What Is an Entrepreneur

What Is the Function of Entrepreneurs?

Entrepreneurs and entrepreneurship are essential to the development of strong industries, economies, and communities. Innovation is essential to the development of new products and services, and can often have an enormous impact locally. Without entrepreneurs in an area, there is a risk of cultural, industrial, and economic stagnation.

What Is an Entrepreneur?

An entrepreneur is someone who starts a business, usually as the result of identifying a market need or a gap in available products and services. While some people use the terms "entrepreneur" and "business owner" interchangeably, this terminology is not correct. Business owners can buy a business instead of starting one. Entrepreneurs are also innovators who develop new products, new services, new delivery methods, and in some cases, new industries.

The Importance of Entrepreneurship

Without entrepreneurs, industrial products and consumer goods would simply not be available. In addition to making useful products and services available to others, entrepreneurs also start businesses that employ workers and develop partnerships with suppliers and retailers. These efforts generate capital for multiple businesses and individuals, contributing to and improving the economy. Even small companies can play a critical role in the economic health of local communities.

Characteristics of Entrepreneurship and Entrepreneurs

Not everybody wants to be an entrepreneur. In fact, many people may lack the personality and skills necessary for successful entrepreneurship. There are some general characteristics and skills that many successful entrepreneurs have:

Problem-solving: Entrepreneurs often start their businesses after identifying a problem and then coming up with a way to address it. Entrepreneurs are also able to figure out how to solve problems that will occur during the development of the business.

Innovation: Entrepreneurs are innovators, and are often engaged continuously in the process of conceiving new products and services, renewing and improving current offerings, and developing new business processes.

Risk-taking: Entrepreneurs are not risk-averse. They are willing to risk their time, money and even their reputation to get the business started and take their products or services to market. Entrepreneurs are also willing to take risks even after they establish a business, developing new products and approaches that can grow their businesses.

Contrariness: Entrepreneurs are often people who are eager to question why and how things are being done – even if these processes are clearly "industry-standard." This doesn't mean an entrepreneur should ignore industry best practices, but the entrepreneur is also willing to challenge these practices if she believes that there is a better way to do them.

Persistence: Entrepreneurs are persistent. They aren't easily discouraged and are willing to work through discouragement and challenges. Entrepreneurs are willing to attend trade shows, meet with bankers, call on clients and do what it takes to get the business started, and then make it successful.

Leadership: Successful entrepreneurs are strong leaders. Leadership is an essential entrepreneurial skill, as the entrepreneur will need to be able to cultivate trust and support from the people who join his business as managers and workers. Many new businesses are cash-poor and experience significant challenges – but a good leader can inspire loyalty in workers who may not yet be receiving high wages, as well as in employees who are facing roadblocks in their efforts to build the company.

Types of Entrepreneurship

Classic entrepreneurs: The so-called "classic" entrepreneur is someone who observes a gap in the market or takes note of a business or consumer need, and develops a company that addresses the deficit or the need. In some cases, the entrepreneur may also be an inventor, although some classic entrepreneurs will team up with someone who has invented a product. In many cases, the classic entrepreneur starts the business and continues to own and manage it for many years.

Serial entrepreneurs: A serial entrepreneur enjoys getting businesses started, and then sells the business to another person or company. This type of entrepreneur is typically somebody who is excited about starting something new and taking risks. Once the business is doing well, however, this entrepreneur wants to move on to another new and different challenge.

Social entrepreneurs: Social entrepreneurs incorporate social conscience with business. While their businesses may still be for-profit, there is typically a strong mission statement connecting the business with a social cause. For example, a social entrepreneur may import fair trade goods for resale while also educating the public about the importance of activism in the area of sustainably and responsibly sourcing products.

Entrepreneur: Important Functions Performed by an Entrepreneur

Some of the most important functions performed by an entrepreneur are as follows:

An entrepreneur possesses special ability in the modern mechanized and complex production system. He occupies a very important place in production.

