Chapter No 1.

Entrepreneur Process

The word entrepreneur originates from the French word, entreprendre, which means "to undertake." In a business context, it means to start a business or means between-taker or go between [1] [2] [3]. There is no universally accepted definition of entrepreneur different authors gave different definitions Definitions of entrepreneur today by Hisrich, Peters & Shepherd 1. To an economist, and entrepreneur is one who brings resources, labour, materials and other assets in to combinations that make their value greater than before, and also one who introduces changes, innovations and a new order. 2. To a psychologist, such a person is typically driven by certain forces the need to obtain or attain something, to experiment, to accomplish, or perhaps to escape the authority of others. 3. To a Business man , entrepreneur appears as a threat, an aggressive competitor, whereas to another business man the same entrepreneur may be an ally, a source of supply , a customer, or someone who creates wealth for others, as well as finds better ways to utilize resources, reduce waste, and produce jobs others are glad to get. 4. Entrepreneur: An entrepreneur is a person who has possession over a new company, enterprise, or venture, and assumes significant accountability for the inherent risks and the outcome. One who organizes, manages, and assumes the risks of a business or enterprise [6] 5. On the one extreme an entrepreneur is a person of very high aptitude who pioneers change, possessing characteristics found in only a very small fraction of the population. On the other extreme of definitions, anyone who wants to work for him-self or her-self is considered to be an entrepreneur. [4] What is Entrepreneurship? Entrepreneurship is the process of creating something new with the value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks and receiving resulting rewards of monetary a personal satisfaction and independence Entrepreneurship: Entrepreneurship is the practice of starting new organizations or revitalizing mature organizations, particularly new businesses generally in response to identified opportunities [5]. The concept of entrepreneurship has a wide range of meanings. According to Kaplan entrepreneurship is the process of planning, organizing, operating and assuming the risk of business venture, is now a mainstream activity. Starting a business is never easy; it requires a special blend of courage, self confidence and skills, all of which determines the success or failure of an enterprise. [2] However a world of resources is now available to individuals who wish to launch ventures. The internet provides access to up-to-date market and technology information and offers would be entrepreneurs many useful support networks. Business schools are now teaching the fundamentals of the entrepreneurship course which were not the part of the programme till 1990s. [2] According to Hisrich, Peters & Shepherd in almost all of the definitions of entrepreneurship, there is agreement that we are talking about a kind of behaviour that includes: 1. Initiative taking.

2. The organization and reorganizing of social and economic mechanisms to turn resources and situations in to practical account. 3. The acceptance of risk or failure.[3] Hisrich and Peters further explains Entrepreneurship is the process of creating something new with value by developing the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence. This definition stresses four basic aspects of being an entrepreneur First entrepreneurship involves the creation process creating something new of value. The creation has to have value to the audience for which it is developed. This audience can be 1. 2. 3. 4. market of organizational buyers for business innovation, the hospitals administration for a new admitting procedures and software, prospective students for a new course or even college of entrepreneurship, or The constituency for a new service provided by a non profit agency.

Second, entrepreneurship requires the devotion of the necessary time and effort. Only those going through the entrepreneurial process appreciate the significant amount of time and effort it takes to create something new and make it operational. As one new entrepreneur so succinctly state, While I may have worked as many hours in the office while I was in industry, as an entrepreneur I never stopped thinking about this business The third part of the definition involves the rewards of being an entrepreneur. The most important of these rewards is independence, followed by personal satisfaction. For profit entrepreneurs, the monetary reward also comes in to play. For some profit entrepreneurs, money becomes the indicator of the degree of success achieved. The fourth part is assuming the necessary risk. Because the action takes place over time, and the future is unknowable, action is inherently uncertain. This uncertainty is further enhanced by the novelty intrinsic to the entrepreneurial actions, such as the creation of new product, new services, new ventures, and so on. Entrepreneurs must decide to act even in the face of uncertainty over the outcome of that action. Therefore, entrepreneurs respond to, and create, change through their entrepreneurial actions, where entrepreneurial action refers to behaviour in response to a judgemental decision under uncertainty about a possible opportunity for profit. We now offer a process perspective of entrepreneurial action. Entrepreneurial Process Entrepreneurs can increase their chances of success if they understand, follow, and implement the basic five-stage entrepreneurial process. Stage 1: Conducting opportunity analysis. Stage 2: Developing the plan and setting up the company. Stage 3: Acquiring Financial Partners / Sources of Funding Stage 4: Determining the resources required and implementing the plan Stage 5: Scaling and Harvesting the Venture. Fro details please read chapter 1 of Patterns of Entrepreneurship, Jack M Kaplan.

