Characteristics OF Entrepreneurship PDF

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Unit -1 Meaning and Definition of Entrepreneur An entrepreneur is ordinarily called a businessman. He is a person who combines capital and labour for the purpose of production. He organizes and manages a business unit assuming the risk for profit. He is the artist of the business world. In the words of J.B. Say, “An entrepreneur is one who brings together the factors of production and combines them into a product”. He made a clear distinction between a capitalist and an entrepreneur. Capitalist is only a financier. Entrepreneur is the coordinator and organizer of a business enterprise.

Joseph A Schumpeter defines an entrepreneur as “ one who innovates, raises money, assembles inputs and sets the organization going with the ability to identify them and opportunities, which others are not able to fulfil such economic opportunities”. He further said, “An entrepreneur is an innovator playing the role of a dynamic businessman adding material growth to economic development Characteristics OF ENTREPRENEURSHIP

1. Entrepreneur is an agent An entrepreneur is perceived as an economic agent who assembles materials for producing goods at a cost that ensures profits and re-accumulation of capital. He is also understood as a change agent who brings about changes in the structure and formation of the organization, market and the arena of goods and services. 2. Entrepreneur is a risk taker Many experts – old and new, have emphasized this characteristic. Back 1955, Redlich pointed out that an entrepreneur is a person who identifies the nature of risk and takes a decision.Later on, Burch, Meredith and other experts have agreed that entrepreneur is a risk taker while undertaking a venture. 3. Entrepreneur is a profit maker An entrepreneur is an individual who establishes and manages the business for the principal purpose of profit and growth. 4. Entrepreneur is an achievement motivator David C. McClelland has initiated this concept of the entrepreneur by calling him “as per sun with a strong desire for achievement.”Later on, Meredith and others have expressed the same concept while they termed “entrepreneurs are action-oriented, highly’ motivated individuals.” Therefore, entrepreneurs have to have a deep-rooted need for achieving their goals. 5. Entrepreneur is a capital provider Entrepreneur a person who operates a business by investing his or her capital. Abbett first pointed out this characteristic in 1967. It a supported by Nadkami (l97S) and Sharma (1981). They perceived entrepreneur as the founder of an enterprise who assembles necessary resources for the operation of the enterprise.

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6. Entrepreneur is the determinant of the nature of the business This characteristic /concept of the entrepreneur was promoted by Evans in 1957 It says that entrepreneur is the person or group of persons who perform the task of determining the kind of business to the operated. Therefore, entrepreneurs promote diversified and distinct types of business in society. 7. Entrepreneur is an innovator Joseph A. Schumpeter {1934) characterized entrepreneur as an innovator of new combination in the field of production Later on Robinson (1962) and Hagen (1962) have described entrepreneur as a person who lakes a small venture to the edge of success by his efforts, innovation and motivation. Innovation is perceived by the Schumpeter as an action that introduces a product, a new quality, a new method of production, new market and new organization. Therefore, entrepreneur innovates something that brings about disequilibria in the industry. 8. Entrepreneur is a reward receiver An entrepreneur is a person who creates something new of value by devoting time and efforts and in tum receives monetary and personal rewards. Max Weber, Hartman, Hisrich and Peters have recognized this distinct phenomenon of entrepreneurs. 9. Entrepreneur is a challenge taker It perceives entrepreneur as a person who accepts challenges for developing and exercising vigilance about success and failure to take a risk and to generate products. The above-mentioned characterizes of an entrepreneur show’ that an entrepreneur is a dynamic person who promotes society and civilization by taking ventures that give an enormous variety of goods and organizations to bring about changes in the arena of industrial activity. Qualities of an Entrepreneur Entrepreneurship is the result of the entrepreneurial quality of entrepreneurs. What makes entrepreneurs successful is still a debate. Experts have listed a long list of qualities relating to general, mental, economic, social and personal trails of entrepreneurs. Qualities for an entrepreneur are; 1. 2. 3. 4. 5. 6.

Self-Confidence. Tasks or Result Oriented. Risk Taker. Leadership. Originality. Future-oriented.

Entrepreneurial Functions An entrepreneur is a person who has possession of a new enterprise, venture or idea and is accountable for the inherent risks and the outcome. He performs a series of functions necessary right from the genesis of an idea up to the establishment and effective operation of an enterprise. He is thus a nucleus of high growth of the enterprise.

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An entrepreneur is said to perform the following functions 1. Assumption of risk Risk bearing or uncertainty bearing is the most important function of an entrepreneur which he tries to reduce by his initiative, skill and good judgment. The entrepreneur assumes all possible risks of business which emerges due to the possibility of changes in the tastes of consumers, modern techniques of production and new inventions. Such risks are not insurable and incalculable. In simple terms such risks are known as uncertainty concerning a loss. Risk bearing or uncertainty bearing still remains the most important function of an entrepreneur which he tries to minimize by his initiative, skill and good judgment. 2. Business decisions The most vital function an entrepreneur discharges refers to decision making in various fields of the business enterprise. He is the decision maker of all activities of the enterprise. The entrepreneur has to decide 1. 2. 3.

