Chapter-1.ppt

©2010 Pearson Education
• Definition of Entrepreneur
• Entrepreneur refers to a person who conceives a creative idea and takes all the
necessary steps required to convert the idea into reality, such as taking initiative to
sets up a new business enterprise by supplying sufficient capital, land, labour and all
the essential resources to produce the product, he/she has in his/her mind and
bearing all risks so as to gain profits in future.
• Definition of Entrepreneurship
• Entrepreneurship is the process or activity, of initiating, developing, managing and
operating a startup company, while taking all the risks involved, so as to make profits.
It is one of the four factors of production, the other being land, labour, capital.
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Concept of
Entrepreneurship
Entrepreneurship is the ability and readiness to develop, organize and
run a business enterprise, along with any of its uncertainties in order
to make a profit. The most prominent example of entrepreneurship is
the starting of new businesses.
• In economics, entrepreneurship connected with land, labor, natural
resources and capital can generate a profit. The entrepreneurial
vision is defined by discovery and risk-taking and is an
indispensable part of a nation’s capacity to succeed in an ever-
changing and more competitive global marketplace.
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• Meaning of Entrepreneur
• The entrepreneur is defined as someone who has the ability and
desire to establish, administer and succeed in a startup venture
along with risk entitled to it, to make profits. The best example of
entrepreneurship is the starting of a new business venture. The
entrepreneurs are often known as a source of new ideas or
innovators, and bring new ideas in the market by replacing old with a
new invention.
• It can be classified into small or home business to multinational
companies. In economics, the profits that an entrepreneur makes is
with a combination of land, natural resources, labour and capital.
• In a nutshell, anyone who has the will and determination to start a
new company and deals with all the risks that go with it can become
an Entrepreneur.
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©2010 Pearson Education 1-5
What is Entrepreneurship?
• Academic Definition (Stevenson & Jarillo)
– Entrepreneurship is the process by which individuals pursue
opportunities without regard to resources they currently
control.
• Venture Capitalist (Fred Wilson)
– Entrepreneurship is the art of turning an idea into a
business.
• Explanation of What Entrepreneurs Do
– Entrepreneurs assemble and then integrate all the resources
needed –the money, the people, the business model, the
strategy—needed to transform an invention or an idea into a
viable business.

What are the 4 Types of Entrepreneurship?
• It is classified into the following types:
• Small Business Entrepreneurship-
• These businesses are a hairdresser, grocery store, travel agent,
consultant, carpenter, plumber, electrician, etc. These people run or
own their own business and hire family members or local employee.
For them, the profit would be able to feed their family and not
making 100 million business or taking over an industry. They fund
their business by taking small business loans or loans from friends
and family.
• Scalable Startup Entrepreneurship-
• This start-up entrepreneur starts a business knowing that their vision
can change the world. They attract investors who think and
encourage people who think out of the box. The research focuses
on a scalable business and experimental models, so, they hire the
best and the brightest employees. They require more venture capital
to fuel and back their project or business.
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• Large Company Entrepreneurship-
• These huge companies have defined life-cycle. Most of these
companies grow and sustain by offering new and innovative
products that revolve around their main products. The change in
technology, customer preferences, new competition, etc., build
pressure for large companies to create an innovative product and
sell it to the new set of customers in the new market. To cope with
the rapid technological changes, the existing organisations either
buy innovation enterprises or attempt to construct the product
internally.
• Social Entrepreneurship-
• This type of entrepreneurship focuses on producing product and
services that resolve social needs and problems. Their only motto
and goal is to work for society and not make any profits.
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• Characteristics of Entrepreneurship:
• Not all entrepreneurs are successful; there are definite characteristics that make
entrepreneurship successful. A few of them are mentioned below:
• Ability to take a risk- Starting any new venture involves a considerable amount
of failure risk. Therefore, an entrepreneur needs to be courageous and able to
evaluate and take risks, which is an essential part of being an entrepreneur.
• Innovation- It should be highly innovative to generate new ideas, start a
company and earn profits out of it. Change can be the launching of a new
product that is new to the market or a process that does the same thing but in a
more efficient and economical way.
• Visionary and Leadership quality- To be successful, the entrepreneur should
have a clear vision of his new venture. However, to turn the idea into reality, a
lot of resources and employees are required. Here, leadership quality is
paramount because leaders impart and guide their employees towards the right
path of success.
• Open-Minded- In a business, every circumstance can be an opportunity and
used for the benefit of a company. For example, Paytm recognised the gravity of
demonetization and acknowledged the need for online transactions would be
more, so it utilised the situation and expanded massively during this time.
• Flexible- An entrepreneur should be flexible and open to change according to
the situation. To be on the top, a businessperson should be equipped to embrace
change in a product and service, as and when needed.
• Know your Product-A company owner should know the product offerings and
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• Importance of Entrepreneurship:
• Creation of Employment- Entrepreneurship generates employment. It
provides an entry-level job, required for gaining experience and training for
unskilled workers.
• Innovation- It is the hub of innovation that provides new product ventures,
market, technology and quality of goods, etc., and increase the standard of
living of people.
• Impact on Society and Community Development- A society becomes
greater if the employment base is large and diversified. It brings about
changes in society and promotes facilities like higher expenditure on
education, better sanitation, fewer slums, a higher level of homeownership.
Therefore, entrepreneurship assists the organisation towards a more stable
and high quality of community life.
• Increase Standard of Living- Entrepreneurship helps to improve the
standard of living of a person by increasing the income. The standard of
living means, increase in the consumption of various goods and services by
a household for a particular period.
• Supports research and development- New products and services need to
be researched and tested before launching in the market. Therefore, an
entrepreneur also dispenses finance for research and development with
research institutions and universities. This promotes research, general
construction, and development in the economy. 1-9

