Unit1: Entrepreneur: Concept, Characteristics, Functions and types of an

Entrepreneur. Entrepreneurship: Concept, Characteristics and Importance of

Entrepreneurship.

Concept of Entrepreneurship:
Entrepreneurship is the ability and readiness to develop, organize and run a business
enterprise, along with any of its uncertainties in order to make a profit. The most prominent
example of entrepreneurship is the starting of new businesses.

In economics, entrepreneurship connected with land, labour, natural resources and capital
can generate a profit. The entrepreneurial vision is defined by discovery and risk-taking and
is an indispensable part of a nation’s capacity to succeed in an ever-changing and more
competitive global marketplace.

In a nutshell, concept of entrepreneurship can be understood as under:

(i) Entrepreneurship involves decision making, innovation, implementation,

forecasting of the future, independency, and success.

(ii) Entrepreneurship is a discipline with a knowledge base theory and is an outcome

of complex socio-economic, psychological, technological, legal and other factors.

(iii) It is a dynamic and risky process.

(iv) It involves a fusion of capital, technology and human talent.

(v) Entrepreneurship is equally applicable to big and small businesses, to economic

and noneconomic activities.

(vi) Different entrepreneurs might have some common traits but all of them will have
some different and unique qualities.

(vii) Entrepreneurship is a process. It is not a combination of some stray incidents.

(viii) It is the purposeful and organized search for change, conducted after systematic
analysis of opportunities in the environment.

(ix) Entrepreneurship is a creative activity.

(x) It is the ability to create and build something from practically nothing.
 (xi) It is a knack of sensing opportunity where others see chaos and confusion.

(xii) Entrepreneurship is the attitude of mind to seek opportunities, take calculated

risks and derive benefits by setting up a venture.

(xiii) Entrepreneurship is a dynamic process of vision, change and creation.

To sum up, “Entrepreneurship is a dynamic process of vision, change and creation. It

requires an application of energy and passion towards the creation and implementation of
new ideas and creative solutions. Essential ingredients include the willingness to take
calculated risks-in terms of time, equity, or career, ability to formulate an effective venture
team, creative skill to organize needed resources, the fundamental skill of building a solid
business plan and, above all, the vision to recognize opportunity where others see chaos,
contradiction, and confusion.’’

Need of Entreprenuership

• Economic growth: The success of the products and services created and sold by
entrepreneurs cascades to other businesses and markets.

• Wealth generation: Entrepreneurs frequently target new markets and tap audiences
outside the focus of established firms. This creates new sources of revenue and profits.

• Social change: The innovative goods and services, entrepreneurs offer reduce dependence
on outdated processes and technologies. One example is the way smartphones have
affected how businesses communicate with customers, employees, and partners.

• Community development: Entrepreneurs foster a sense of community among people with

common goals and interests, whether in a single neighbourhood or across continents. Their
products and services contribute to the communities’ social and economic well-being.

Characteristics of Entrepreneurship: Some characteristics of Entrepreneurship are as

follows-
1. Creativity
2. Self-confidence
3. Visionary and Leadership
4. Flexibility
5. Motivation
6. Tenacity
7. Determination
8. Resilience
 9. Problem Solving
10. Open-Minded
11. Persuasiveness
12. Versatility
13. Social Skills

Meaning of Entrepreneur:

The entrepreneur is defined as someone who has the ability and desire to establish,
administer and succeed in a startup venture along with risk entitled to it, to make profits.
The best example of entrepreneurship is the starting of a new business venture. The
entrepreneurs are often known as a source of new ideas or innovators, and bring new ideas
in the market by replacing old with a new invention. It can be classified into small or home
business to multinational companies. In economics, the profits that an entrepreneur makes
is with a combination of land, natural resources, labour and capital.

In a nutshell, anyone who has the will and determination to start a new company and deals
with all the risks that go with it can become an Entrepreneur. Some definitions to
understand who an entrepreneur is:
(i) According to Oxford Dictionary an entrepreneur is “A person who sets up a
business or businesses, taking on financial risks in the hope of profit”.

(ii) According to the International Encyclopaedia, an entrepreneur is “An individual

who bears the risk of operating a business in the face of uncertainty about the
future conditions”.

(iii) Schumpeter’s Definition – The entrepreneur, in an advanced economy is an

individual who introduces something new in the economy – a method of
production not yet tested by experience in the branch of manufacturing, a
product with which consumers are not yet familiar, a new source of raw material
or of new markets and the like”.

