UNIT I ENTREPRENEURSHIP

INTRODUCTION: An entrepreneur is an individual who creates a new business, bearing most of the risks and enjoying most of
the rewards. The entrepreneur is commonly seen as an innovator, a source of new ideas, goods, services, and business/or procedures.

Entrepreneurs play a key role in any economy. These are the people who have the skills and initiative necessary to anticipate current
and future needs and bring good new ideas to market. Entrepreneurs who prove to be successful in taking on the risks of
a startup are rewarded with profits, fame and continued growth opportunities. Those who fail, suffer losses and become less
prevalent in the markets.

Entrepreneurship is one of the resources economists categorize as integral to production, the other three being land/natural
resources, labor and capital. An entrepreneur combines the first three of these to manufacture goods or provide services. They
typically create a business plan, hire labor, acquire resources and financing, and provide leadership and management for the
business.
Importance of entrepreneurship
1. Development of managerial capabilities:The biggest significance of entrepreneurship lies in the fact that it helps in identifying
and developing managerial capabilities of entrepreneurs. An entrepreneur studies a problem, identifies its alternatives, compares
the alternatives in terms of cost and benefits implications, and finally chooses the best alternative.
This exercise helps in sharpening the decision making skills of an entrepreneur. Besides, these managerial capabilities are used by
entrepreneurs in creating new technologies and products in place of older technologies and products resulting in higher
performance.
2. Creation of organisations:Entrepreneurship results into creation of organisations when entrepreneurs assemble and coordinate
physical, human and financial resources and direct them towards achievement of objectives through managerial skills.
3. Improving standards of living:By creating productive organisations, entrepreneurship helps in making a wide variety of goods
and services available to the society which results into higher standards of living for the people.
Possession of luxury cars, computers, mobile phones, rapid growth of shopping malls, etc. are pointers to the rising living standards
of people, and all this is due to the efforts of entrepreneurs.
4. Means of economic development:Entrepreneurship involves creation and use of innovative ideas, maximisation of output from
given resources, development of managerial skills, etc., and all these factors are so essential for the economic development of a
country.
Role of entrepreneurship:
The entrepreneur who is a business leader looks for ideas and puts them into effect in fostering economic growth and
development. Entrepreneurship is one of the most important input in the economic development of a country. ... They looks for
opportunities, identifies them and seizes them mainly for economic gains

1. Wealth Creation and Sharing: By establishing the business entity, entrepreneurs invest their own resources and attract capital
(in the form of debt, equity, etc.) from investors, lenders and the public. This mobilizes public wealth and allows people to benefit
from the success of entrepreneurs and growing businesses. This kind of pooled capital that results in wealth creation and distribution
is one of the basic imperatives and goals of economic development.

2. Create Jobs: Entrepreneurs are by nature and definition job creators, as opposed to job seekers. The simple translation is that
when you become an entrepreneur, there is one less job seeker in the economy, and then you provide employment for multiple
other job seekers. This kind of job creation by new and existing businesses is again is one of the basic goals of economic
development. This is why the Govt. of India has launched initiatives such as StartupIndia to promote and support new startups, and
also others like the Make in India initiative to attract foreign companies and their FDI into the Indian economy. All this in turn
creates a lot of job opportunities, and is helping in augmenting our standards to a global level.

3. Balanced Regional Development: Entrepreneurs setting up new businesses and industrial units help with regional development
by locating in less developed and backward areas. The growth of industries and business in these areas leads to infrastructure
improvements like better roads and rail links, airports, stable electricity and water supply, schools, hospitals, shopping malls and
other public and private services that would not otherwise be available.

Every new business that locates in a less developed area will create both direct and indirect jobs, helping lift regional economies
in many different ways. The combined spending by all the new employees of the new businesses and the supporting jobs in other
businesses adds to the local and regional economic output. Both central and state governments promote this kind of regional
development by providing registered MSME businesses various benefits and concessions.

