ethics is a necessary element for any entrepreneur to start up his own business, this document will put on some light on modern-day entrepreneurship practices and ethics
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Ethics and entrepreneurship
1. A PROJECT REPORT ON
“ETHICS & ENTREPRENEURSHIP”
In partial fulfillment of
Integrated Master of Business Administration
Submitted By
Indu Nath Jha
(Semester VI)
CUJ/I/2015/IMBA/14
Submitted To
Mr. S.M. Vipul
Assistant Professor,
Centre for Business
Administration,
Central University of
Jharkhand, Ranchi
2. ETHICS AND ENTREPRENEURSHIP
Entrepreneurship or “establishing and running a new business” is a very trendy and fascinating
career in modern society. It might look like something that comes in trend in recent two or three
decades. But Entrepreneurship is not something which is very new, from a very long period of
time entrepreneurship has shown as a very attractive and fascinating field for all classes of society.
Be it journey of Vasco-de-gama to India or discover of America by Columbus, every journey was
motivated by profit orientation and was basically for trading purpose.
In India also the famous ‘Bali Yatra’ of Orissa can be assumed as an example of ancient
entrepreneurship. From these examples one thing is clear that entrepreneurship is existing form a
very long period of time and is accepted in society. And for something to be survive this much
long, one quality is needed to present in that and that factor is “ETHICS”. Nothing in this can
survive that much long if it is unethical and does not contributes anything in favor of society. So
for any entrepreneur it is necessary to perform ethical practices only and always keep welfare of
society in mind while making decision in business.
For being a successful entrepreneur one must look for all the ethical aspects of entrepreneurship,
in this report we are going to look various factor such as ethics, entrepreneurship, relationship
between ethics and entrepreneurship, importance of ethics in entrepreneurship and ethical &
unethical practices in entrepreneurship.
ENTREPRENEURSHIP
Entrepreneurship can be defined as “The capacity and willingness to develop, organize and
manage a business venture along with any of its risks in order to make a profit. The most common
example of entrepreneurship is the starting of new business.” (Business Dictionary, 2018)
In economics, entrepreneurship combined with Money, Man, Material (resources) and Machinery
leads to profit making activities for an entrepreneur. Innovation and risk-taking ability are major
characteristics of entrepreneurship. And it is considered as an essential part of a nation’s ability to
succeed in dynamic competitive global market.1
1
www.businessdictionary.com/definition/entrepreneurship/html
3. Entrepreneurship is derived from French word “Entreprnede”, a word used in 18th
century in
France that means ‘to undertake’ and was mainly used to describe a ‘manager or promoter of a
theatrical production’. The first used of word ‘entrepreneur’ was seen in a book published in 1755
by Richard Cantillon named ‘Essai sur la Nature du Commerce au General’.
Today word entrepreneur is rapidly evolving and it means different things to different people, but
in whole the word entrepreneur can be defined as someone who has an idea and who works to
create a product or service that people will buy, by building an organization to support those sales.
And entrepreneurship is both the study of how new business are created as well as the process of
starting a new business.2
ETHICS
Ethics can be defined as a tool that determines rightness or wrongness of an action, a philosophy
that deals with law of morality and rules of conduct, an art of controlling means so that they will
serve specifically human ends.
It contain a set of principles of personal & professional conduct, that doesn’t just rest on feelings
of approval or disapproval but also careful examine reality around us. Although ethics is not
something that is related with legislature though it doesn’t permit violation of law. Ethics is
involved in all human activities including business.
According to wheeler, “Business ethics is an art and science for maintaining harmonious
relationship with society, its various group and institution as well as reorganizing the moral
responsibility for rightness and wrongness of business conduct.”
In modern day business, being ethical provides an edge over others, as ethics provide the ability
to assess the benefits and problem associated with different ways of managing ethics in
organization. In the age of complexity in business field competition is increasing day by day, good
ethical standards helps the business to face the challenges.
2
www.shopify.com/encyclopedia/entrepreneurship
4. ETHICS IN ENTREPRENEURSHIP
In the age of neck to neck competitive business market, to operate a business successfully and for
having an edge over others, an entrepreneur must follow certain ethical principles and norms. That
ethical norms not just only helps an entrepreneur to manage ethical dilemmas and problems faced
in daily business but also it helps to retain the business for long period of time.
In modern society business has the potential to provide a major contribution to our society, in terms
of producing product and service that people want, providing employment, paying taxes and acting
as an engine for economic development and thereby increasing goodwill.