Why Become an Entrepreneur?
The three primary reasons that people become
entrepreneurs and start their own firms
Desire to be their own boss
Financial rewards
Desire to pursue their
own ideas

• Innovation
• Every successful entrepreneur should be innovative in some way or the
other and he should be able to see the demand for a specific good or
service in the market because this is what makes them different from other
entrepreneurs and their ventures are even more profitable. When an
entrepreneur is innovative, he sees new opportunities coming up in different
places where one cannot even imagine. For example, Bhavish Aggarwal
and Ankit Bhati, the founders of OLA Cabs saw the rising demand for
reasonable and affordable public transports in India which later on they
turned that into inspiration and went on to establish OLA Cabs.
• Organization
• Organization is among the key factors of a successful entrepreneurship.
Without organization, everything will become chaotic and unmanageable
which further will cause losses, decreasing goodwill, unsatisfied customers,
and mental stress to the staff due to which the workers may leave the
corporation. So it’s vital to possess an honest organizational structure within
the company, which defines who will do a particular task and the way that
task would be carried forward.
•
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• Decision Making
• Entrepreneurs must consider every decision very carefully because they make plenty
of decisions every day and are generally liable to be at risk and should learn from
their past mistakes. Decision-making could be a skill that usually comes easily to
entrepreneurs who are high-risk takers in the business world. An entrepreneur should
concentrate on quality decisions instead of decisions that are made within seconds. A
decent entrepreneur always takes on the pros and cons while making a visit to
another company. An honest head will always consult his employees because they
know what’s entering the corporate zone. Good decision-making requires experience,
intuition, intelligence, awareness of the business environment, good listening skills,
and therefore the ability to react when necessary.
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• Risk bearer
• An entrepreneur needs to understand that risk can’t be completely eliminated from a
business, so he should be prepared for its consequences as well. It can be that the
consumers won’t seem to be satisfied with the merchandise or services provided or
even the competitors can provide the identical thing with better quality and better
price or there might be changes in the government policies. These varieties of risks
can never be eliminated and also the entrepreneur must be prepared for such
situations and must specialize in a way to pander to such situations. Like if the
consumers aren’t satisfied with the merchandise, the entrepreneur must target a way
to make the merchandise better to satisfy the consumers.
• Vision
• Every successful entrepreneur has this one idea in his childhood that he was keen
about, but with time that zeal fades away. Good entrepreneurs have that zeal and
vision in them because without vision and keenness they cannot grow. Unfortunately,
young entrepreneurs have these great visions which sadly never transform into an
idea. One main key to success is to recollect the fact that a lot of entrepreneurs fail
but the main thing is that how hard they tried. If one idea fails try another, maybe
that’s the one for you. Don’t be afraid to make bold decisions because that’s what is
going to make you different and powerful from others. Visionaries must follow the
path they require to attain. Entrepreneurs must accept the paradox of the center so
as to achieve success. The vision of thought will facilitate you to remain focused and
ensure that your actions are leading you in the right direction.
•
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Characteristics of Successful Entrepreneurs
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Four Primary Characteristics