4. GDP and Per Capita Income: India’s MSME sector, comprised of 36 million units that provide employment for more than 80
million people, now accounts for over 37% of the country’s GDP. Each new addition to these 36 million units makes use of even
more resources like land, labor and capital to develop products and services that add to the national income, national product and
per capita income of the country. This growth in GDP and per capita income is again one of the essential goals of economic
development.

5. Standard of Living: Increase in the standard of living of people in a community is yet another key goal of economic
development. Entrepreneurs again play a key role in increasing the standard of living in a community. They do this not just by
creating jobs, but also by developing and adopting innovations that lead to improvements in the quality of life of their employees,
customers, and other stakeholders in the community. For example, automation that reduces production costs and enables faster
production will make a business unit more productive, while also providing its customers with the same goods at lower prices.

6. Exports: Any growing business will eventually want to get started with exports to expand their business to foreign markets.
This is an important ingredient of economic development since it provides access to bigger markets, and leads to currency inflows
and access to the latest cutting-edge technologies and processes being used in more developed foreign markets. Another key benefit
is that this expansion that leads to more stable business revenue during economic downturns in the local economy.

7. Community Development: Economic development doesn’t always translate into community development. Community
development requires infrastructure for education and training, healthcare, and other public services. For example, you need highly
educated and skilled workers in a community to attract new businesses. If there are educational institutions, technical training
schools and internship opportunities, that will help build the pool of educated and skilled workers.

A good example of how this kind of community development can be promoted is Azim Hashim Premji, Chairman of Wipro
Limited, who donated Rs. 27,514 crores for promoting education through the Azim Premji Foundation. This foundation works with
more than 350,000 schools in eight states across India.
So, there is a very important role for entrepreneurs to spark economic development by starting new businesses, creating jobs, and
contributing to improvement in various key goals such as GDP, exports, standard of living, skills development and community
development.

Qualities of an entrepreneur:

Successful business people have many traits in common with one another. They are confident and optimistic. They are disciplined
self starters. They are open to any new ideas which cross their path it covers the mindset of millennial entrepreneurs). Here are ten
traits of the successful entrepreneur.

1. Disciplined:These individuals are focused on making their businesses work, and eliminate any hindrances or distractions to their
goals. They have overarching strategies and outline the tactics to accomplish them. Successful entrepreneurs are disciplined enough
to take steps every day toward the achievement of their objectives.

2. Confidence:The entrepreneur does not ask questions about whether they can succeed or whether they are worthy of success.
They are confident with the knowledge that they will make their businesses succeed. They exude that confidence in everything
they do.

3. Open Minded:Entrepreneurs realize that every event and situation is a business opportunity. Ideas are constantly being generated
about workflows and efficiency, people skills and potential new businesses. They have the ability to look at everything around
them and focus it toward their goals.

4. Self Starter:Entrepreneurs know that if something needs to be done, they should start it themselves. They set the parameters and
make sure that projects follow that path. They are proactive, not waiting for someone to give them permission.

5. Competitive:Many companies are formed because an entrepreneur knows that they can do a job better than another. They need
to win at the sports they play and need to win at the businesses that they create. An entrepreneur will highlight their own company’s
track record of success.

6. Creativity:One facet of creativity is being able to make connections between seemingly unrelated events or situations.
Entrepreneurs often come up with solutions which are the synthesis of other items. They will repurpose products to market them
to new industries.

7. Determination:Entrepreneurs are not thwarted by their defeats. They look at defeat as an opportunity for success. They are
determined to make all of their endeavors succeed, so will try and try again until it does. Successful entrepreneurs do not believe
that something cannot be done.

8. Strong people skills:The entrepreneur has strong communication skills to sell the product and motivate employees. Most
successful entrepreneurs know how to motivate their employees so the business grows overall. They are very good at highlighting
the benefits of any situation and coaching others to their success.
9. Strong work ethic:The successful entrepreneur will often be the first person to arrive at the office and the last one to leave. They
will come in on their days off to make sure that an outcome meets their expectations. Their mind is constantly on their work,
whether they are in or out of the workplace.