Development of the entrepreneurship theory and the entrepreneur Middle ages (before 17th century) In the middle ages, the term entrepreneur was used to describe both an actor and a person who managed large production projects. In such large production projects this individual did not take any risks, but merely managed the project using the resources provided, usually by the government of the country. A typical entrepreneur in the middles ages was the cleric the person in charge of great architectural works, such as castles of fortifications, public buildings, Abbeys, and cathedrals. 17 th century
Richard Cantillon, a noted economist and author in the 1700s. Cantillion developed one of the early theories of the entrepreneur and is regarded by some as the founder of the term. He viewed the entrepreneur as a risk taker, observing that merchants, farmers, craftsmen (an art, trade, or occupation requiring special skill, esp. manual skill: the craft of a mason.), and other sole proprietors buy at certain price and sell at an uncertain price therefore operating a risk.

18th Century Finally, in the 18th century, the person with capital was differentiated from who needed capital (the present-day venture capitalist). One reason for this differentiation was the industrialization occurring through out the world. Many of the inventions developed during this time were reactions to the changing world. 19th and 20th century Briefly stated, the entrepreneur organizes and operates an enterprise for personal gain. He pays current prices for the materials consumed in the business, for the use of the land for the personal services he employs and for the capital he requires. He contributes his own initiative, skill, and ingenuity in planning, organising and administering the enterprise. He also assumes the chance of loss and gain consequent to unforeseen and uncontrollable circumstances. The net residue of the annual receipts of the enterprise after all costs have been paid, he retains for himself means he keeps the profit. In this the creativity (The state or quality of being creative) and the innovations (The act of introducing something new.) was not considered. Andrew Carnegie is one of the best examples of this definition. Carnegie invented nothing, but rather adapted (To make suitable to or fit for a specific use or situation, we adapt to the winter season of murree) and developed new technology in the creation of products to achieve economic vitality. Carnegie, who descended from a poor Scottish family, made the American steel industry one of the wonder s of the industrial world, primarily through his unremitting competitiveness rather than his inventiveness or creativity. In the middle of the 20th century, the notion of an entrepreneur as an innovator was established. The function of the entrepreneur is to reform or revolutionize the pattern of production by exploiting an invention or, more generally, an untried technological method of producing a new commodity or producing an old one in a new way, opening a new source of supply of materials or a new outlet for products by organizing a new industry. For example artifical vegetables, sony flat screen, mobile phones keep inventing. IPod and the new invention of apple is the iphone. This all refers to as innovating some thing new. The concept of innovation and newness is an integral part of the entrepreneurship in this definition. Indeed, innovation, the act of introducing something new, is the most difficult task for the

entrepreneur. It takes not only the ability to create and conceptualize but also the ability to understand all the forces at work in the environment. The newness can consist of any thing from a new product to a new distribution system to a method of developing a new organizational structure. The ability to innovate can be observed through out history; from the Egyptians who designed and built great pyramids out of stone blocks weighing many tones each, and another is the laser beams. Although the tools have changed with advances in science and technology, the ability to innovate has been present in every civilization. Characteristics of an entrepreneur [Wikipedia] Entrepreneurs have many of the same character traits as leaders, similar to the early great man theories of leadership; however trait-based theories of entrepreneurship are increasingly being called into question. Entrepreneurs are often contrasted with managers and administrators who are said to be more methodical and less prone to risk-taking. Such person-centric models of entrepreneurship have shown to be of questionable validity, not least as many real-life entrepreneurs operate in teams rather than as single individuals. Still, a vast but now clearly dated literature studying the entrepreneurial personality found that certain traits seem to be associated with entrepreneurs:

David McClelland (1961) described the entrepreneur as primarily motivated by an overwhelming need for achievement and strong urge to build. Collins and Moore (1970) studied 150 entrepreneurs and concluded that they are tough, pragmatic people driven by needs of independence and achievement. They seldom are willing to submit to authority. Bird (1992) sees entrepreneurs as mercurial, that is, prone to insights, brainstorms, deceptions, ingeniousness and resourcefulness. They are cunning, opportunistic, creative, and unsentimental. Cooper, Woo, & Dunkelberg (1988) argue that entrepreneurs exhibit extreme optimism in their decision-making processes. In a study of 2004 entrepreneurs they report that 81% indicate their personal odds of success as greater than 70% and a remarkable 33% seeing odds of success of 10 out of 10. Busenitz and Barney (1997) claim entrepreneurs are prone to overconfidence and over generalisations. Cole (1959) found there are four types of entrepreneur: the innovator, the calculating inventor, the over-optimistic promoter, and the organization builder. These types are not related to the personality but to the type of opportunity the entrepreneur faces.

Other characteristics include

The entrepreneur has an enthusiastic vision, the driving force of an enterprise. The entrepreneur's vision is usually supported by an interlocked collection of specific ideas not available to the marketplace. The overall blueprint to realize the vision is clear; however details may be incomplete, flexible, and evolving. The entrepreneur promotes the vision with enthusiastic passion. With persistence and determination, the entrepreneur develops strategies to change the vision into reality. The entrepreneur takes the initial responsibility to cause a vision to become a success. Entrepreneurs take prudent risks. They assess costs, market/customer needs and persuade others to join and help. An entrepreneur is usually a positive thinker and a decision maker.

