Entrepreneurship 12

Entrepreneur and EntrepreneurshipEntrepreneur and Entrepreneurship

By

Prof. B.Manchanda

Jagannath International Management School,

Vasant Kunj,New Delhi

Learning ObjectivesLearning Objectives

Define the term entrepreneur & entrepreneurship and distinguish among entrepreneurs, small-business owners, and managers.

Identify the different types of entrepreneurs.

Explain why people choose to become entrepreneurs.

Discuss factors that support and expand opportunities for entrepreneurs.

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Learning Objectives Learning Objectives

Identify personality traits that typically characterize successful entrepreneurs.

Summarize the process of starting a new venture.

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EntrepreneurshipEntrepreneurship

Entrepreneurship The pursuit of lucrative opportunities by

enterprising individuals. Capacity to take risks Ability to own and organize Desire and capability to innovate and

diversify (Stepanek, 1962)

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Entrepreneurship (Contd.)Entrepreneurship (Contd.)

Entrepreneurship is more than simply “starting a business.” The definition of entrepreneurship is a process through which individuals identify opportunities, allocate resources, and create value. This creation of value is often through the identification of unmet needs or through the identification of opportunities for change.

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Entrepreneurship (Contd.)Entrepreneurship (Contd.)

Process of creating something different, with value, by devoting necessary time and effort, by assuming the accompanying financial, psychological, and social risks, and receiving the resulting rewards of monetary and personal satisfaction (Bowen and Hisrich, 1986).

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Entrepreneur Entrepreneur

Entrepreneur is someone who exercises initiative by organizing a venture to take benefit of an opportunity and, as the decision maker, decides what, how, and how much of a good or service will be produced.

Entrepreneurs see “problems” as “opportunities,” then take action to identify the solutions to those problems and the customers who will pay to have those problems solved.

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Entrepreneur (Contd.)Entrepreneur (Contd.)

Person conducting own business (Webster) Person who sets up business deals in order

to make profits (Collins Cobuild) Organizer of an economic venture, one who

owns, organizes, manages, and assumes the risks of the business (Chandrashekhar)

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Theories of EntrepreneurshipTheories of Entrepreneurship

Max Weber’s Theory of Social Change Hoselitz Socio-cultural Theory Trait theory of Entrepreneurship Economic Theory of Entrepreneurship Schumpeter’s Innovation Theory McCllelland’s Psychological Theory X-Efficiency Theory

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Schumpeter’s TheorySchumpeter’s Theory

According to economist Joseph Alois Schumpeter (1883-1950), entrepreneurs are not necessarily motivated by profit but regard it as a standard for measuring achievement or success.

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Schumpeter’s TheorySchumpeter’s Theory

Schumpeter discovered that they (1) greatly value self-reliance, (2) strive for distinction through excellence, (3) are highly optimistic (otherwise nothing

would be undertaken), and (4) always favour challenges of medium risk

(neither too easy, nor ruinous).

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Characteristics of EntrepreneursCharacteristics of Entrepreneurs

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Characteristics of EntrepreneursCharacteristics of Entrepreneurs Vision - entrepreneurs begin with an overall idea for how to make their

business idea a success

High Energy Level - a willingness to work hard

Need to Achieve - entrepreneurs work hard because they want to excel

Self-Confidence - fearlessness in the face of difficult odds

Tolerance for Failure - entrepreneurs are not easily discouraged

Creativity - entrepreneurs devise innovative ways to overcome difficult problems and situations

Tolerance for Ambiguity - entrepreneurs take in stride uncertainties.

Internal Locus of Control - entrepreneurs believe they can control their own fate

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Characteristics of EntrepreneursCharacteristics of Entrepreneurs

Tolerance for Failure - entrepreneurs are not easily discouraged

Creativity - entrepreneurs devise innovative ways to overcome difficult problems and situations

Tolerance for Ambiguity - entrepreneurs take in stride uncertainties.

Internal Locus of Control - entrepreneurs believe they can control their own fate

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Categories of EntrepreneursCategories of Entrepreneurs

Social Entrepreneurs

Social

Serial Entrepreneurs

Lifestyle Entrepreneurs

Lifestyle

Lifestyle Entrepreneurs7-15

Social entrepreneurSocial entrepreneur

A social entrepreneur is motivated by a desire to help, improve and transform social, environmental, educational and economic conditions. Key traits and characteristics of highly effective social entrepreneurs include ambition and a lack of acceptance of the status quo or accepting the world "as it is".