10. Passion

Passion is the most important trait of the successful entrepreneur. They genuinely love their work. They are willing to put in those
extra hours to make the business succeed because there is a joy their business gives which goes beyond the money. The successful
entrepreneur will always be reading and researching ways to make the business better.

Successful entrepreneurs want to see what the view is like at the top of the business mountain. Once they see it, they want to go
further. They know how to talk to their employees, and their businesses soar as a result.

Functions of entrepreneur:
An entrepreneur possesses special ability in the modern mechanized and complex production system. He occupies a very important
place in production.

1. To Prepare Plan:The first and foremost function of an entrepreneur is to prepare the plan or scheme of production i. e., the scale
of production, types of goods to be produced and its quantity.2. Selection of the Site:

The entrepreneur makes the selection of the site for the factory to be installed. The place should be near the market, railway station
or bus-stand. The selection of the place may be near the source of raw materials also. The selection of the place has an important
bearing on the cost of production.

3. Provision of Capital:Capital is required to install a factory or an industry. Capital is required at all the stages of business. It is
not necessary that the entrepreneur should invest his own capital. Therefore, he has to trace out a capitalist, to make provision for
capital for the investment. He tries to obtain capital at the lowest possible rate of interest.

4. Provision of Land:After making provision of capital and selection of site, he has to arrange for land. Land is either purchased or
hired.

5. Provision of Labour:In modern times, different types of labour are required to produce one type of commodity. The entrepreneur
has to make provision for labour from different places.

6. Purchase of Machines and Tools:It is the function of the entrepreneur to purchase machines and tools in order to start and
continue the production.

7. Provision of Raw Materials:It is the entrepreneur who makes provision for raw materials. He purchases the best quality of raw
materials at the minimum cost. He also knows the sources of raw materials.

8. Co-ordination of the Factors of production:

One of the main functions of the entrepreneur is to coordinate different factors of production in proper combinations, so that the
cost of production is reduced to the minimum.

9. Division of Labour:The splitting up of production into different parts and entrusting them to different workers is also the function
of an entrepreneur. Thus, the entrepreneur decides the level and type of division of labour.

10. Quality of Product:Keeping in view the competition in the market, the entrepreneur has to determine the quality of his product.
He is to decide whether the goods produced should be of superior quality only or both of superior and ordinary qualities.

11. Sale of Goods:The responsibility of the entrepreneur is not only to produce goods but also to sell his produce. He employs a
good number of salesmen to market the goods. He makes arrangement for publicity to push up the sales. He adopts both informative
and persuasive methods to achieve his goal.12. Advertisement:

It is the duty of an entrepreneur to do advertisement explaining the superiority and quality of his goods through newspapers,
magazines, radio, TV, etc. Advertisement is done to create and increase the demand or sale of his goods.

13. Search for Markets:The entrepreneur has to explore markets for his products. He produces goods in accordance with the
consumers’ tastes which can be known from market trends.

14. Supervision:One of the main jobs of an entrepreneur is to supervise all the factors engaged in the production process. He has
to supervise every little detail so as to ensure maximum production and economy.

15. Contact with the Government:The entrepreneur has to make contacts with the government because the modern production
system is controlled by the government in several ways. A licence is taken before the start of production. The entrepreneur has to
abide by certain rules and regulations of production and has to pay taxes regularly.

16. Payment to Factors of Production:The rewards of the various factors of production have to be decided by the entrepreneur.
He makes payments to the landlord, labour and capitalist in the form of rent, wages and interest. Since payments to these factors
of production constitute cost, so no entrepreneur wants to pay to a factor more than its productivity.

17. Quantity of Production:The entrepreneur determines the quantity of production keeping in view the demand for goods and
the extent of market. How much goods are to be produced is the main decision taken by the entrepreneur.

