Elements of Entrepreneurship - Study Notes

23.01 Entrepreneurship: meaning, concept and definition

• Entrepreneurship is the process of setting up one's own business venture, as distinct from employment or a profession. The person who establishes the business is the entrepreneur; the output is an enterprise.
• It generates employment and self employment and triggers many economic activities, so it is crucial for a nation's economic development.
• It is one of the four major factors of production, besides land, labour and capital.
• People should take pride in being job providers rather than job seekers.

Concept of entrepreneur

• The word comes from the French language, where it meant an organiser of musical or other entertainments.
• Oxford Dictionary (1897): the director or manager of a musical institution that organises musical performances.
• Later applied to military expeditions (16th century), civil engineering activities (17th century) and to economics (18th century).

Schumpeter's definition: "Entrepreneurship is essentially a creative activity... An entrepreneur is one who innovates, i.e. carries out new combination or enterprise."

23.02 Characteristics of entrepreneur

1. Spirit of enterprise: bold enough to face risk; not discouraged by setbacks.
2. Self confidence: negatives must not weaken the resolve.
3. Flexibility: change decisions as the environment changes.
4. Innovation: new product, method, feature, territory or raw material.
5. Resource mobilisation: marshal tangible and intangible inputs.
6. Hard work: strenuous effort; do not blame uncontrollable factors.
7. Leadership: influence the team, lead from the front.
8. Foresight: foresee changes in market, consumer attitude and technology.
9. Analytical ability: objective, rational decisions without prejudice.
10. Decision making: timely, correct decisions on product, technology, location, size and volume.

23.03 Importance of entrepreneurship

• Innovation: new products, upgrades, new markets and technology raise income and output.
• Contribution to GDP: countries like America, Japan and Germany grew through entrepreneurship.
• Balanced regional development: incentives in backward regions; checks rural to urban migration.
• Export promotion: export oriented goods add to foreign exchange reserves and help the balance of payment.
• Full utilisation of latent resources through small, medium and micro enterprises.
• Reduction of concentration of economic power in a few hands; equitable distribution of wealth.
• Better standard of living for employees and the public.

23.04 Entrepreneur, intrapreneur and manager

An intrapreneur thinks and acts like an entrepreneur for the firm's development while employed in it: an inside entrepreneur who uses the firm's resources without bearing the risk.

23.05 Women entrepreneurs

• Schumpeter's concept: women who innovate, imitate or adopt a business activity.
• Government of India: an enterprise owned and controlled by a woman with at least 51 per cent of capital, giving at least 51 per cent of employment to women.

Opportunities

1. Based on business: manufacturing, service, commerce and large business.
2. Financial: micro small loans from banks.
3. Non-financial support: counselling, advisory service, lower interest, collateral free loans, flexible repayment.
4. Associations: SHG, FIWE, SIDO, NABARD, SEWA, AWAKE, TNCDW and others; Credit Guarantee Fund Scheme up to 80 per cent for women's MSEs.
5. Government schemes: Stand-Up India, TREAD, Mahila Coir Yojana, Mahila E-haat, Magalir Udavi, PMRY, DWCRA, Mudra Yojana, Udyogini, TRYSEM.
6. Training programmes: STEP, DWCRA, Small Industry Service Institutes, State Financial Corporations, NSIC, District Industrial Centres.
7. CWEI: registered as a civil society in 1996, non-profit, accredited by the Government of India, member of the National Board, Ministry of MSME.

Challenges

Problem of finance, limited mobility, lack of education, lack of network support, stiff competition, sensitivity, lack of information, dependent culture.

23.06 Entrepreneurial functions

• Controlling: fix standards, measure performance, compare, find causes of deviation, correct.
• Marketing mix: product, price, promotion, physical distribution; for services add people, process and physical evidence.
• Accounting: profit and loss account, balance sheet, cash flow and fund flow statements.