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• Passion for the Business
– The number one characteristic shared by successful
entrepreneurs is a passion for the business.
– This passion typically stems from the entrepreneur’s belief
that the business will positively influence people’s lives.
• Product/Customer Focus
– A second defining characteristic of successful
entrepreneurs is a product/customer focus.
– An entrepreneur’s keen focus on products and customers
typically stems from the fact that most entrepreneurs are, at
heart, craftspeople.

3 of 3
• Tenacity Despite Failure
– Because entrepreneurs are typically trying something new,
the failure rate is naturally high.
– A defining characteristic for successful entrepreneurs’ is
their ability to persevere through setbacks and failures.
• Execution Intelligence
– The ability to fashion a solid business idea into a viable
business is a key characteristic of successful entrepreneurs.

Additional characteristics
• Vision and Passion for business
• Innovative
• Risk Taker
• Leader
• Ethical
• Competitive Spirit
• Compatibility { work successfully with someone} and Resilience {
someone who is able to recover from the difficult situation}
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Common Myths About Entrepreneurs
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• Myth 1: Entrepreneurs Are Born Not Made
– This myth is based on the mistaken belief that some people
are genetically predisposed to be entrepreneurs.
– The consensus of many studies is that no one is “born” to
be an entrepreneur; everyone has the potential to become
one.
– Whether someone does or doesn’t become an entrepreneur,
is a function of the environment, life experiences, and
personal choices.

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Although no one is “born” to be an entrepreneur, there are common traits and
characteristics of successful entrepreneurs
• Achievement motivated
• Alert to opportunities
• Creative
• Decisive
• Energetic
• Has a strong work ethic
• Is a moderate risk taker
• Is a networker
• Lengthy attention span
• Optimistic disposition
• Persuasive
• Promoter
• Resource assembler/leverager
• Self-confident
• Self-starter
• Tenacious
• Tolerant of ambiguity
• Visionary

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• Myth 2: Entrepreneurs Are Gamblers
– Most entrepreneurs are moderate risk takers.
– The idea that entrepreneurs are gamblers originates from
two sources:
• Entrepreneurs typically have jobs that are less structured, and so
they face a more uncertain set of possibilities than people in
traditional jobs.
• Many entrepreneurs have a strong need to achieve and set
challenging goals, a behavior that is often equated with risk taking.

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• Myth 3: Entrepreneurs Are Motivated Primarily by
Money.
– While it is naïve to think that entrepreneurs don’t seek
financial rewards, money is rarely the reason entrepreneurs
start new firms.
– In fact, some entrepreneurs warn that the pursuit of money
can be distracting.

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• Myth 4: Entrepreneurs Should Be Young and
Energetic.
– The most active age for business ownership is 35 to 45
years old.
– While it is important to be energetic, investors often cite
the strength of the entrepreneur as their most important
criteria in making investment decisions.
• What makes an entrepreneur “strong” in the eyes of an investor is
experience, maturity, a solid reputation, and a track record of
success.
• These criteria favor older rather than younger entrepreneurs.