18. Risk-Taking:Risk-taking is the most important function of an entrepreneur. He has to pay to all the other factors of production
in advance. There are chances that he may be rewarded with a handsome profit or he may suffer a heavy loss. Therefore, the risk-
bearing is the final responsibility of an entrepreneur.

19. Innovation:Innovation plays an important role in modern business. The entrepreneur makes arrangements for introducing
innovations which help in increasing production on the one hand, and reducing costs, on the other. Innovations may take the form
of the introduction of new methods in the process of production or introducing improvements in the existing methods. It also
includes discovery of new markets, raw materials and new techniques of production.

Theories of entrepreneurship.
Economic Theory:
•Entrepreneurship and economic growth take place when theeconomic conditions are favourable
•Economic incentives are the main motivators for entrepreneurialactivities
•Economic incentives include taxation policy, industrial policy,sources of finance and raw material, infrastructure
availability,investment and marketing opportunities, access to informationabout market conditions, technology etc
Sociological Theory
•Entrepreneurship is likely to get a boost in a particular social culture
•Society’s values, religious beliefs, customs, taboos influence the behaviour of individuals in a society
•The entrepreneur is a role performer according to the role expectations by the society
Psychological Theory
•Entrepreneurship gets a boost when society has sufficient supply of individuals with necessary psychological characteristics
•The psychological characteristics include need for high achievement, a vision or foresight, ability to face opposition
•These characteristics are formed during the individual’s upbringing which stress on standards of excellence, self reliance and low
father dominance

Barriers to entrepreneurship

1. Money: Every idea needs funding and money to turn it into a business. For most of us, financing a business or securing
enthusiastic investors can seem impossible. Any business starts with funding, and this means you’re going to have to put yourself
out there to promote what you believe in. This, in return, is going to make hearing "no" all too common.

It is important to not get overwhelmed by this challenge of seeking financial backing. Money can often be an intimidating aspect
in the business, but facing it head-on is the first step in achieving greatness.

Ex: In 1985, the founder of Starbucks, Howard Schultz was seeking investment in his coffee company. According to him, over the
course of a year, he spoke to 242 people and 217 of them said no. Ultimately he was able to get that one yes and because of that,
Starbucks became what it is today.

Hearing people tell you why they don’t like your idea is inevitable but overcoming the rejection and continuing the hustle is an
important part of this process.

2. Fear of failure: Let's face it, we all fear failure. Failure meticulously looms over our shoulders contemplating defeat. While fear
is apparent to most, it’s a choice to consider. Sir Richard Branson himself is the best example of this, in 1994, he launched Virgin
Cola, a drink willing to compete with Coca-Cola. While the drink was an immediate hit, it’s popularity came to a sudden halt when
Coca-Cola went at lengths to rid stores of it. Virgin Cola was eventually defeated and discontinued. But that was just one of a few
failures out of his some 250 businesses within Virgin brand. Despite these handful barriers, Virgin continues to be one of the most
successful and recognised brands globally,

Failure is associated with risks and stakes. Even though, we tend to pour every inch of our effort into our idea, the key is to avoid
self-doubt. There’s a reason we believe in a specific idea and are willing to go to such strides to make this vision a reality. Having
firm belief in oneself is the first step towards crushing the fear of failure.

3. Lack of a plan:"A goal without plan is just a wish". The most effective way of calculating success is executing a plan that lead
towards achieving the goal you’re setting for yourself, be it personal or professional.
One of the most reputable and visionary entrepreneurs of our time, Elon Musk and his company, SpaceX recently announced their
achievement in launching a mission into space by using recycled rockets. This will greatly reduce the cost of space travel and save
companies millions of dollars in the process.

With SpaceX’s next goal already being in place, Musk is well on his way to his ultimate goal; sustaining life on Mars.

