Amity Global Business SchoolEntrepreneurship Development

BBA - VI

Entrepreneurship

“Entrepreneurship is a process of giving birth to an enterprise”.

Economist Joseph Schumpeter has given a significant contribution in understanding the concept of entrepreneurship. According to him, “An entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation.” In the view of Schumpeter an entrepreneur employs “the gale of creative destruction.” Creative destruction can be defined as the process of creating new product, business model, or other business innovations by replacing the old ones. Thus, new products and technologies developed by entrepreneurs over time make current products and technologies obsolete. For example, before the advent of mobile phones, pagers were very popular among people, but with the invention of mobile phones, pagers became obsolete. Therefore, Schumpeter held the argument that creative destruction is the main factor behind economic growth and industry dynamism. He also held a view that entrepreneurship results not only in new industries, but also in new combinations of currently existing inputs. Schumpeter exemplified this concept with the invention of a steam engine, which was used to develop a horseless carriage. Further, the horseless carriage was transformed into a car. This formation of car from steam engine was not the development of a new technology, but the application of existing technologies in a novel manner. Thus, we can say that entrepreneurship is an act of bearing risks, bringing innovation, generating employment, and mobilizing resources. Entrepreneurs and entrepreneurship play a significant role in the socio-economic development of a nation. Entrepreneurs set up enterprises and generate employment for people in their enterprises. This helps in reducing unemployment, which is the main cause of all socio-economic problems as well as results in increasing the total income of a country. Moreover, goods and services produced by entrepreneurs, after meeting the domestic demand, are exported to foreign countries to earn foreign exchange. In this way, entrepreneurs play a significant role in the country‟s growth and prosperity in terms of production, employment generation, and export. The significance of entrepreneurship is explained in the following points:

Raises productivity through technical and other forms of innovation

Generates employment opportunities by establishing new enterprises

Facilitates the transfer of technology

Plays a strategic role in commercializing new inventions and products

Facilitates the proper utilization of resources

Improves the standard of living

Plays a crucial role in the restructuring and transforming economy

Facilitates a balanced economic development

Brings dynamism in industries by launching innovative products and services

Creates new markets and facilitates expansion into international markets

Entrepreneurship is the pursuit of market opportunities to produce innovative goods and services. Once the enterprise gets established, the entrepreneurial process becomes effectively a recurring progress of opportunities. It becomes the process of allocating scarce resources judiciously to pursue the value-adding opportunities. The steps involved in the entrepreneurial process are explained as follows:

Deciding to become an entrepreneur: Refers to the first step of the entrepreneurial process in which an individual decides to start his/her own enterprise. The desire to become an entrepreneur may be triggered by any on the following factors:

Arising of an innovative idea backed up the ability to start a business

Inheriting wealth and skills to establish an enterprise

Prevailing problems in current jobs

Willing to become own boss

Pursuing own ideas

Realizing the need of earning money

Identifying and evaluating the opportunity: Refers the second stage of the entrepreneurial process. In this process, the entrepreneur recognizes potential opportunities. Sometimes, the set mechanisms, such as entrepreneurship development training programs and government policies to promote entrepreneurs, help potential entrepreneurs in identifying the opportunities. The entrepreneurs keep on scanning the environment to gather useful information for identifying opportunity in the form of a potential product or service. Further, they evaluate and screen the identified opportunity. The evaluation of the identified opportunity helps entrepreneurs in assessing whether the opportunity is realistic and the returns of the opportunity are as per the resources required.

Developing a business plan: Involves developing a successful business plan to exploit the identified opportunity. Developing a business plan involves setting goals, standards, methods, and techniques of achieving those set goals. A well drafted business plan serves as a road map to the entrepreneur to guide and monitor his/her activities towards the set goals.

Determining the required resources: Involves determining the resources required to meet the identified opportunity. In this step, the entrepreneur assesses the available resources and the resources that are essential to convert the identified opportunity into a reality. The entrepreneur needs to be careful while determining the amount and quality of resources required as insufficient or inappropriate resources can hamper the success of the opportunity. Next, he/she needs to acquire the resources required in a timely manner, while focusing on right quality and quantity.