Entrepreneur

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1. To Prepare Plan: The first and foremost function of an entrepreneur is to prepare the plan or scheme of production i. e., the scale of production, types of goods to be produced, and their quantity.

2. Selection of the Site: The entrepreneur makes the selection of the site for the factory to be installed. The place should be near the market, railway station or bus stand. The selection of the place may be near the source of raw materials also. The selection of the place has an important bearing on the cost of production.

3. Provision of Capital: Capital is required to install a factory or an industry. Capital is required at all stages of business. It is not necessary that the entrepreneur should invest his own capital. Therefore, he has to trace out a capitalist, to make provision for capital for the investment. He tries to obtain capital at the lowest possible rate of interest.

4. Provision of Land: After making provision of capital and selection of site, he has to arrange for land. The land is either purchased or hired.

5. Provision of Labour: In modern times, different types of labor are required to produce one type of commodity. The entrepreneur has to make provisions for labor from different places.

6. Purchase of Machines and Tools: It is the function of the entrepreneur to purchase machines and tools in order to start and continue production.

7. Provision of Raw Materials: It is the entrepreneur who makes provision for raw materials. He purchases the best quality raw materials at the minimum cost. He also knows the sources of raw materials.

8. Coordination of the Factors of production: One of the main functions of the entrepreneur is to coordinate different factors of production in proper combinations so that the cost of production is reduced to the minimum.

9. Division of Labour: The splitting up of production into different parts and entrusting them to different workers is also the function of an entrepreneur. Thus, the entrepreneur decides the level and type of division of labor.

10. Quality of Product: Keeping in view the competition in the market, the entrepreneur has to determine the quality of his product. He is to decide whether the goods produced should be of superior quality only or both of superior and ordinary qualities.

11. Sale of Goods: The responsibility of the entrepreneur is not only to produce goods but also to sell his produce. He employs a good number of salesmen to market the goods. He makes arrangements for publicity to push up the sales. He adopts both informative and persuasive methods to achieve his goal.

12. Advertisement: It is the duty of an entrepreneur to do advertisements explaining the superiority and quality of his goods through newspapers, magazines, radio, TV, etc. Advertisement is done to create and increase the demand or sale of his goods.

13. Search for Markets: The entrepreneur has to explore markets for his products. He produces goods in accordance with the consumers’ tastes which can be known from market trends.

14. Supervision: One of the main jobs of an entrepreneur is to supervise all the factors engaged in the production process. He has to supervise every little detail so as to ensure maximum production and economy.

15. Contact with the Government: The entrepreneur has to make contact with the government because the modern production system is controlled by the government in several ways. A license is taken before the start of production. The entrepreneur has to abide by certain rules and regulations of production and has to pay taxes regularly.

16. Payment to Factors of Production: The rewards of the various factors of production have to be decided by the entrepreneur. He makes payments to the landlord, labor, and capitalist in the form of rent, wages, and interest. Since payments to these factors of production constitute cost, so no entrepreneur wants to pay to a factor more than its productivity.

17. Quantity of Production: The entrepreneur determines the number of products keeping in view the demand for goods and the extent of the market. How much goods are to be produced is the main decision taken by the entrepreneur.

18. Risk-Taking: Risk-taking is the most important function of an entrepreneur. He has to pay to all the other factors of production in advance. There are chances that he may be rewarded with a handsome profit or he may suffer a heavy loss. Therefore, risk-bearing is the final responsibility of an entrepreneur.

19. Innovation: Innovation plays an important role in modern business. The entrepreneur makes arrangements for introducing innovations that help in increasing production on the one hand and reducing costs, on the other. Innovations may take the form of the introduction of new methods in the process of production or introducing improvements in the existing methods. It also includes the discovery of new markets, raw materials, and new techniques of production.