(iv) Adam Smith’s definition – “The entrepreneur is an individual, who forms an

organization for commercial purpose. She/he is proprietary capitalist, a supplier
of capital and at the same time a manager who intervenes between the labour
and the consumer. “Entrepreneur is an employer, master, merchant but explicitly
considered as a capitalist”.

(v) Peter F. Drucker’s Views on Entrepreneur – “An entrepreneur is the one who
always searches for change, responds to it and exploits it as an opportunity.
 Innovation is the specific tool of entrepreneurs, the means by which they exploit
changes as an opportunity for a different business or different service”.

(vi) In the 20th century the theorist Arthur H. Cole defined an entrepreneur as an
‘organization builder’.

Characteristics of an Entrepreneur:

Functions of an Entrepreneur:
1. Initiating and leading business activities: Initiating and growing business to its
maturity is a traditional role of an entrepreneur. Identifying a gap and planning how
to address it helps entrepreneurs initiate new business ventures at any opportunity.

2. Allocating Employees’ Duties: From the onset of a business, an entrepreneur needs

to allocate their employees’ responsibilities effectively. Hiring qualified and
competent staff requires a great deal of care. An entrepreneur is also responsible for
organizing a business structure and environment that helps each employee maximise
their potential. The success of a business venture often relies on its employees’
contribution.

3. Forecasting Business changes: Most business face some kind of uncertainty as they
develop. An entrepreneur’s role in this aspect is to anticipate any challenges and
 address them as quickly as possible. Forecasting helps entrepreneur to make
decisions.

4. Identifying Business Opportunities: Entrepreneurs regularly seek out opportunities

that can grow or boost sales for their business. They identify which product to add
and which market to expand to.

5. Creating and Sharing Wealth: Starting a business involves a network of activities.

Whether an entrepreneur runs a small business or an established company, many
spend money from savings and gain capital from family, friends, investors, lenders or
banks when they start out. The cycle of such fund mobilization can help the economy
build wealth.

6. Improving the standard of living: Innovations that can reduce the cost of creating a
product also reduce the product’s price while allowing the business to maintain the
same profits, which in turn allows a customer to spend less money and thus save
more. This is an indication of an improved standard of living.

7. Taking up and Reducing Business Risk: When entrepreneurs start a business, they
spend time analysing and researching to make sure their ideas succeed. An
entrepreneur’s role is to eliminate the risk of business failure by taking measures to
reduce as much risk as possible.

Types of Entrepreneurs:

Let us understand each type in detail :

Based on the Business Type Depending on the type of business, entrepreneurs are classified
into the following types:

Trading Entrepreneur: A trading entrepreneur refers to a person who undertakes business-

related activities. These types of entrepreneurs usually buy finished products in bulk from
manufacturers at some discount. They then sell these products directly or with the help of
retailers or vendors with profits. A business entrepreneur usually acts as a middleman
between manufacturers and customers. This may include wholesalers, retailers, dealers, etc.

Manufacturing Entrepreneur: The founder of a business to manufacture products is known

as a manufacturing entrepreneur. Manufacturing entrepreneurs analyze market needs or
customer needs and manufacture products to meet such needs using various resources or
technologies. In simple words, manufacturing entrepreneurs transform raw materials into
finished products according to the customer's needs.

Agricultural Entrepreneur: Agricultural entrepreneurs refer to the types of entrepreneurs

who primarily do agricultural work. They participate in a wide range of agricultural activities
such as farming, irrigation, agricultural produce, mechanization, technology, etc.

Based on the Technology Based on technology, entrepreneurs are classified into the
following types:

Technical Entrepreneur: Such entrepreneurs are called technology entrepreneurs who use
to start and continue industries primarily based on science and technology. These
entrepreneurs develop new ideas and turn those ideas into technology-based innovations
and inventions. They always work to create new methods of production in the fields of
technology and science. Besides, they also manufacture products that can help ordinary
citizens and other non-technical entrepreneurs in their enterprises.

Non-Technical Entrepreneur: As the name suggests, entrepreneurs who do not set up and
run enterprises based on science and technology are known as non-technical entrepreneurs.
In short, non-tech entrepreneurs are those who work for innovations using traditional
methods. They typically use alternative and exemplary marketing methods and follow non-
technical delivery strategies to engage directly with customers. This ultimately helps them to
survive and grow their business in a competitive market. Moreover, they create better
relationships and meet customer needs.