There are certain key elements that gives a solid base for an ethical organization: (Matthwes, 2018)
1. Respect
As an entrepreneur starting a business, one need to respect himself and surround
organization with people that one can respect. An entrepreneur should try to not
hire or do business with people he don't respect, or who don't respect him or his
business. Since these are the types of people who ultimately don't respect their
colleagues, customers, vendors, or themselves. Respect is the first and prime most
thing while talking about an ethical business.
2. Honor
For running a business successfully an entrepreneur need a team of some good and
honorable people, good people are a fundamental part of good ethics. A good
enterprise always recognize and give special attention to strong performers and best
achievers of organization. They always show their gratitude to the people who
exhibit exemplary behavior, and who have helped organization to be successful,
and they must be acknowledged and get honored for their contributions publicly,
as well as privately.
3. Integrity
When it comes to integrity, it is impossible to avoid sounding preachy or parental.
Do not lie, steal, or cheat. One should always stand by their promises that they made
to other stakeholders such as customers, shareholders and employees. For making
an ethical enterprise an entrepreneur try to do not hire or retain people who do not
have integrity, Other employees, customers and vendors will not trust them. That
5. lack of trust is like a virus; eventually this lack of trust will lead them to having a
bad impression about organization and lack of trust for both enterprise and
entrepreneur.
4. Customer Orientation
A company is nothing if it does not have customers, in others words, if a company
does not produce what people want and will pay for, there is no point to that
company. Customer oriented service is most vital and important for an
organization, since they are the one who are going to pay for the product or service
an enterprise is producing, hence serving all of these people is part of ethical
responsibility of an organization. Compromising with customer’s right will not
only risks compromising ethics, it also risks the long-term health of the enterprise.
5. Result Oriented
An entrepreneur is not called entrepreneur if he hasn't focused on results already,
but consider ethics factor into results too. A succesful entrepreneur don't aim for
results at any cost. One should work on achieving the results within company
values. Results should be attained in the context of developing something that
customers want, and producing and delivering it at a price that is fair to all the
parties involved. In a good enterprise results are more than just numbers, they are
benchmarks and lessons for the future as well as goals for the present.
6. Risk taking Ability
Risk taking ability is one the key quality of an entrepreneur. Good organizations
are thrive, prosper and grow do so taking risks. They do not stick to the safe path.
Great companies innovate, they think "out of the box", and they try new things.
They re-invent themselves and they reward the risk-takers. As long as one stick to
his philosophical guns, risk-taking poses no threat to organizational ethics. Great
companies attract employees who are willing to take risks, and they encourage,
support and reward them for taking calculated risks.
7. Passion
Great organizations are comprised of people who have a passion for their task and
job profile. The role model of these employees are those people who are willing to
take the thrill and challenge of problems and who are not just working for a mere
6. salary slip. This people are excited, driven, and believe that their work and efforts
can make a difference. Without the passion burning within them, people put in a
minimal effort, getting paid and going home and this is not what an emerging firm
want from their employees.
8. Persistence
People in great organizations have the will to persist. They will keep working even
when results are not what they hoped, or when customers refuse to buy. Their
persistence is tied to their passion for what they are doing and a belief that this
group of people, this company, has the best chance of "making it" of any company
they could join. And so, they work harder, they continue to take risks. They behave
with honor and integrity. They keep their focus on the customer's needs and wants.
And, they are not satisfied until they achieve the goals and results that are expected.
And the leader, need to put a lot of time and effort into hiring people who share
these values3
On the basis of these parameters an enterprise can be identify as an ethical enterprise, however
there are various other dimensions that one entrepreneur should fulfill such as maintaining good
and pleasant relationship with stakeholders, providing volunteer are non-profit oriented service to
society and to get engage in some kind of CSR (Corporate Social Responsibility) activities. After
all it’s the society who is providing all the elements required for business such as land, labor, raw
material and other natural resources to an entrepreneur.
Thus it is responsibility of an entrepreneur to serve society in a fair and just way and to get involve
in ethical practices only. Although some unethical ways looks like a shortcut to achieve goals of
organizational as well as personal, though in a long run those shortcut leads to failure only.
UNETHICAL PRACTICES IN ENTREPRENEURSHIP
Act of dishonesty or deception through business has been existing from a long time in society, so
seeing evidences in modern day entrepreneurship is not something that is surprising. Although it
is right for an enterprise to get involve in ethical activities or to avoid doing anything wrong in
3
https://www.entrepreneurship.org/articles/2002/12/eight-elements-of-an-ethical-organization
7. business, though in modern business scenario enterprises give priority to maximizing profit over
ethical norms and get involved in unethical practices.