Entrepreneurial Motivation-Meaning, Definition, Nature, and Factors

Entrepreneurial Motivation

Meaning…Entrepreneurial motivation is the process that activates and motivates the entrepreneur to exert a higher level of effort for the achievement of his/her entrepreneurial goals. In other words, entrepreneurial motivation refers to the forces or drive within an entrepreneur that affects the direction, intensity, and persistence of his / her voluntary behavior as an entrepreneur. So say, a motivational entrepreneur will be willing to exert a particular level of effort (intensity), for a certain period of time (persistence) toward a particular goal (direction).

Definition…Motivation is regarded as “the inner state that energizes activities and directs or channels behavior towards the goal”.

Motivation is the process that arouses action, sustains the activity in progress, and regulates the pattern of activity.

Nature of Motivation..The nature of motivation emerging out of the above definitions can be expressed as follows:

1. Motivation is internal to man. Motivation cannot be seen because it is internal to man. It is externalized via behavior. It activates the man to move toward his / her goal.

2. A Single motive can cause different behaviors…A person with a single desire or motive to earn prestige in society may move towards joining politics, attain additional education and training, join identical groups, and change his outward appearance.

3. Different motives may result in single behavior….It is also possible that the same or single behavior may be caused by many motives. For example, if a person buys a car, his such behavior may be caused by different motives such as to look attractive, be respectable, gain acceptance from a similar group of persons, differentiate the status, and so on.

4. Motives come and go…Like tides, motives can emerge and then disappear. Motives that emerged at a point in time may not remain with the same intensity at another point in time. For instance, an entrepreneur overly concerned about maximization of profit earning during his initial age as an entrepreneur may turn his concern towards other higher things like contributing towards philanthropic activities in social health and education once he starts earning sufficient profits.

5. Motives interact with the environment…The environment in which we live at a point in time may either trigger or suppress our motives. You probably have experienced an environment or situation when the intensity of your hunger picked up just you smelled the odor of palatable food.

You may desire an excellent performance bagging the first position in your examination but at the same time may also be quite sensitive to being shunned and disliked by your classmates if you really perform too well and get too much praise and appreciation from your teachers. Thus, what all this indicates is that human behavior is the result of several forces differing in both direction and intent.

Entrepreneurial Motivating Factors

Most of the researchers have classified all the factors motivating entrepreneurs into internal and external factors as follows:

Internal Factors

These include the following factors:

1. Desire to do something new.

2. Become independent.

3. Achieve what one wants to have in life.

4. Be recognized for one’s contribution.

5. One’s educational background.

6. One’s occupational background and experience in the relevant field.

External Factors These include:

1. Government assistance and support.

2. Availability of labor and raw material.

3. Encouragement from big business houses.

4. Promising demand for the product.

Entrepreneurship: Characteristics, Importance, Types, and Functions of Entrepreneurship

Entrepreneurial development today has become very significant; in view of its being a key to economic development. The objectives of industrial development, regional growth, and employment generation depend upon entrepreneurial development.

Entrepreneurs are, thus, the seeds of industrial development, and the fruits of industrial development are greater employment opportunities for unemployed youth, an increase in per capita income, higher standard of living and increased individual savings, and revenue to the government in the form of income tax, sales tax, export duties, import duties, and balanced regional development.

Entrepreneurship

Concept of Entrepreneurship: The word “entrepreneur” is derived from the French verb enterprendre, which means ‘to undertake. This refers to those who “undertake” the risk of new enterprises. An enterprise is created by an entrepreneur. The process of creation is called “entrepreneurship”.

Entrepreneurship is a process of actions of an entrepreneur who is a person always in search of something new and exploits such ideas into gainful opportunities by accepting the risk and uncertainty with the enterprise.

Characteristics of Entrepreneurship:

Entrepreneurship is characterized by the following features:

1. Economic and dynamic activity: Entrepreneurship is an economic activity because it involves the creation and operation of an enterprise with a view to creating value or wealth by ensuring optimum utilization of scarce resources. Since this value creation activity is performed continuously in the midst of an uncertain business environment, therefore, entrepreneurship is regarded as a dynamic force.