Based on Ownership Based on ownership, entrepreneurs are classified into the following
types:

Private Entrepreneur: When an entrepreneur starts something personal of his or her own,
such as setting up an enterprise, he/she is called a private entrepreneur. A private
entrepreneur is the only person who plays the sole proprietor role for a business venture
and bears the risk associated with it.

State Entrepreneur: When a state or government does a business or industrial undertaking,

it is referred to as a 'state entrepreneur'. In this case, the government is the sole owner of
the enterprise and will bear all the profits and losses involved with it.

Joint Entrepreneurs: When a business or industrial undertaking is established and operated

jointly by the private entrepreneur and the government, it is called joint entrepreneurship.
The parties involved are called joint entrepreneurs. In this case, risk and profits are shared
by both parties. However, the sharing percentages generally depend on the type of business
and the agreement between the two parties.

Based on Gender Based on gender, entrepreneurs are classified into the following types:

Men Entrepreneurs: When any business venture is formed, managed and operated by men,
these men are referred to as men entrepreneurs.

Women Entrepreneurs: When any business venture is formed, managed and operated by
women, these women are referred to as women entrepreneurs. Besides, if women have a
minimum 51 percent share of the capital, they can also be known as women entrepreneurs.
Based on the Enterprise size.

Based on the size of the enterprise, entrepreneurs are classified into the following types:

Small-Scale Entrepreneur: If an entrepreneur has invested up to a maximum of 1 crore in

starting an enterprise, including plant and machinery, such entrepreneur is called Small Scale
Entrepreneur.

Medium-Scale Entrepreneur: If an entrepreneur has invested a minimum of 1 crore to a

maximum of 5 crores in starting an enterprise, including plant and machinery, then such
entrepreneur is called Medium Scale Entrepreneur.

Large-Scale Entrepreneur: If an entrepreneur has invested more than 5 crores in starting an

enterprise, including plant and machinery, such an entrepreneur is called a large-scale
entrepreneur. This includes any investment above 5 crores.

Based on Clarence Danhof Study, Clarence Danhoff conducted a study on American

agriculture and classified entrepreneurs accordingly. According to him, entrepreneurs
generally have less initiative and drive when they start any business venture. However, they
learn things with their continued economic work and become more innovative and
enthusiastic. Based on his study, he classified entrepreneurs as follows:

Innovating Entrepreneurs: Innovative entrepreneurs, also known as innovators, are the type
of entrepreneurs who usually come to the market with new ideas or innovations. In
particular, they create new products, find new production methods, create new markets and
restructure the business. Such entrepreneurs always try to innovate and invest their time
and money in research and development.

Imitative Entrepreneurs: Imitative entrepreneurs or imitating entrepreneurs are often called

'copy cats'. This is because these entrepreneurs mainly follow and adopt the innovative
entrepreneurs' existing successful enterprise system. They do nothing new of their own.
Imitative entrepreneurs apply strategy from other enterprises in a manner where all core
fundamentals of the original business model are replicated, and all efficiencies are retained.
These entrepreneurs help improve any product, production process or suggest the use of
improved technology addressed by other enterprises.
Fabian Entrepreneurs: Fabian entrepreneurs are defined as those types of entrepreneurs
who generally do not seek to implement changes in their enterprise techniques. They are
very careful in applying any approach and cautious in exercising any change. These
entrepreneurs are known for not making sudden decisions. They imitate the change in their
strategy only when it is completely clear that failing to do so will not harm.

Drone Entrepreneurs: Drone entrepreneurs are defined as entrepreneurs who do not like to
adopt any changes in their enterprise techniques. They strictly follow their traditional
strategies or methods for development, production or marketing. These entrepreneurs feel
gagger experience pride and tradition in the old ways of doing business. This is why drone
entrepreneurs sometimes suffer losses, yet they do not adopt changes in their current
methods.

Other Types of Entrepreneurs, Apart from the above types, there are several other types of
entrepreneurs as given below:

Solo Operators: Solo operators include those types of entrepreneurs who start their work
primarily alone. However, these entrepreneurs employ few employees if they require. It is
the most common type of entrepreneur, and most people start their ventures like solo
operators.

Active Partners: Active partners include entrepreneurs who jointly start their ventures. This
may include two or more people. However, each person should have equal participation in
the operation of the business. Besides, when the entrepreneurs support only with the
money but do not actively participate in the business's operation, they are just called
'partners'.