• Additional Myth
• Myth #1: Entrepreneurs don't quit
• "Entrepreneurs tend to believe, "I've got my idea, I'll go until I die."
• Myth #2: Entrepreneurs know exactly what they want, and how to
get it.
• Myth #3: Entrepreneurs are their own boss.
• Myth #4: Entrepreneurs have to be connected.
• Myth #5: Entrepreneurs are usually rich.
• Myth #6: Entrepreneurship requires huge funding.
• Myth #7: Entrepreneurship is fun!
• Myth #8: Entrepreneurs always take huge risks
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• Definition of start-up firm: The term startup refers to a company in the first stages
of operations. Startups are founded by one or more entrepreneurs who want to
develop a product or service for which they believe there is demand. These
companies generally start with high costs and limited revenue, which is why they look
for capital from a variety of sources such as venture capitalists.
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Types of Start-Up Firms

Importance and significance of
Entrepreneurship
• Entrepreneurial firms’ impact on society
• It makes our lives easier, enhance our productivity at work, improve our health, and
entertain us too.
• In addition to improved health care, consider Smartphone, social networks, Internet
shopping,overnight package delivery, and digital photography. All these products are
new to this generation, yet it’s hard to imagine our world without them.
• For example, bar-code scanner technology and the Internet have made it easier for
companies to track the purchasing behavior of their customers, a fact that raises
privacy concerns.
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Economic Impact of Entrepreneurial Firms
• Innovation
– Is the process of creating something new, which is central
to the entrepreneurial process.
– Small firms are twice as innovative per employee as large
firms.
• Job Creation
– In the past two decades, economic activity has moved in
the direction of smaller entrepreneurial firms, which may
be due to their unique ability to innovate and focus on
specialized tasks.

• Impact on Larger Firms
Many entrepreneurial firms have built their entire business models around
producing products and services that help larger firms become more efficient and
effective.
– Without taking mutually benefit
Don’t give an opportunity of monopoly market. So, compete with larger
companies which have really the strong brand names such as i-phone, Samsung,
canon, Johnson and Johnson etc. that brings price competition and getting validity
and reliability products.
– With taking mutually benefit
The larger firms help to develop business model of entrepreneur firm to
producing products and services that increase the efficiency or effectiveness of
larger firms because of strategic alliance{exploits max all resources}.

The Entrepreneurial Process /
The process of new venture creation
The Entrepreneurial Process Consists of Four Steps
Step 1: Deciding to become an entrepreneur.
Step 2: Developing successful business ideas.
Step 3: Moving from an idea to an entrepreneurial firm.
Step 4: Managing and growing the entrepreneurial firm.

• 1. Identify and evaluate opportunity:
• Opportunity identification is the process by which an entrepreneur
comes up with the opportunity for a new venture. Opportunity
identification and evaluation is a very difficult task. Most good
business opportunities do not suddenly appear, but rather result
from an entrepreneur’s alertness to possibilities or, in some cases,
the establishment of mechanisms that identify potential
opportunities.
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• 2. Develop Business Plan:
• A business plan is the written description of the future direction of the
business. It helps entrepreneur in Putting Ideas together and Preparing B-
Plan Draft.
•
• A good business plan must be developed in order to exploit the defined
opportunity. This is a very time-consuming phase of the entrepreneurial
process. An entrepreneur usually has not prepared a business plan before
and does not have the resources available to do a good job. A good
business plan is essential to developing the opportunity and determining the
resources required, obtaining those resources, and successfully managing
the resulting venture.
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3. Determine the Resources Required:
Assessing the resources needed starts with an appraisal of the entrepreneur’s present
resources. Any resources that are critical must be distinguished from those that are just
helpful.Care must be taken not to underestimate the amount and variety of resources needed.
The entrepreneur should also assess the downside risks associated with insufficient or
inappropriate resources.The entrepreneur also needs to identify alternative sup-pliers of these
resources along with their needs and desires.By understanding resource supplier needs,the entrepreneur
can structure a deal that enables the resources to be acquired at the lowest possible cost and with the
least loss of control.

4. Manage the Enterprise.
After resources are acquired, the entrepreneur must use them to implement the business
plan. The operational problems of the growing enterprise must also be examined.
This involves implementing a management style and structure, as well as determining
the key variables for success.A control system must be established, so that any problem
areas can be quickly identified and resolved.Some entrepreneurs have difficulty
managing and growing the venture they created.

Chapter-1.ppt

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