Entrepreneurship and management of SMEs

Chapter 1

Contents
Concept, meaning, definition of entrepreneur and entrepreneurship Importance and significance of growth of entrepreneurial activity Concept of intrapreneur Characteristics and qualities of entrepreneurs

Definitions
The entrepreneur is an individual who introduces something new in the economy- a new production method, a new product, a new source of raw material, a new market etc. - Joseph Schumpeter An entrepreneur is the one who always searches for change, responds to it and exploits it as an opportunity. Innovation is a specific tool by which he exploits change as an opportunity, for a business or service. - Peter Drucker A true entrepreneur is the one who is endowed with more than average capacity in the task of organising and coordinating the various other factors of production. Francis Walker

Entrepreneurship is purposeful activity of an individual or a group of associated individuals, undertaken to initiate, maintain or aggrandise profit by production or distribution of economic goods or services. - A.H. Cole

Who is an entrepreneur?
Entrepreneur is the person responsible for setting up a business or an enterprise He takes the initiative, is innovative, and looks for high achievements He is a change agent who puts up new projects that create wealth, open up employment opportunities and leads to the growth of the sector One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them

Common Traits of an Entrepreneur

Aggressively pursues goals; pushes self and others Seeks autonomy, independence and freedom from boundaries Sends consistent messages; very focused Acts quickly, often without deliberating Keeps distance and maintains objectivity Pursues simple, practical solutions Willing to take moderate risks; comfortable with uncertainty Exhibits clear opinions and values; has high expectations Impatient; just do it mentality High level of energy, optimistic attitude; communicates confidence Desire for immediate feedback

What is entrepreneurship?
It is the propensity of mind to take calculated risks with confidence to achieve a pre determined business or industrial objective

Entrepreneur

Entrepreneurship

Enterprise

Person

Process of action

Object

Features of Entrepreneurship
Economic activity Creative activity Innovation Managerial skill and development Dynamic process

Myths about Entrepreneurship

1. 2. 3. 4. 5. 6. 7. Entrepreneur is one who starts and runs a business (They in fact go for growth and expansion) Entrepreneurship happens at one given point in time (It takes place as a process and is not fixed) You are or you are not an entrepreneur Here is a popular one, the entrepreneur is a BIG Risk Taker The entrepreneur is in it Only for moneys sake Its only about the individual It takes luck and money

Entrepreneurial Decision Process

Pull Factors
o Perception of Advantages o Spotting an Opportunity o Government Policies o Motivation from Biographies or Success Stories o Influenced by Culture, Community, Family Background, Teachers, Peers, etc.

Push Factors
o Job Dissatisfaction o Relocation o Lay-off o Retirement o Boredom

Importance and significance of growth of entrepreneurial activity

Role of Entrepreneurship in Economic Development of India

Capital formation Contribution in terms of productivity, output, income and employment Optimum resource utilisation (particularly relevant in under developed and developing countries) Increase in per capita income Scales up standard of living Backward and forward integration Economic independence Offers challenging career options Commercializing new inventions Increases competition

Factors favoring entrepreneurship in developing countries

Growth of education- science, technology & management Developing infrastructure facilities Financial assistance Training facilities Protective and promotional policies Globalization

Problems in growth of entrepreneurship

Lack of technical skills/business know how Restriction imposed by customs and tradition, Socio-cultural rigidities Lack of Capital Involvement of high risk Lack of motivation, complacency Lack of infrastructural facilities/Lack of communication network Marketing imperfections Low quality products Legal formalities

Emergence of Entrepreneurial Class

BEFORE 1850 East India Company introduced many changes in Indian Economy. Company first established its shipbuilding industry in 1673 Parsees were the founder manufacturing entrepreneurs in India Other communities were traders from South India and Marwaris First Cotton textile manufacturing unit was set up in 1854 Out of 96 textile mills existing, 41 were owned by Parsees, 23 by Hindus, 10 by Muslims and 22 by British

Jamshedji Tata was first Parsee entrepreneur to set up steel unit in Jamshedpur in 1911 In 1820s when East India Company lost its monopoly, various European and Indian managing agents emerged to provide venture capital and entrepreneurial talent

ENTREPRENEURIAL GROWTH AFTER 1850: Government of India spelt out through Industrial Policy statements for rapid and balanced industrialization of country Government encouraged development of SSIs It recognized role of private sector in accelerating industrial development More benefits were offered especially in backward areas

IPR (Industrial policy resolution)1948: To encourage momentum of industrialization by promoting entrepreneurship To scatter the entrepreneurial concentration from few dominant communities to a large number of industrially potential people

Stages of Evolution of Entrepreneurship

Hunting stage (producers were consumers, no business, wants were limited) Pastoral Stage (realized importance of cattle breeding, surplus was exchanged, barter system introduced) Agricultural Stage (people started living in their agricultural field, free exchange) Handicraft Stage (small scale and cottage industry, also caste system evolved according to activities conducted by them) Present Industrial Stage (current monetary system, growth of entrepreneurship, improved means of communication & developed markets)

Intrapreneur
Intrapreneur was a term that took shape in late 70s Many bright executives started leaving big corporations for their entrepreneurial urge and drive The success of entrepreneurs posed a threat to corporations they left few years ago Hence the concept of intrapreneur was introduced to retain the human resource in the organisation while allowing them chance to use their entrepreneurial abilities Intrapreneurship is the art of working within an organisation to effect change, by developing new ideas, procedures or products, by innovating practice and thereby enhancing the business

Who is an Intrapreneur?
The one who innovates and turns the idea into a profitable reality, within the framework of an organization It is necessary that an organization has a conducive environment to encourage intrapreneurs

Characteristics of a conducive intrapreneurial environment are: Encouragement to innovation and experimentation Freely available resources Measurable rewards Flexibility to alter plans Long time horizon to measure success Top management support

Entrepreneur
Person striving for creating something new, takes risks and owns the reward Independent in his operations Personal capital investment in his venture Owns the reward generated

Intrapreneur
Is an employee in an organisation who commits time and energy to create innovative ideas using company s resources Dependent in his operations Uses financial and other resources of the organisation May get handsome salary increase or promotion

Characteristics of an Intrapreneur
Self motivated Self Confident Educated Extremely focused Excellent communication Likes to take decision Assumes responsibility