Inventors: Inventors include entrepreneurs who work effectively and invent new products,
using their ability and inventiveness. These entrepreneurs are generally primarily interested
in innovative strategies.

Challengers: Challengers include entrepreneurs who seek new challenges in enterprise

ventures, including manufacturing, distribution, and marketing. Once they achieve their set
challenge, they begin to set and acquire new challenges.

Buyers: Buyers include entrepreneurs who do not like to take too much risk in completely
new business establishments. These entrepreneurs mainly purchase on-going enterprises by
paying a decent amount and start their operations. This ultimately reduces the risk of
establishing a new enterprise as the existing enterprise typically has better business value
and customer reach.

Researchers: Researchers include entrepreneurs who believe in facts and figures based on
business studies. These entrepreneurs analyze all aspects of an enterprise and take enough
time to gather enough information to make a clear assumption. Then they put their detailed
work and understanding to launch the products. Researchers are usually least likely to fail
because they leave no room for mistakes. They gather information and analyze all ideas from
all angles based on all aspects.
Life-Timers: Life-timers includes entrepreneurs who consider enterprises as an integral part
of their lives. In particular, these entrepreneurs mainly learn skills from their elders and
continue to operate family ventures further. These entrepreneurs usually consider their
enterprises a family tradition.

Difference between an entrepreneur and entrepreneurship:

Characteristics of Entrepreneurship: Not all entrepreneurs are successful; there are definite
characteristics that make entrepreneurship successful. A few of them are mentioned below:

• Ability to take a risk- Starting any new venture involves a considerable amount of failure
risk. Therefore, an entrepreneur needs to be courageous and able to evaluate and take risks,
which is an essential part of being an entrepreneur.

• Innovation- It should be highly innovative to generate new ideas, start a company and earn
profits out of it. Change can be the launching of a new product that is new to the market or
a process that does the same thing but in a more efficient and economical way.

• Visionary and Leadership quality- To be successful, the entrepreneur should have a clear
vision of his new venture. However, to turn the idea into reality, a lot of resources and
employees are required. Here, leadership quality is paramount because leaders impart and
guide their employees towards the right path of success.

• Open-Minded- In a business, every circumstance can be an opportunity and used for the
benefit of a company. For example, Paytm recognised the gravity of demonetization and
acknowledged the need for online transactions would be more, so it utilised the situation
and expanded massively during this time.

• Flexible- An entrepreneur should be flexible and open to change according to the

situation. To be on the top, a businessperson should be equipped to embrace change in a
product and service, as and when needed.

• Know your Product- A company owner should know the product offerings and also be
aware of the latest trend in the market. It is essential to know if the available product or
service meets the demands of the current market, or whether it is time to tweak it a little.
Being able to be accountable and then alter as needed is a vital part of entrepreneurship.

Importance of Entrepreneurship:

• Creation of Employment- Entrepreneurship generates employment. It provides an entry-

level job, required for gaining experience and training for unskilled workers.

• Innovation- It is the hub of innovation that provides new product ventures, market,
technology and quality of goods, etc., and increase the standard of living of people.

• Impact on Society and Community Development- A society becomes greater if the

employment base is large and diversified. It brings about changes in society and promotes
facilities like higher expenditure on education, better sanitation, fewer slums, a higher level
of home ownership. Therefore, entrepreneurship assists the organisation towards a more
stable and high quality of community life.

• Increase Standard of Living- Entrepreneurship helps to improve the standard of living of a

person by increasing the income. The standard of living means, increase in the consumption
of various goods and services by a household for a particular period.
• Supports research and development- New products and services need to be researched
and tested before launching in the market. Therefore, an entrepreneur also dispenses
finance for research and development with research institutions and universities. This
promotes research, general construction, and development in the economy.

Women Entrepreneur

Of late entrepreneurship amongst women has become a topic of concern for all of us. Since
women constitute nearly fifty percent of the total population of our country, it is necessary
they play a positive and constructive role in the socio-economic development of the country.
After Independence a good deal of attention has been given to spread of literacy, increasing
employment through industrial development and improving health and quality of life of
women in the country.
Women entrepreneurs may be defined as the woman or a group of women who initiate,
organize and operate a business enterprise. Any women or group of women which
innovates, initiates or adapts an economic activity may be called women entrepreneurship.