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Entrepreneurship Development

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  • 1. Amity Global Business School Entrepreneurship Development BBA - VI Entrepreneurship“Entrepreneurship is a process of giving birth to an enterprise”. Economist Joseph Schumpeter has given a significant contribution in understanding theconcept of entrepreneurship. According to him, “An entrepreneur is a person who is willing andable to convert a new idea or invention into a successful innovation.” In the view of Schumpeteran entrepreneur employs “the gale of creative destruction.” Creative destruction can be definedas the process of creating new product, business model, or other business innovations byreplacing the old ones. Thus, new products and technologies developed by entrepreneurs overtime make current products and technologies obsolete. For example, before the advent ofmobile phones, pagers were very popular among people, but with the invention of mobilephones, pagers became obsolete. Therefore, Schumpeter held the argument that creativedestruction is the main factor behind economic growth and industry dynamism. He also held aview that entrepreneurship results not only in new industries, but also in new combinations ofcurrently existing inputs. Schumpeter exemplified this concept with the invention of a steamengine, which was used to develop a horseless carriage. Further, the horseless carriage wastransformed into a car. This formation of car from steam engine was not the development of anew 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 developmentof a nation. Entrepreneurs set up enterprises and generate employment for people in theirenterprises. 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, areexported to foreign countries to earn foreign exchange. In this way, entrepreneurs play asignificant role in the country‟s growth and prosperity in terms of production, employmentgeneration, and export. The significance of entrepreneurship is explained in the followingpoints: 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
  • 2. Entrepreneurship is the pursuit of market opportunities to produce innovative goods andservices. Once the enterprise gets established, the entrepreneurial process becomes effectivelya recurring progress of opportunities. It becomes the process of allocating scarce resourcesjudiciously to pursue the value-adding opportunities. The steps involved in the entrepreneurialprocess are explained as follows:Deciding to become an entrepreneur: Refers to the first step of the entrepreneurial process inwhich an individual decides to start his/her own enterprise. The desire to become anentrepreneur 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 moneyIdentifying and evaluating the opportunity: Refers the second stage of the entrepreneurialprocess. In this process, the entrepreneur recognizes potential opportunities. Sometimes, theset mechanisms, such as entrepreneurship development training programs and governmentpolicies to promote entrepreneurs, help potential entrepreneurs in identifying theopportunities. The entrepreneurs keep on scanning the environment to gather usefulinformation for identifying opportunity in the form of a potential product or service. Further,they evaluate and screen the identified opportunity. The evaluation of the identifiedopportunity helps entrepreneurs in assessing whether the opportunity is realistic and thereturns of the opportunity are as per the resources required.Developing a business plan: Involves developing a successful business plan to exploit theidentified 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 mapto the entrepreneur to guide and monitor his/her activities towards the set goals.Determining the required resources: Involves determining the resources required to meet theidentified opportunity. In this step, the entrepreneur assesses the available resources and theresources that are essential to convert the identified opportunity into a reality. Theentrepreneur needs to be careful while determining the amount and quality of resourcesrequired 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 onright quality and quantity.Converting the idea to an enterprise: Refers to the most important step of the entrepreneurialprocess in which the entrepreneur develops his/her own enterprise to execute the identifiedopportunity. In this step, the entrepreneur brings the set business plan into practice. He/shearranges the resources that are identified in the previous step. Moreover, he/she takes intoconsideration 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
  • 3. 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 controlsystem to identify and resolve problem areas on time. The growth of the enterprise depends onthe selection of an appropriate target market. The entrepreneur needs to take into account thefour Ps, product, price, promotion, and place of marketing, for the growth and development ofthe enterprise. EntrepreneurAccording to Encyclopedia Americana (1988), “An entrepreneur is a businessman who assumesthe risk of bringing together the means of production including capital, labor and material andreceives his reward in profit from the market value of his product”.An entrepreneur takes the risk and organizes resources to establish and operate his/herenterprise. He/she identifies and traps the existing opportunities in the market, converts ideainto action, bears the risk and uncertainties involved, and takes promotional activities to launchthe enterprise. In addition, they strive for excellence in their field. Some of the functions of anentrepreneur 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
  • 4. Entrepreneurial leaders and Manager Differences between Entrepreneurial Leaders and Managers Entrepreneurial Leaders ManagersAreas of DifferentiationPosition They are their own bosses They are salaried employeesRisk Bearer They are the owner of They are the employees of enterprises; therefore, the organization and need bear all the risks and the not bear any risk uncertainties involved in the businessObjectives Their objective is to Their objective is to introduce innovations and supervise and create act as change agents routines as well as implement entrepreneur’s plans and ideasPays and Rewards Their income is not fixed They get fixed salaries and and depends on the rewards for performing performance of the well enterpriseFaults and Failures They believe in They put efforts to avoid experimenting new ideas; mistakes therefore, may experience faults and failure. They also believe to learn from their failures.Decision Making They take own decisions They execute the decision of the owner
  • 5. Entrepreneur and IntrapreneurDifferences between Entrepreneurs and IntrapreneurAreas of Differentiation Entrepreneurs IntrapreneursArea of Activity They work inside as well They are bound to as outside the enterprise perform within the enterpriseIdea An entrepreneur An intrapreneur adopts generates ideas the idea generated by an entrepreneur and makes it betterEmployment An entrepreneur employs An intrapreneur are paid intrapreneur and pays for using their creative them in exchange of their thinking and services implementing the ideasSense of Responsibility An entrepreneur works An intrapreneur works overtime to run his/her overtime helping to run own business someone’s else business for the enterprise’s futureRewards The rewards of An intrapreneur is a entrepreneurs depend on person employed by an the success and profit organization whose margins of the enterprise compensation is fixed