To enter the industry this offers him the best prospects To produce goods that he thinks will pay him the most To employ those methods of production which seem to him the most profitable.

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To effect suitable changes in the size of the business, its location that are needed for the development of his business. 3. Managerial Functions The entrepreneur performs the managerial functions such as

1. 2. 3. 4.

Formulating production plans Overseeing finances Dealing with the purchases of raw materials Providing production facilities

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5.

Organizing sales In large establishments these management functions are delegated to professional managers an entrepreneur performs many useful functions such as

1. 2. 3. 4.

Undertakes a venture Assumes risk and Earns profits Identifies opportunities to start business either as a manufacturer or a distributor The entrepreneurship exists in every field of economic endeavor. Entrepreneurship has also been developed in the trading sector. A manufacturing entrepreneur demonstrates his entrepreneurial talents by bringing out new products while a trading entrepreneur performs his entrepreneurial functions in creating demand for the business he deals.

The success and the quality of the output of the performance of the entrepreneur depend on how well he performs these functions. Therefore these functions performed describe the intensity of the relationship of the entrepreneur with the enterprise. For

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this reason, we can say that the relationship between the entrepreneur and entrepreneurship can be described as that between the body and the soul.

Importance of Entrepreneurship in Developing Country The entrepreneur who is a business leader looks for ideas and puts them into effect in fostering economic growth and development. Entrepreneurship is one of the most important input in the economic development of a country. The nature of a developing economy is quite different from a developed economy. The developing economy can be an agricultural country moving towards the industrialization or it may be the one where in the industry may be in its infancy lacking advance technology. The modern era is an era of changes. The whole world is becoming a village due to the industrial revolution and fast developing communication technology. The globalization of industry and commerce is bringing a vast change in various aspects of life. Economic development of a country is the outcome of purposeful human activity. The modern era is an era of changes. The whole world is becoming a village due to the industrial revolution and fast developing communication technology. The globalization of industry and commerce is bringing a vast change in various aspects of life. Economic development of a country is the outcome of purposeful human activity. Economic development is a highly dynamic process characterized by the pattern of demand shifts, new products are needed, appear for the production of goods within a country. A developing country needs entrepreneurs who are competent to perceive new opportunities and are willing to incur the necessary risk in exploiting them. A developing economy is required to be brought out of the vicious circle of low income and poverty. Entrepreneur can break this vicious circle. Entrepreneurs and helping government can change a developing economy in developed economy.

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Employment Generation Entrepreneurs not only give employment to the entrepreneur but also a source of direct and indirect employment for many people in a country. Unemployment is a chronic problem in most of the developing and underdeveloped countries. Entrepreneurs play an effective role in reducing the problem of unemployment in the country which in turn clears the path towards economic development of the nation Entrepreneurial development is looked at as a vehicle for employment generation through promotion of small business. India, being far more developed and forward looking country than some of the third world countries, can provide lead to entrepreneurial development activities. However, India can benefit from the welldocumented success experiences of developed countries like USA, Japan and UK in the field of employment generation and small business promotion. Promotes Capital Formation Entrepreneurs mobilize the idle funds which lead to capital formation. The funds which are used by entrepreneurs is a mix of their own and borrowed. This leads to creation of wealth which is very essential for development of an economy. Small Business Plan Dynamism Great dynamism is one of the qualities of the small and medium enterprises. This quality of dynamism originates in the inherent nature of the small business. The structure of small and medium enterprises is less complex than that of large enterprises and therefore facilitates quicker and smoother communication and decision- making. This allows for the greater flexibility and mobility of small business management. Also, small enterprises, more often make it possible for owners, who have a stronger entrepreneurial spirit than employed mangers, to undertake risk and challenges. Balanced Economic Development Small business promotion needs relatively low investment and therefore can be easily undertaken in rural and semi-urban areas. This in turn creates additional employment

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in these areas and prevents migration of people from rural to urban areas. Since majority of the people are living in the rural areas, therefore, more of our development efforts should be directed towards this sector. Small enterprises use local resources and are best suited to rural and underdeveloped sector The growth of industries and business in these areas lead to a large number of public benefits like road transport, health, education, entertainment, etc… Setting up of more industries leads to more development of backward regions and thereby promotes balanced regional development. Innovations in Enterprises Business enterprises need to be innovative for survival and better performance. It is believed that smaller firms have a relatively higher necessity and capability to innovate. The smaller firms do not face the constraints imposed by large investment in existing technology. Thus they are both free and compelled to innovate. Entrepreneurship development is accelerating the pace of small firm’s growth in India. An increased number of small firms are expected to result in more innovations and make the Indian industry compete in the international market. Better standards of living Entrepreneurs play a vital role in achieving a higher rate of economic growth. Entrepreneurs are able to produce goods at lower cost and supply quality goods at lower price to the community according to their requirements. When the price of the commodes decreases the consumers get the power to buy more goods for their satisfaction. In this way they can increase the standard of living of the people. Self-Reliance Entrepreneurs are the corner stores of national self-reliance. They help to manufacture indigenous substitutes to imported products which reduce the dependence on foreign countries. There is also a possibility of exporting goods and services to earn foreign exchange for the country. Hence, the import substitution and export promotion ensure economic independence and the country becomes self-reliance.