Lack of planning causes us to fumble when these barriers hit us that results in us ultimately questioning your vision. Having a very
specific plan drives accountability and that gives us the push we need to make our dreams a reality. 4.Motivational: Once the
venture status functioning, the obstacles faced in the initial stages can make the entrepreneurs to list their commitment and
consequently their level of motivation dips. The entrepreneurs who lack toughness and perseverance often quit. 5. Perceptional
Barriers: Certain perception barrier humerthe progress of the entrepreneurs. Lack of clear vision and misunderstanding can result
in faulty perception. If the entrepreneur demands everything yo be clear and well defined in order to develop a perception, it will
lead to disappointment. As entrepreneurs world basically disorderly and ambiguous, the people who excessively depend on the
order will find it a barrier to entrepreneurship.

Stimulants of entrepreneurship:
1. Focus on capital information
2. Transformation of scientific and technical development
3. Supportive government programs
4. Availability of required training and inputs
5. Collabarative relationship between business and resources
6. Environment conducive for innovation

Ethics and Social Responsibility of Entrepreneurs:

Business Ethics: A Brief Definition
Ethics is the branch of philosophy concerned with the meaning of all aspects of human behavior. Theoretical ethics, sometimes
called normative ethics, is about discovering and delineating right from wrong. It is the consideration of how we develop the rules
and principles (norms) by which to judge and guide meaningful decision-making. Theoretical ethics is supremely intellectual in
character, and, being a branch of philosophy, is also rational in nature. Theoretical ethics is the rational reflection on what is right,
what is wrong, what is just, what is unjust, what is good, and what is bad in terms of human behavior. How we see 'ethical behavior'
- in terms of what is right and wrong - is guided by these definitions.
Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral
or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct
of individuals and entire organizations.
Business ethics can be defined as written and unwritten codes of principles and values that govern decisions and actions within a
company. In the business world, the organization’s culture sets standards for determining the difference between good and bad
decision making and behavior. In the most basic terms, a definition for business ethics boils down to knowing the difference
between right and wrong and choosing to do what is right. The phrase 'business ethics' can be used to describe the actions of
individuals within an organization, as well as the organization as a whole.
There are three parts to the discipline of business ethics: personal, professional, and corporate. All three are intricately related. It is
helpful to distinguish between them because each rests on slightly different assumptions and requires a slightly different focus in
order to be understood. We are looking at business ethics through a trifocal lens: close up and personal, intermediate and
professional, and on the grand scale (utilizing both farsighted and peripheral vision) of the corporation. In spite of some recent bad
press, business executives are first and foremost human beings. Like all persons, they seek meaning for their lives through
relationships and enterprise, and they want their lives to amount to something. Since ethics is chiefly the discipline of meaning, the
business executive, like all other human beings, is engaged in this discipline all the time, whether cognizant of it or not.
Social responsibility: A Brief Note
Social responsibility is an ethical ideology or theory that an entity, be it an organization or individual, has an obligation to act to
benefit society at large. Social responsibility is a duty every individual or organization has to perform so as to maintain a balance
between the economy and the ecosystem. A trade-off always exists between economic development, in the material sense, and the
welfare of society and the environment. Social responsibility means sustaining the equilibrium between the two. It pertains not
only to business organizations but also to anyone whose action impacts the environment. This responsibility can be passive, by
avoiding engaging in socially harmful acts, or active, by performing activities that directly advance social goals. This shows the
various ways that companies can invest in being socially responsible and the value those actions can bring to the company.
A report suggests that social responsibility is a way of conducting business through balancing the long-term objectives, decision-
making, and behavior of a company with the values, norms, and expectations of society. Social responsibility can be a normative
principle and a soft law principle engaged in promoting universal ethical standards in relationship to private and public corporations.
Companies can demonstrate social responsibility in a myriad of ways. They can donate funds to education, arts and culture,
underprivileged children, animal welfare, or they can make commitments to reduce their environmental footprint, implement fair
hiring practices, sponsor events, and work only with suppliers with similar values.
Social responsibility in business is also known as corporate social responsibility, corporate responsibility, corporate citizenship,
responsible business, sustainable responsible business, or corporate social performance. This term refers to a form of self-regulation
that is integrated into different disciplines, such as business, politics, economy, media, and communications studies.