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The social entrepreneur is driven by an emotional desire to address some of the big social and economic conditions in the world, for example, poverty and educational deprivation, rather than by the desire for profit. Social entrepreneurs seek to develop innovative solutions to global problems that can be copied by others to enact change.

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Social entrepreneurs act within a market aiming to create social value through the improvement of goods and services offered to the community. Their main aim is to help offer a better service improving the community as a whole and are predominately run as non profit schemes. Zahra has said that “social entrepreneurs make significant and diverse contributions to their communities and societies, adopting business models to offer creative solutions to complex and persistent social problems”.

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Serial entrepreneurSerial entrepreneur

A serial entrepreneur is one who continuously comes up with new ideas and starts new businesses.The serial entrepreneur is represented as possessing a higher propensity for risk, innovation and achievement. Serial entrepreneurs are more likely to experience repeated entrepreneurial success. They are more likely to take risks and recover from business failure.

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Lifestyle entrepreneurLifestyle entrepreneur

A lifestyle entrepreneur places passion before profit when launching a business in order to combine personal interests and talent with the ability to earn a living. Many entrepreneurs may be primarily motivated by the intention to make their business profitable in order to sell to shareholders.

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Lifestyle entrepreneurLifestyle entrepreneur

A lifestyle entrepreneur intentionally chooses a business model intended to develop and grow their business in order to make a long-term, sustainable and viable living working in a field where they have a particular interest, passion, talent, knowledge or high degree of expertise.

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Why People become EntrepreneursWhy People become Entrepreneurs

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Why People become EntrepreneursWhy People become Entrepreneurs

Being your Own Boss Self-management is the motivation that drives many

entrepreneurs. Financial Success

Entrepreneurs are wealth creators. Job Security

Over the past ten years, large companies have eliminated more jobs than they have created.

Quality of Life Starting a business gives the founder some choice over

when, where, and how to work.7-23

The Environment for The Environment for EntrepreneurshipEntrepreneurship

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Business Environment & EntrepreneurshipBusiness Environment & Entrepreneurship

Micro Environment Suppliers Customers Competitors General public

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Business Environment & EntrepreneurshipBusiness Environment & Entrepreneurship

Macro Environment Economic Socio-cultural Politico-Legal Technological Financial Market Environment

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Role of the EntrepreneurRole of the Entrepreneur

An innovator who combines technical innovations and financial finesses.

Important role in producing competitive products, processes, and services.

Generation of new employment Local and regional economic development Improved allocation of resources and

transfer of technologies7-27

Entrepreneur as an Economic PioneerEntrepreneur as an Economic Pioneer

Introduction of new goods and products Introduction of new processes and methods

of production Opening up of new markets Opening up of new sources of supply Industrial re-organization

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Strategic Importance of the Small-Scale Strategic Importance of the Small-Scale SectorSector

Significant contributions to national income, employment, and export earnings

Value of output over Rs. 9,70,000 crores Employment of over 27.5 million (> twice the

private sector; almost as much as all public sector employment)

Exports of over Rs. 84,000 crores (> 35 per cent of all exports) (2010-11 figures)

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Some Myths About EntrepreneurshipSome Myths About Entrepreneurship

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Some Myths About EntrepreneurshipSome Myths About Entrepreneurship

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Mega-Entrepreneurs WhoMega-Entrepreneurs WhoStarted in Their 20sStarted in Their 20s

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Who is The Entrepreneur?Who is The Entrepreneur?

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Figure 7.1

The IdeaThe Idea

A great product, a viable market, and good timing are essential ingredients in any recipe for success.

What else ?

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Decision-makingDecision-making

No business can survive without effective decision-making.

According to Peter Drucker ,”whatever a manager does,he does through decision-making.”

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Steps in Decision-makingSteps in Decision-making

1.Defining the problem 2.Analysing the problem 3.Collection of data 4. developing alternatives 5.Review of key factors 6. Selecting the best alternative 7.Implementing the decision 8.Follow up

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What Business Should You Start? What Business Should You Start?