According to a poll survey by IBM, Almost two-thirds of 100 venture capital (VC) investors 64%
polled claim performing ‘unethical business conduct’. The IBM report cited misreporting of
financial and other data, misrepresentation of financial plans or achievements, and ignorance of
regulatory requirements as factors of unethical business conduct. (economic times, 2017)
In today business world where business is dynamic in nature, there are many enterprises that takes
unethical shortcuts to overcome others. There are so many ways by which a firm performs
unethical activities, such as:
Publish wrong or false report of financial and other data
Misrepresentation of financial plans and other achievement
Ignoring various factors such as government norms, regulatory policy and other legislative
policies.
Blind and over depletion of natural resources and ignoring environmental policies.
In business, there is a probe saying that ‘Customer is king’ but there are many enterprises that
cheats customer by making false promises and not delivering what customers are pay for. And
nothing is more unethical than cheating your customers. If an entrepreneur is playing with rights
of customer, makes false promises and is involve in other unethical activities then one thing is sure
that he is going to face severe consequences in future.
STAYZILLA: Case of a close succesful startup
Stayzilla was a startup by a young Indian entrepreneur “Yogendra Vasupal” and his team. It was
started as an online service provider for booking hotels named “Insara” but soon in 2010 get
morphed into a complete hotel aggregator and renamed as “Stayzilla”
In 2017 one of Stayzilla’s vendor Jigsaw Advertising, a Chennai based advertisement agency
filed a case against owner of Stayzilla claiming that they were unpaid dues to the tune of Rs. 1.5
Crore.
8. Vasupal, in a blog post, argued the claims made by the advertisement agency and sought legal
recourse. His blog claimed that there were bogus complaints framed against him.
Stayzilla had suspended its operations in February after a sustained struggle. Stayzilla, once seen
as a leading player in the home-stay aggregator space, had received $34 million in venture capital.
On June 19, 2017 the founder of stayzilla, Yogendra aka Yogi got arrested, afterwards the company
has announced the shutdown of the company.4
On the BlogSpot of Yogi, he described various reason for failure but on the looking as whole case
it seems as a case of wrong financial decision of owner and misuse of assets as well as capital of
firm.
Company Name: Stayzilla
Launched in: 2005
Founders: Yogendra Vasupal (Yogi), Rupal Yogendra, Sachit Singhi
Category: Hotel aggregator Headquarters: Bengaluru
Brief Outline: The founders initially launched the platform as an online travel agency for hotel
bookings named as “Inasra”. Later, they renamed the platform to “Stayzilla” and pivoted to a
hotel aggregator model in 2010.
Funding: Stayzilla raised $33.5 Mn funding in three funding rounds – $500K in 2012, $20 Mn in
2015 and $13 Mn in 2016. It was backed by investors including Matrix Partners and Nexus Venture
Partners.
Shutdown Reason: In a Medium blogpost on February 23, 2017, co-founder Yogi announced the
shutdown of the company. He described the shutdown reason as lack of local network effect,
inability to expand quickly, and cost effectively plus high costs and low revenues. The company
is also in plenty of legal trouble, following the startup shutdown with Yogi being arrested on
charges of fraud. The site is not working at the moment. (Agrawal, 2017)
4
http://www.financialexpress.com/industry/startup-stayzillas-yogendra-vasupal-jailed-for-fraud-to-spend-another-
night-in-prison-as-lawyers-fail-to-post-bail/589458/
9. Bibliography
Agrawal, M. (2017, may). inc42. Retrieved from inc42.com: https://inc42.com/buzz/startup-shutdowns-
india-2017/
Business Dictionary. (2018, March 31). Retrieved from www.businessdictionary.com:
http://www.businessdictionary.com/definition/entrepreneurship.html
economic times, t. o. (2017, May 17). Economic times. Retrieved from India times:
https://economictimes.indiatimes.com/small-biz/startups/unethical-business-conduct-a-major-
reason-for-indian-startups-failure-ibm/articleshow/58707138.cms
financial express, industry. (2017). Retrieved from financial express.com:
http://www.financialexpress.com/industry/startup-stayzillas-yogendra-vasupal-jailed-for-fraud-
to-spend-another-night-in-prison-as-lawyers-fail-to-post-bail/589458/
Matthwes, J. (2018, March 31). kuffman entrepreneurship. Retrieved from www.entrepreneurship.org:
https://www.entrepreneurship.org/articles/2002/12/eight-elements-of-an-ethical-organization