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2.1 Meaning
• Entrepreneurship refers to the functions
performed by an entrepreneur in
establishing an enterprise.
• Just as management is regarded as what
managers do, entrepreneurship may be
regarded as what entrepreneurs do.
• It is a process involving various actions to
be undertaken to establish an enterprise.
• Though the term entrepreneur is often used
interchangeably with entrepreneurship, yet
they are conceptually different.
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• Innovation and risk-bearing are regarded as
the two basic elements involved in
entrepreneurship.
i. Innovation:
• Doing something new or something
different is a necessary to be called a
person as an entrepreneur.
• Entrepreneurs may or may not be inventors
of new products or new methods of
production, but they possess the ability to
foresee the possibility of making use of the
inventions for their enterprises.
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• For example, in order to satisfy the changing
preference of customers, now-a-days fruit juice
is sold in small cartons instead of bottles so
that customers can carry it and throw away the
container after drinking it.
ii. Risk-Bearing:
• Starting a new enterprise always involves risk
and trying for doing something new and
different is also risky.
• The enterprise may earn profits or incur losses
because of various factors like increasing
competition, changes in customer preferences,
shortage of raw materials and so on.
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2.2 Relationship between Entrepreneur and
Entrepreneurship
Entrepreneur Entrepreneurship
Person Process
Organizer Organization
Innovator Innovation
Risk-bearer Risk-bearing
Motivator Motivation
Creator Creation
Visualiser Vision
Leader Leadership
Imitator Imitation
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2.3 Entrepreneurship as a Process:
Entrepreneurship is a process consisting of
several stages:
Stage 1:
• Any change in the socio-economic
environment may result in the life styles.
• Change in the life style paves the way for
new products.
• New products are developed through new
ideas.
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Stage 2:
• New product ideas can be derived from
many sources like customers and
competitors.
• Good ideas come from inspiration,
perspiration and techniques.
• Ideas generated are to be screened to spot
and drop poor ideas as early as possible.
Stage 3:
• After screening the ideas, the short listed
ideas are to be developed into products.
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• To develop ideas into products,
entrepreneur has to start his venture.
Stage 4:
• Mobilization of internal resources is the next
stage in the process of entrepreneurship.
Stage 5:
• An entrepreneur has to co-ordinate and
organize various activities to achieve the
organizational goals.
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There may be various ways through which one
may become an entrepreneur, such as
acquiring a running enterprise, starting a new
business, acquiring a franchise, i.e., running a
business based on the right to manufacture
something granted by a manufacturer or other
organization.
2.4 Barriers to Entrepreneurship
• Various studies found that the new product
failure rate was 40 per cent for consumer
products, 20 per cent for industrial products
and 18 per cent for services.
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Many entrepreneurs fail due to several barriers
and problems, which are as follows:
i. The idea is good but the market size is
over-estimated
ii. The idea is pushed through without any
research being carried on
iii. Actual product is not designed as per the
requirement of the customers
iv. Over priced
v. Lack of market knowledge
vi. Lack of technical skills
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vii. Lack of initial capital
viii. Legal constraints and regulations
2.5 Environmental Analysis of Entrepreneurship
• A business has to monitor the macro
environmental factors such as demographic,
economic, political, legal, social,
technological and cultural factors, which will
affect its ability to earn profits.
• It should also analyze the micro
environmental factors such as suppliers,
customers, intermediaries, competitors,
public, etc.
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• The business unit normally depends on
Marketing intelligence system to get required
information on important developments that are
taking place in the market.
• Before any policy or program is formulated, the
management needs to identify the opportunities.
• Some of the opportunities, which require analysis
are growing population, increase in disposable
income, good monsoon, easily availability of
men, materials and money, availability of
appropriate technology, favorable governmental
policies, availability of market information,
distributors, media, presence of favorable
cultural environment.
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• Environment is the sum total of external
factors within which the enterprise operates.
i. Analysis of Political and Government
Forces:
• It is the government that regulated the
business activities as it is the custodian of
the nation.
• The producers and marketers are to work
within the concessions and limits set by
political forces.
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ii. Analysis of Economic Forces:
• Economic environment affect the demand
structure of any industry/product.
• Markets require purchasing power, which is a
function of current income, prices, savings, and
credit availability.
• Entrepreneurs should be aware of main trends
in the economic environment, viz., gross
national product, real per-capita income,
balance of payment position, trade cycles,
trends in the prices of goods and services,
fiscal policies and rate of interest, changing
consumer expenditure pattern, etc.
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iii. Analysis of Social Forces:
• Changes in social forces refer to demographic
changes and geographical location changes.
• An entrepreneur is required to understand the
age composition, which will help him in
deciding optimal marketing mix, sex structure
and the changing role of women and
occupation and literacy profile of the
population.
• Geographical shifts in the population and
changes in the value system also affect the
demand for a product.
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• Values are the beliefs, which are held in the
society. These are bound to have deep influence
on consumer taste, temperament, life and living.
iv. Analysis of Technological Forces:
• Technology has released wonders such as,
pencillin, birth control pill, X-Ray, etc.
• The level of technological development in the
country creates an opportunity for an
entrepreneur to develop new products.
• Technological developments are greatly
influenced by Government policies and industries
response in terms of investment in research and
development.
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• New technology will mean new ideas, new
products and new marketing efforts.
v. Analysis of Legal Forces:
• Entrepreneurial decisions are highly affected
by the developments in the legal
environment.
• Made up laws, Government agencies and
pressure groups influence and constrain
various organizations and individuals in
society.
• Legislation affecting business has steadily
increased over the years.
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• The purposes of legislation are: (1) to
protect entrepreneurs from each other; (2)
to protect consumers from unfair business
practices; and (3) to protect the larger
interest of the society against mischievous
business society.
• There are regulations which lay down
procedures for obtaining import license, raw
material permits, financial assistance and
foreign exchange permits.
• Entrepreneurs should have the working
knowledge of different rules and
regulations.
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VI. Analysis of Cultural Forces:
• People in a given society hold many core beliefs
and values that will tend to persist.
• Core beliefs and values are passed on from
parents to children, and are reinforced by the
major institutions of society, schools, pagoda,
business and government.
vii. Analysis of Physical Forces:
• The earths materials consist of (1) infinite
resources such as air and water, (2) finite
renewable resources such as food and forests
but these are to be used wisely, (3) finite
nonrenewable resources such as oil, coal and
minerals.
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• Entrepreneurs should have a constant watch
on the availability of above physical
resources and do their manufacturing
activities.
• An information about environment is
necessary for the successful conduct of the
business activities.