Some other characteristics found in most of the entrepreneurs are Entrepreneurs have a vision of what the future could be like for them and their businesses. And, more importantly, they have the ability to implement their dreams. They don't procrastinate. They make decisions swiftly. Their swiftness is a key factor in their success. Decisiveness Once they decide on a course of action, they implement it as quickly as possible. Determination They implement their ventures with total commitment. They seldom give up, even when confronted by obstacles that seem insurmountable. They are totally dedicated to their business, sometimes at considerable cost to their relationships with their friends and families. They work tirelessly. Twelve-hour days and seven-day work weeks are not uncommon when an entrepreneur is striving to get a business off the ground. Entrepreneurs love what they do. It is that love that sustains them when the going gets tough. And it is love of their product or service that makes them so effective at selling it. It is said that the devil resides in the details. That is never more true than in starting and growing a business. The entrepreneur must be on top of the critical details. They want to be in charge of their own destiny rather than dependent on an employer. Getting rich is not the prime motivator of entrepreneurs. Money is more a measure of their success. They assume that if they are successful they will be rewarded. Entrepreneurs distribute the ownership of their businesses with key employees who are critical to the success of the business. Once they decide on a course of action, they implement it as quickly as possible.

Dream

Dedication

Devotion

Details Destiny Dollars Distribute Doers

The Myths of Entrepreneurship Myth 1: Entrepreneurs are Doers, not thinkers Although it is true entrepreneurs tends toward action, they are also thinkers. Indeed, they are often very methodical people who plan their moves carefully. The emphasis today on the creation of clear and complete business plans is an n indication that thinking entrepreneurs are as important as doing entrepreneurs. Myth 2: Entrepreneurs are born, not made. Characteristics of entrepreneurs can not be taught or learned, that they are innate traits one must be born with. All the qualities they should possess when they born. Today entrepreneurship as a discipline is helping to dispel this myth. Like all disciplines, entrepreneurship has models, processes and case studies that allow the topic to be studies and the knowledge to be acquired.

Myth 3: Entrepreneurs are always inventors Although inventors are also entrepreneurs, numerous entrepreneurs encompass all sorts of innovative activity. Fro Example, Ray Kroc did not invent the fast food franchise, but his innovative ideas made McDonalds the largest fast-food enterprise in the world. A contemporary understanding of entrepreneurship covers more than just invention. It requires a complete understanding of innovative behaviour in all forms. Myth 4: Entrepreneurs are academic and social misfits. Most of entrepreneurs left school or quit the job. Business education for example was aimed primarily at the study of corporate activity. Today the entrepreneurs is considered as a hero socially, economically and academically no longer is a misfit, the entrepreneur now viewed as a professional. Myth 5: Entrepreneurs must fit the profile Many books and articles have presented checklists of characteristics of the successful entrepreneurs. These lists were neither validated nor completed. Myth 6: All entrepreneurs need is money. It is true that a venture needs capital to survive and large no. of businesses fails due to lack of money. But managerial incompetence lack of financial understanding, poor investments, poor planning and like. Many entrepreneurs have overcome the lack of money while establishing their ventures. To those entrepreneurs, money is a source but never an end in itself. Myth 7: All entrepreneurs need is luck. Being at the right place at the right time is always and advantage. But luck happens when preparation meets opportunity is an equally appropriate adage Entrepreneurs are in fact better prepared to deal with situations and turn them into success. Myth 8: Ignorance is bliss for Entrepreneurs. The myth that too much planning and evaluation leads to constant problems that- over analysis leads to paralysis does not hold up in to days competitive market which demands detailed planning and preparations. Identify the clear time tables with contingencies for handling problems, and minimizing these problems through careful strategy formulation are all key factors for successful entrepreneurship. Thus careful planning not ignorance of it is the mark of an accomplished entrepreneur. Myth 9: Entrepreneurs seek success but experience high failure. At first if you dont succeed, try, try again failure can teach many lessons those willing to learn and often leads to future success. For Example the 3 M Corporation invented Post-it notes using glue that had not been strong enough for its intended use. Rather than throw away the glue, the company focused on finding another use for it and, in the process, developed a multimillion- dollar product.

Myth 10: Entrepreneurs Are Extreme Risk Takers. The concept of risk is a major element in the entrepreneurial process. Entrepreneurs work on a moderate or calculated risk. They work hard through planning and preparation to minimize the risk involved in order to better control the destiny of their vision.

Every one is an entrepreneur you undertake many things in your life as ur MBA is also a part of your entrepreneur. Start grow and sell several business over the course of their career of life are known as the serial entrepreneurs.

For the process approach (entrepreneurial process) students should see the given handouts. References 1. 2. 3. 4. 5. 6. http://www.merriam-webster.com/dictionary/entrepreneurship Jack M Kaplan, Patterns of entrepreneurs Robert D. Hisrich & Michael P. Peters, Entrepreneurship (fifth edition) http://www.quickmba.com/entre/definition/ http://en.wikipedia.org/wiki/Entrepreneurship Kuratko & Hodgetts (2001), Entrepreneurship , a contemporary approach (fifth edition) Thomas learning, Mike Roche