Converting the idea to an enterprise: Refers to the most important step of the entrepreneurial process in which the entrepreneur develops his/her own enterprise to execute the identified opportunity. In this step, the entrepreneur brings the set business plan into practice. He/she arranges the resources that are identified in the previous step. Moreover, he/she takes into consideration all internal and external environmental forces, while developing the enterprise.

Managing and growing the enterprise: Refers to the final stage of the entrepreneurial process. Once the resources are acquired, the entrepreneur uses them efficiently to carry out the

business plan successfully. He/she also strives to identify and examine operational problems, and solve them. Apart from this, the entrepreneur needs to implement an effective control system to identify and resolve problem areas on time. The growth of the enterprise depends on the selection of an appropriate target market. The entrepreneur needs to take into account the four Ps, product, price, promotion, and place of marketing, for the growth and development of the enterprise.

EntrepreneurAccording to Encyclopedia Americana (1988), “An entrepreneur is a businessman who assumes the risk of bringing together the means of production including capital, labor and material and receives his reward in profit from the market value of his product”. An entrepreneur takes the risk and organizes resources to establish and operate his/her enterprise. He/she identifies and traps the existing opportunities in the market, converts idea into action, bears the risk and uncertainties involved, and takes promotional activities to launch the enterprise. In addition, they strive for excellence in their field. Some of the functions of an entrepreneur are described as follows:

1. Idea Generation: Implies that an entrepreneur identifies business opportunities, selects the most suitable business opportunity, and converts that opportunity/idea into a successful business venture.

2. Promotion: Indicates that in today’s time the activities of entrepreneurs are not only limited to establish an enterprise. Nowadays, entrepreneurs are also involved in various other activities, such as promoting for setting up a new enterprise, attracting the investors, expanding the existing enterprise, and combining two or more enterprises. As a promoter, an entrepreneur conducts feasibility studies, decides the form of organization, assembles the required resources, such as capital and human resource, and shapes up the enterprise.

3. Risk and Uncertainty Bearing: Implies that an enterprise needs to bear risks involved in establishing a new enterprise or starting a new business venture. He/she should be ready to bear the losses that may arise because of unforeseen situations in future. He/she does not hesitate in doing new things and adopting new methods of production.

4. Arranging Finance: Indicates that entrepreneurs arrange finance for setting up the enterprise. An entrepreneur is an individual, who provides initial capital to start the venture and arranges additional funds required to carry on activities and expand the business.

5. Staffing: Signifies that an entrepreneur needs to employ individuals with the required skill-sets for operating in the different functions of the organizations

Entrepreneurial leaders and Manager

Differences between Entrepreneurial Leaders and Managers

Areas of Differentiation Entrepreneurial Leaders Managers

Position They are their own bosses They are salaried employees

Risk Bearer They are the owner of enterprises; therefore, bear all the risks and the uncertainties involved in the business

They are the employees of the organization and need not bear any risk

Objectives Their objective is to introduce innovations and act as change agents

Their objective is to supervise and create routines as well as implement entrepreneur’s plans and ideas

Pays and Rewards Their income is not fixed and depends on the performance of the enterprise

They get fixed salaries and rewards for performing well

Faults and Failures They believe in experimenting new ideas; therefore, may experience faults and failure. They also believe to learn from their failures.

They put efforts to avoid mistakes

Decision Making They take own decisions They execute the decision of the owner

Entrepreneur and Intrapreneur

Differences between Entrepreneurs and Intrapreneur Areas of Differentiation Entrepreneurs Intrapreneurs Area of Activity They work inside as well

as outside the enterprise They are bound to perform within the enterprise

Idea An entrepreneur generates ideas

An intrapreneur adopts the idea generated by an entrepreneur and makes it better

Employment An entrepreneur employs intrapreneur and pays them in exchange of their services

An intrapreneur are paid for using their creative thinking and implementing the ideas

Sense of Responsibility An entrepreneur works overtime to run his/her own business

An intrapreneur works overtime helping to run someone’s else business for the enterprise’s future

Rewards The rewards of entrepreneurs depend on the success and profit margins of the enterprise

An intrapreneur is a person employed by an organization whose compensation is fixed