An entrepreneur should consider opportunities in: Technological

discoveries Demographic

changes Lifestyle and taste

changes Specific Industries

Economic dislocations

Calamities Government

initiatives and rule changes.

Skill, likes,success7-37

What Business Should You Start? What Business Should You Start?

Franchising An entrepreneurial alliance between a franchisor

(an innovator who has created at least one successful store and wants to grow) and a franchisee (a partner who manages a new store of the same type in a new location).

McDonalds Subway KFC

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The InternetThe Internet

Transaction fee model Charging fees for goods

and services. Subscription model

Charging fees for site visits.

Advertising support model Charging fees to

advertise on a site.

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The InternetThe Internet

Intermediary model Charging fees to bring

buyers and sellers together.

Affiliate model Charging fees to direct

site visitors to other companies’ sites.

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What Does it Take, Personally? What Does it Take, Personally?

1. Commitment and determination 2. Leadership3. Opportunity obsession4. Tolerance of risk, ambiguity, and uncertainty5. Creativity, self-reliance, and ability to adapt6. Motivation to excel7. What else?

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Entrepreneurial StrategyEntrepreneurial StrategyMatrixMatrix

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Sources of CapitalSources of Capital

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Success and Failure Success and Failure

Anticipate risk---Business Plan Consider the role of the economic environment Utilize business incubators Realize there are common management

challenges Going public with an initial public offering (IPO) Who, What, When, Where, Why and How

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Common Management ChallengesCommon Management Challenges

You might not enjoy it Survival is difficult Growth creates new challenges, new competitors It’s hard to delegate Misuse of funds, lack of funds Poor controls Mortality Employees

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Success and Failure Success and Failure

Business incubators Protected

environments for new, small businesses

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Going PublicGoing Public

Initial public offering (IPO) Sale to the public, for the first time, of federally

registered and underwritten shares of stock in the company

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Increasing Your Chances of SuccessIncreasing Your Chances of Success

Opportunity analysis A description of the good or service, an

assessment of the opportunity, an assessment of the entrepreneur, specification of activities and resources needed to translate your idea into a viable business, and your source(s) of capital.

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Opportunity AnalysisOpportunity Analysis

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PlanningPlanning

Business plan A formal planning step

that focuses on the entire venture and describes all the elements involved in starting it.

Capital people will demand and so should you.

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Outline of a Business PlanOutline of a Business Plan

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Outline of a Business PlanOutline of a Business Plan

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Five Key FactorsFive Key Factors

The people, including you

The opportunity The competition The context Risk and reward

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Non financial ResourcesNon financial Resources

Legitimacy Networks Top-Management Teams Advisory Boards Partners

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Legitimacy People’s judgment of a company’s acceptance,

appropriateness, and desirability, generally stemming from company goals and methods that are consistent with societal values.

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Social capital A competitive advantage in the form of

relationships with other people and the image other people have of you.

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Building Support for your IdeaBuilding Support for your Idea

Clear the investment with your immediate boss

Make cheerleaders who will support your idea

Horse trading for support, time, money, and other resources

Get the blessing of relevant higher-level officials

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Checklist for Choosing IdeasChecklist for Choosing Ideas

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Checklist for Choosing IdeasChecklist for Choosing Ideas

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Building IntrapreneurshipBuilding Intrapreneurship

Skunk works A project team

designated to produce a new, innovative product.

Bootlegging Informal work on

projects, other than those officially assigned, of employees’ own choosing and initiative.

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Management Challenges in Management Challenges in IntrapreneurshipIntrapreneurship

Failing to foster innovation Overreliance on a single project Spread intrapreneurial efforts over too many

projects Politics Nay sayers

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Entrepreneurial OrientationEntrepreneurial Orientation

Entrepreneurial orientation The tendency of an organization to identify and

capitalize successfully on opportunities to launch new ventures by entering new or established markets with new or existing goods or services

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Characteristics of Entrepreneurial Characteristics of Entrepreneurial OrientationOrientation

Allow independent action Innovativeness Risk taking Proactiveness Competitive aggressiveness Foster creativity

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Documents

Entrepreneurship 12