Role of entrepreneur in economic development:

The entrepreneur who is a business leader looks for ideas and puts them into effect in fostering economic growth and development.
Entrepreneurship is one of the most important input in the economic development of a country. The entrepreneur acts as a trigger
head to give spark to economic activities by his entrepreneurial decisions. He plays a pivotal role not only in the development of
industrial sector of a country but also in the development of farm and service sector. The major roles played by an entrepreneur in
the economic development of an economy is discussed in a systematic and orderly manner as follows.

(1) Promotes Capital Formation:Entrepreneurs promote capital formation by mobilizing the idle savings of public. They employ
their own as well as borrowed resources for setting up their enterprises. Such type of entrepreneurial activities lead to value addition
and creation of wealth, which is very essential for the industrial and economic development of the country.

(2) Creates Large-Scale Employment Opportunities:Entrepreneurs provide immediate large-scale employment to the unemployed
which is a chronic problem of underdeveloped nations. With the setting up of more and more units by entrepreneurs, both on small
and large-scale numerous job opportunities are created for others. As time passes, these enterprises grow, providing direct and
indirect employment opportunities to many more. In this way, entrepreneurs play an effective role in reducing the problem of
unemployment in the country which in turn clears the path towards economic development of the nation.

(3) Promotes Balanced Regional Development:Entrepreneurs help to remove regional disparities through setting up of industries
in less developed and backward areas. The growth of industries and business in these areas lead to a large number of public benefits
like road transport, health, education, entertainment, etc. Setting up of more industries lead to more development of backward
regions and thereby promotes balanced regional development.

(4) Reduces Concentration of Economic Power:Economic power is the natural outcome of industrial and business activity.
Industrial development normally lead to concentration of economic power in the hands of a few individuals which results in the
growth of monopolies. In order to redress this problem a large number of entrepreneurs need to be developed, which will help
reduce the concentration of economic power amongst the population.(5) Wealth Creation and Distribution:

It stimulates equitable redistribution of wealth and income in the interest of the country to more people and geographic areas, thus
giving benefit to larger sections of the society. Entrepreneurial activities also generate more activities and give a multiplier effect
in the economy.

(6) Increasing Gross National Product and Per Capita Income:Entrepreneurs are always on the look out for opportunities. They
explore and exploit opportunities,, encourage effective resource mobilisation of capital and skill, bring in new products and services
and develops markets for growth of the economy. In this way, they help increasing gross national product as well as per capita
income of the people in a country. Increase in gross national product and per capita income of the people in a country, is a sign of
economic growth.

(6) Improvement in the Standard of Living:Increase in the standard of living of the people is a characteristic feature of economic
development of the country. Entrepreneurs play a key role in increasing the standard of living of the people by adopting latest
innovations in the production of wide variety of goods and services in large scale that too at a lower cost. This enables the people
to avail better quality goods at lower prices which results in the improvement of their standard of living.

(7) Promotes Country’s Export Trade:Entrepreneurs help in promoting a country’s export-trade, which is an important ingredient
of economic development. They produce goods and services in large scale for the purpose earning huge amount of foreign exchange
from export in order to combat the import dues requirement. Hence import substitution and export promotion ensure economic
independence and development.

(8) Induces Backward and Forward Linkages:Entrepreneurs like to work in an environment of change and try to maximise profits
by innovation. When an enterprise is established in accordance with the changing technology, it induces backward and forward
linkages which stimulate the process of economic development in the country.

(9) Facilitates Overall Development:Entrepreneurs act as catalytic agent for change which results in chain reaction. Once an
enterprise is established, the process of industrialization is set in motion. This unit will generate demand for various types of units
required by it and there will be so many other units which require the output of this unit. This leads to overall development of an
area due to increase in demand and setting up of more and more units. In this way, the entrepreneurs multiply their entrepreneurial
activities, thus creating an environment of enthusiasm and conveying an impetus for overall development of the area.