad
