MODULE - 1

ENTREPRENEURSHIP
DEVELOPMENT
ENTREPRENEUR
 Does things that are not generally done in the ordinary
course of business
 Some entrepreneurs become celebrities…others get
ridiculed for their failed dreams.

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EVOLUTION

 Derived from a French word in 17th Century – Entreprendre

means the individual who undertook the risk of a new
enterprise…. “to undertake”.
 Entrepreneur is a person who creates an enterprise.
 The process of creation is called entrepreneurship.
 Examples: soldiers of fortune, adventurers, builders,
merchants
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 CONTD…
 In the earlier part of 16th century, the French men who
organized and led military expeditions were referred to as
entrepreneurs.
 French tradition regarded an entrepreneur as a person
translating a profitable idea into a productive activity.
 It also recognized a rich farmer as an entrepreneur who
manages and makes his business profitable by his intelligence
and wealth.
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 CONTD…

 Adam Smith in “The Wealth of Nations”, spoke of the ‘enterpriser’

as an individual who undertook the formation of an organization for
commercial purposes.
 He describes the role of industrialist as – a person with unusual
foresight who could recognize the potential demand for goods and
services.

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CHARMS OF BEING AN
ENTREPRENEUR
 You will be your own boss and boss to others.

 You will have a chance to put your ideas into practice.

 You will make money for yourself rather than for others.

 You may participate in each and every aspect of running a

business and learn and gain experience in a variety of
disciplines.
 To work directly with your customer.

 Personal satisfaction of creating and running a business.

 You will be able to work in a field or area that you really

enjoy.
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 ENTREPRENEUR VS MANAGER
Point of Entrepreneur Manager
Difference
Motive To start a venture by setting up an To render his service in an
enterprise. He understands the venture enterprise already setup by
for his personal gratification. someone else
Status Owner of the enterprise He is an employee
Risk bearing An entrepreneur being the owner of the A manager does not bear any
enterprise assumes all the risks and risk involved in the
uncertainty enterprise.
Rewards Profits – and are directly proportional to Salary – which is certain and
risk fixed

Innovation He acts as an innovator and also called Execution of plans prepared

as change – agent by the entrepreneur

Qualification & Needs to possess qualities and A manager needs to possess

Qualities qualifications like high achievement distinct qualifications in
motive, originality in thinking, foresight, terms of sound knowledge in
risk bearing ability etc. management theory and 7
practice.
CHARACTERISTICS OF AN
ENTREPRENEUR
 Creativity: The ability to bring something new into existence. This
emphasizes on ability and not the activity. The creative process
for an idea involves five stages –
 Germination: The seeding stage of new idea
 Preparation: Conscious search for knowledge
 Incubation: Subconscious assimilation of information.
 Illumination: Recognizing an idea as feasible
 Verification: Application or test to prove idea has value.
 Innovation: It is the act that endows resources with a new
capacity to create wealth. It indeed creates a new resource. 8
 CONTD…
 Dynamism: The ability and capacity to bring about change, accept
change and keep moving with times. Given the potentialities of the
enterprise, he sets attainable goals which are to be accomplished
within specific time frames. Tends to approach problems in
pragmatic way.
 Leadership

 Team building: Team is a group of individuals with a common

purpose, that is focused and aligned to achieve a specific task or set
of outcomes. Team building consists of these stages –
 Identifying the problem and needs of the enterprise
 Creating a vision
 Forming a group with shared vision
 Setting goals for the group
 Reviewing the progress

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 CONTD…
 Achievement motivation: Entrepreneurs have a high need for achievement
and are guided by their inner self, motivating their behavior towards
accomplishments. Based on this entrepreneurs can be classified as
dreamers, doubters and doers.
 Problem solving: Define the problem  Gather information  Identify
various solutions  Evaluate alternatives and select best option  Take
action  Evaluate the action taken
 Goal orientation: It is the achievement of targets and objectives for
successful performance by an entrepreneur. The goal setting process has
three steps: Defining the Goal  Specific targets  Feedback
 Target Oriented
 Achievement driven
 Specific
 Primary Goal
 Secondary goals
 Long term / Short term
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 CONTD..

 Risk taking and decision making: Entrepreneurs are persons

who takes decisions under conditions of uncertainty and
therefore are willing to bear risk. Persons who can take risks
and make quick decisions always prosper.
 Commitment: One of the subtle qualities of an entrepreneur is
his will-power. Strong determination with sound thinking
creates will power.

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 FUNCTIONS
 Idea generation and scanning of the best suitable idea.
 Determination of the business objectives.
 Product Analysis and market research.
 Determination of form of ownership / organization.
 Completion of promotional formalities.
 Raising necessary funds.
 Procuring machine and material.
 Recruitment of people.
 Undertaking the business operations.

Broadly, the functions of an entrepreneur can be classified into -

• Risk Bearing
• Organization 12

• Innovation
 TYPES OF ENTREPRENEURS
 Based on Functional Characteristics
 Innovative Entrepreneur: They introduce new goods or new methods of
production or discover new markets or reorganize their markets.
Entrepreneurs in this group have lot of information and trying out a novel
product or process
 Imitative or adoptive entrepreneur: They do not innovate but imitate the
techniques and technology of others. Entrepreneurs in this group are
characterized by their readiness to adopt successful innovations by
successful entrepreneurs.
 Fabian entrepreneur: Such entrepreneurs display great caution and
skepticism in experimenting with any change in their enterprise. They
change only when there is an imminent threat to the very existence of their
enterprise.
 Drone entrepreneur: Such entrepreneurs are characterized by a die-hard
conservatism and may even be prepared to suffer the loss of business.
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 CONTD…
 Based on Developmental Angle
 Prime mover: This entrepreneur sets in motion a powerful
sequence of development, expansion and diversification of
business.
 Manager: Such an entrepreneur does not initiate expansion and
is content just staying in business.
 Minor innovator: This entrepreneur contributes to economic
progress by finding better use for existing resources.
 Satellite: This entrepreneur assumes a supplier’s role and
slowly moves towards a productive enterprise.
 Local Trading: Such an entrepreneur limits his enterprise to the
local market.

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 CONTD…
 Based on types of Entrepreneurial Business
 Manufacturing: An entrepreneur who runs such a business
actually and produces the products that can be sold using
resources and supplies. E.g.: Apparel and textile products,
chemical related products etc.
 Wholesaling: An entrepreneur with such a business sells
products to the middleman.
 Retailing: An entrepreneur with such a business sells
products directly to the people who use or consume them.
 Service: An entrepreneur in this business sells service rather
than products.

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 CONTD…
 Based on Nine Personality types of entrepreneurs
 The Improver: If you operate your business predominately in the
improver mode, you are focused on using your company as a
means to improve the world. They run the business with high
integrity and ethics.
 The Advisor: The business personality type will provide an
extremely high level of assistance & advice to customers. The
advisor’s motto is customer is right and we must do everything
to please them.
 The Superstar: Here the business is centered on the charisma and
high energy of the superstar CEO. This personality often will
cause you to build your business around your own personal
brand. They will be too competitive and workaholics.
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 CONTD…
 The Artist: The business personality is the reserved but a highly
creative type (E.g.: Web design, Ad agency). As an artist type
you will tend to build your own business around the unique
talents and creativities that you have.
 The Visionary: A business built by a visionary will often be
based on the future vision and thoughts of the founder.
Visionaries can be too focused on the dream with little focus on
reality. Action must precede vision.
 The Analyst: here your company’s focus is on fixing problems in
a systematic way. These companies excel at problem solving.

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 CONTD…

 The Fireball: A business owned and operated by a fireball is

full of life, energy and optimism.
 The Hero: You have an incredible will and ability to lead the
world and your business through any challenge. You are the
essence of entrepreneurship and can assemble great
companies.

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 Based on Schools of Thought on Entrepreneurship:
Model Focus / Purpose Behaviors / Skills Situation
Great Person The entrepreneur has an Intuition, Energy, Start up
School intuitive ability – sixth Persistence, and self-esteem
sense & traits & instincts
he is born with
Psychological Have unique values, Personal values, risk taking, Start up
Characteristics attitudes, and needs need for achievement
School which drive them
Classical School Innovation Innovation, Creativity and Start up &
discovery early growth

Management Organizers of economic Production planning, people Early growth

School venture; they are people organization, capitalization & Maturity
who organize, own, and budgeting
manage and assume the
risk.
Leadership Leaders of people; have Motivating, directing & Early growth
school the ability to adapt their leading & Maturity
style to the needs of
people
Intrapreneurship It is the development of Alertness to opportunities, Maturity and
school independent units to maximizing decisions change
create, market & expand
services
INTRAPRENEUR
 They emerge from the confines of an existing enterprise.
 In big organizations, the top executives are encouraged to
catch hold of new ideas
 Then convert these into products through R&D activities
within the framework of organization.
 It is also found that an increasing number of Intrapreneurs is
leaving their jobs in big organization and starting own
enterprises.
 Many of them have become exceedingly successful.
 What is more important is that they are causing a threat to the
organization which they left.

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ENTREPRENEUR VS INTRAPRENEUR
Point of Difference Entrepreneur Intrapreneur

Dependency Is independent of his Is dependent on the

operations entrepreneur i.e., the
owner.

Raising of Funds All entrepreneurs Funds are not raised by

themselves raises funds Intrapreneur.
required for their
enterprise.
Risk Bears a high level of risk Does not fully bear the
involved in the business. risk involved in the
enterprise.

Operation An entrepreneur On the contrary, an

operates from outside. intrapreneur operates
form within the 21
organization itself.
ROLE OF ENTREPRENEURSHIP IN ECONOMIC
DEVELOPMENT
 Promotes capital formation by mobilizing the idle saving of the
public.
 Provides immediate large-scale employment thereby reduces
unemployment (the root cause for all socio – economic problems).
 Promotes balanced regional development.
 Helps reduce the concentration of economic power.
 It stimulates the equitable redistribution of wealth, income and even
political power in the interest of the country.
 It also promotes country’s export trade.
 It also induces forward and backward linkages which stimulates the
process of economic development in the country.

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SECRETS FOR BUILDING ENTREPRENEURIAL
CULTURE
 Build parallel interests
 Be an architect of the future.
 Be decisive, multifaceted, and ethical to a fault.
 Know the risk – measure the reward.
 Communicate to be a show-er not a teller.
 Power to the people.
 Become a trust builder.
 Sharing wealth increases wealth.
 Be constant, consistent and concise.
 Treat important people like important people.
 Do simple things – simply do them. 25
PROCESS
 Entrepreneurial Development can be explained in five stages –
 Perceiving, identifying and evaluating opportunity.
 Creation & scope of opportunity

 Perceived and actual worth of the opportunity

 Risks and profiles involved in the opportunity

 Competitors analysis

 Drawing up a business plan.

 Executive Summary

 Concept of the business

 Management Team

 Production / Marketing & Sales / Finance Plans

 Structure and operation

 Marshalling resources.
 Creating the enterprise
 Consolidation and management.
 Critical factors to success

 Management Style

 Identify present & potential Problems

 Implementing a control system

 Professionalize the management 26

 Get into new markets.
MYTHS AND REALITIES OF
ENTREPRENEURSHIP
MYTHS AND REALITIES ABOUT
ENTREPRENEURS
 Myth 1: Entrepreneurs are born, not made.
 Reality: While entrepreneurs are born with certain native
intelligence, a flair for creating, and energy, these talents by
themselves are like unmolded clay or an unpainted canvas. The
making of an entrepreneur occurs by accumulating the
relevant skills, know how, experiences and contacts over a
period of years and includes large doses of self-
development. The creative capacity to envision and then
pursue an opportunity is a direct descendant of at least 10 or
more years of experience that lead to pattern recognition.
MYTHS AND REALITIES ABOUT
ENTREPRENEURS
 Myth 2: Anyone can start a business.
 Reality : Entrepreneurs who can recognize the
difference between an idea and an opportunity, and
who think big enough, start businesses that have a
better chance of succeeding. Luck, to the extent it
is involved, requires good preparation. And the
easiest part is starting. What is hardest is surviving,
sustaining, and building a venture so its founders
can realize a harvest. Perhaps only one in 10 to 20
new businesses that survive five years or more
MYTHS AND REALITIES ABOUT
ENTREPRENEURS
 Myth 3 : Entrepreneurs are gamblers.
 Reality : Successful entrepreneurs take careful, calculated
risks. They try to influence the odds, often by getting others to
share risk with them and by avoiding or minimizing risks if they
have the choice. Often, they slice up the risk into smaller, quite
digestible pieces; only then do they commit the time or resources
to determine if that piece will work. They do not deliberately
seek to take more risk or to take unnecessary risk, nor do
they shy away from unavoidable risk.
MYTHS AND REALITIES ABOUT
ENTREPRENEURS
 Myth 4 : Entrepreneurs want the whole show to
themselves.
 Reality : Owning and running the whole show
effectively puts a ceiling on growth. Solo entrepreneurs
usually make a living. It is extremely difficult to
grow a higher potential venture by working single-
handedly. Higher potential entrepreneurs build a
team, an organization, and a company. Besides, 100 %
of nothing is nothing, so rather than taking a large
piece of the pie, they work to make the pie bigger.
MYTHS AND REALITIES ABOUT
ENTREPRENEURS
 Myth 5 : Entrepreneurs are their own bosses and completely
independent.
 Reality : Entrepreneurs are far from independent and have to
serve many masters and constituencies, including partners,
investors, customers, suppliers, creditors, employees,
families, and those involved in social and community
obligations. Entrepreneurs, however, can make free choices of
whether, when, and what they care to respond to. Moreover, it
is extremely difficult, and rare, to build a business beyond
$1 million to $ 2 million in sales single-handedly.
MYTHS AND REALITIES ABOUT
ENTREPRENEURS
 Myth 6 :Entrepreneurs work longer and harder than
managers in big companies.
 Reality: There is no evidence that all entrepreneurs work
more than their corporate counterparts. Some do, some
do not. Some actually report that they work less.
MYTHS AND REALITIES ABOUT
ENTREPRENEURS
 Myth 7: Entrepreneurs experience a great deal of stress and pay a high price.
 Reality : Being an entrepreneur is stressful and demanding. But there is no
evidence that it is any more stressful than numerous other highly demanding
professional roles, and entrepreneurs find their jobs very satisfying. They have a
high sense of accomplishment, are healthier, and are much less likely to retire
than those who work for others. Three times as many entrepreneurs as corporate
managers say they plan to never retire.
 Myth 8: Start a business and fail and you’ll never raise money again.
 Reality : Talented and experienced entrepreneurs – because they pursue
attractive opportunities and are able to attract the right people and necessary
financial and other resources to make the venture work – often head successful
ventures. Further, businesses fail, but entrepreneurs do not. Failure is often the
fire that tempers the steel of an entrepreneur’s learning experience and street
savvy.
MYTHS AND REALITIES ABOUT
ENTREPRENEURS
 Myth 9: Money is the most important startup ingredient.
 Reality : If the other pieces and talents are there, the money
will follow, but it does not follow that an entrepreneur will
succeed if he or she has enough money. Money is one of the
least important ingredients in new venture success. Money is to
the entrepreneur what the paint and brush are to the artist – an
inert tool that in the right hands can create marvels.
MYTHS AND REALITIES ABOUT
ENTREPRENEURS
 Myth 10 : Entrepreneurs should be young and
energetic.
 Reality : While these qualities may help, age is no
barrier. The average age of entrepreneurs starting high
potential businesses is in the mid-30s, and there are
numerous examples of entrepreneurs starting
businesses in their 60s. What is critical is possessing
the relevant know-how, experience, contacts that
greatly facilitate recognizing and pursuing an
opportunity.
MYTHS AND REALITIES ABOUT
ENTREPRENEURS
 Myth 11: Entrepreneurs are motivated solely by the quest for the
almighty dollar.
 Reality : Entrepreneurs seeking high potential ventures are more
driven by building enterprises and realizing long-term capital gains
than by instant gratification through high salaries and perks. A sense of
personal achievement and accomplishment, feeling in control of their
own destinies, and realizing their vision and dreams are also powerful
motivators. Money is viewed as a tool and a way of keeping score,
rather than an end in itself. Entrepreneurs thrive on the thrill of the
chase; and, time and again, even after an entrepreneur has made a few
million dollars or more, he or she will work on a new vision to build
another company.
MYTHS AND REALITIES ABOUT
ENTREPRENEURS
 Myth 12: Entrepreneurs seek power and control over others.
 Reality: Successful entrepreneurs are driven by the quest for
responsibility, achievement and results, rather than for power for
is own sake. They thrive on a sense of accomplishment and
outperforming the competition, rather than a personal need for
power expressed by dominating and controlling others. By virtue
of their accomplishments, they may be powerful and influential,
but these are more the by-products of the entrepreneurial process
than a driving force behind it.
MYTHS AND REALITIES ABOUT
ENTREPRENEURS
 Myth 13: If an entrepreneur is talented, success will
happen in a year or two.
 Reality: An old maxim among venture capitalists
says it all: The lemons ripen in two and a half years,
but the pearls take seven or eight . Rarely is a new
business established solidly in less than 3 or 4 years.
 Myth 14: Any entrepreneur with a good idea can
raise venture capital.
 Reality : Of the ventures of entrepreneurs with good
ideas who seek out venture capital, only 1 to 3 out of
100 are funded.
MYTHS AND REALITIES ABOUT
ENTREPRENEURS
 Myth 15: If an entrepreneur has enough startup capital, he or
she can’t miss.
 Reality : The opposite is often true; that is, too much money at
the outset often creates euphoria and a spoiled-child syndrome.
The accompanying lack of discipline and impulsive spending
usually lead to serious problems and failure.
MYTHS AND REALITIES ABOUT
ENTREPRENEURS
 Myth 16: Entrepreneurs are lone wolves and cannot work
with others.
 Reality: The most successful entrepreneurs are leaders
who build great teams and effective relationships working
with peers, directors, investors, key customers, key
suppliers and the like.
 Myth 17: Unless you attained 600+ on your SATs or
GMATs, you’ll never be a successful entrepreneur.
 Reality: Entrepreneurial IQ is a unique combination of
creativity, motivation, integrity, leadership, team building,
analytical ability, and ability to deal with ambiguity and
adversity.
FACTORS AFFECTING GROWTH OF
ENTREPRENEURSHIP IN INDIA
 Corrupt and unsupportive industry environment
 Market entry regulations

 Shortage of funds and resources

 Lack of capacity

 Employee related difficulties (Unions, Lobbies)

 Lack of adequate skills & training (HR limitations)

 Real Estate market unfavourable

 Work culture and Work Ethics

 Labour Market regulations

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