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Facilitates Overall Development: Entrepreneurs act as catalytic agent for change which results in chain reaction. Once an enterprise is established, the process of industrialization is set in motion. This unit will generate demand for various types of units required by it and there will be so many other units which require the output of this unit. This leads to overall development of an area due to increase in demand and setting up of more and more units. In this way, the entrepreneurs multiply their entrepreneurial activities, thus creating an environment of enthusiasm and conveying an impetus for overall development of the area

Role of an Entrepreneur in Economic Development The entrepreneur who is a business leader looks for ideas and puts them into effect in fostering economic growth and development. Entrepreneurship is one of the most important inputs in the economic development of a country. The entrepreneur acts as a trigger head to give spark to economic activities by his entrepreneurial decisions. He plays a pivotal role not only in the development of industrial sector of a country but also in the development of farm and service sector. The major roles played by an entrepreneur in the economic development of an economy is discussed in a systematic and orderly manner as follows. (1) Promotes Capital Formation Entrepreneurs promote capital formation by mobilizing the idle savings of public. They employ their own as well as borrowed resources for setting up their enterprises. Such type of entrepreneurial activities lead to value addition and creation of wealth, which is very essential for the industrial and economic development of the country. (2) Creates Large-Scale Employment Opportunities Entrepreneurs provide immediate large-scale employment to the unemployed which is a chronic problem of underdeveloped nations. With the setting up of more and more units by entrepreneurs, both on small and large-scale numerous job opportunities are created for others. As time passes, these enterprises grow, providing direct and indirect employment opportunities to many more. In this way, entrepreneurs play an effective role in reducing the problem of unemployment in the country which in turn clears the path towards economic development of the nation. (3) Promotes Balanced Regional Development Entrepreneurs help to remove regional disparities through setting up of industries in less developed and backward areas. The growth of industries and business in these areas lead to a large number of public benefits like road transport, health, education, entertainment, etc. Setting up of more industries lead to more development of backward regions and thereby promotes balanced regional development.

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(4) Reduces Concentration of Economic Power Economic power is the natural outcome of industrial and business activity. Industrial development normally leads to concentration of economic power in the hands of a few individuals, which results in the growth of monopolies. In order to redress this problem a large number of entrepreneurs need to be developed, which will help reduce the concentration of economic power amongst the population. (5) Wealth Creation and Distribution It stimulates equitable redistribution of wealth and income in the interest of the country to more people and geographic areas, thus giving benefit to larger sections of the society. Entrepreneurial activities also generate more activities and give a multiplier effect in the economy.

(6) Increasing Gross National Product and Per Capita Income Entrepreneurs are always on the look out for opportunities. They explore and exploit opportunities,, encourage effective resource mobilization of capital and skill, bring in new products and services and develops markets for growth of the economy. In this way, they help increasing gross national product as well as per capita income of the people in a country. Increase in gross national product and per capita income of the people in a country, is a sign of economic growth. (6) Improvement in the Standard of Living Increase in the standard of living of the people is a characteristic feature of economic development of the country. Entrepreneurs play a key role in increasing the standard of living of the people by adopting latest innovations in the production of wide variety of goods and services in large scale that too at a lower cost. This enables the people to avail better quality goods at lower prices, which results in the improvement of their standard of living. (7) Promotes Country’s Export Trade Entrepreneurs help in promoting a country’s export-trade, which is an important ingredient of economic development. They produce goods and services in large scale for the purpose earning huge amount of foreign exchange from export in order to combat the import dues requirement. Hence import substitution and export promotion ensure economic independence and development. (8) Induces Backward and Forward Linkages Entrepreneurs like to work in an environment of change and try to maximize profits by innovation. When an enterprise is established in accordance with the changing technology, it induces backward and forward linkages, which stimulate the process of economic development in the country.

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(9) Facilitates Overall Development Entrepreneurs act as catalytic agent for change, which results in chain reaction. Once an enterprise is established, the process of industrialization is set in motion. This unit will generate demand for various types of units required by it and there will be so many other units which require the output of this unit. This leads to overall development of an area due to increase in demand and setting up of more and more units. In this way, the entrepreneurs multiply their entrepreneurial activities, thus creating an environment of enthusiasm and conveying an impetus for overall development of the area.

Types of Entrepreneurs Entrepreneurs are classified into different types based on different classifications as mentioned below: Based on the Type of Business: 1. Trading Entrepreneur: As the name itself suggests, the trading entrepreneur undertake the trading activities. They procure the finished products from the manufacturers and sell these to the customers directly or through a retailer. These serve as the middlemen as wholesalers, dealers, and retailers between the manufacturers and customers. 2. Manufacturing Entrepreneur: The manufacturing entrepreneurs manufacture products. They identify the needs of the customers and, then, explore the resources ...