2. Related to innovation: Entrepreneurship involves a continuous search for new ideas. Entrepreneurship compels an individual to continuously evaluate the existing modes of business operations so that more efficient and effective systems can be evolved and adopted. In other words, entrepreneurship is a continuous effort for synergy (optimization of performance) in organizations.

3. Profit potential:“Profit potential is the likely level of return or compensation to the entrepreneur for taking on the risk of developing an idea into an actual business venture.” Without profit potential, the efforts of entrepreneurs would remain only abstract and theoretical leisure activities.

4. Risk bearing: The essence of entrepreneurship is the ‘willingness to assume risk’ arising out of the creation and implementation of new ideas. New ideas are always tentative and their results may not be instantaneous and positive.

An entrepreneur has to have the patience to see his efforts bear fruit. In the intervening period (time gap between the conception and implementation of an idea and its results), an entrepreneur has to assume risk. If an entrepreneur does not have the willingness to assume risk, entrepreneurship would never succeed.

Entrepreneurial Process:

Entrepreneurship is a process, a journey, not the destination; a means, not an end. All the successful entrepreneurs like Bill Gates (Microsoft), Warren Buffet (Hathaway), Gordon Moore (Intel) Steve Jobs (Apple Computers), Jack Welch (GE) GD Birla, Jamshedji Tata, and others all went through this process.

Establishing and running an enterprise is divided into three parts – the entrepreneurial job, the promotion, and the operation. An entrepreneurial job is restricted to two steps, i.e., generation of an idea and preparation of a feasibility report. In this article, we shall restrict ourselves to only these two aspects of the entrepreneurial process.

The Entrepreneurial Process

1. Idea Generation: To generate an idea, the entrepreneurial process has to pass through three stages:

a. Germination: This is like the seeding process, not like planting seed. It is more like natural seeding. Most creative ideas can be linked to an individual’s interest or curiosity about a specific problem or area of study.

b. Preparation: Once the seed of interest and curiosity has taken the shape of a focused idea, creative people start a search for answers to the problems. Inventors will go on for setting up laboratories; designers will think of engineering new product ideas and marketers will study consumer buying habits.

c. Incubation:This is a stage where the entrepreneurial process enters the subconscious intellectualization. The subconscious mind joins the unrelated ideas so as to find a resolution.

2. Feasibility study:

A feasibility study is done to see if the idea can be commercially viable.

It passes through two steps:

a. Illumination:

After the generation of the idea, this is the stage when the idea is thought of as a realistic creation. The stage of idea blossoming is critical because ideas by themselves have no meaning.

b. Verification:

This is the last thing to verify the idea as realistic and useful for application. Verification is concerned with the practicality to implement an idea and explore its usefulness to society and the entrepreneur.

Importance of Entrepreneurship:

Entrepreneurship offers the following benefits:

Benefits of Entrepreneurship to an Organisation:

1. Development of managerial capabilities:

The biggest significance of entrepreneurship lies in the fact that it helps in identifying and developing the managerial capabilities of entrepreneurs. An entrepreneur studies a problem, identifies its alternatives, compares the alternatives in terms of cost and benefits implications, and finally chooses the best alternative.

This exercise helps in sharpening the decision-making skills of an entrepreneur. Besides, these managerial capabilities are used by entrepreneurs in creating new technologies and products in place of older technologies and products resulting in higher performance.

2. Creation of organizations:

Entrepreneurship results in the creation of organizations when entrepreneurs assemble and coordinate physical, human, and financial resources and direct them towards the achievement of objectives through managerial skills.

3. Improving standards of living:

By creating productive organizations, entrepreneurship helps in making a wide variety of goods and services available to society which results in higher standards of living for the people.

The possession of luxury cars, computers, mobile phones, the rapid growth of shopping malls, etc. are pointers to the rising living standards of people, and all this is due to the efforts of entrepreneurs.

4. Means of economic development:

Entrepreneurship involves the creation and use of innovative ideas, maximization of output from given resources, development of managerial skills, etc., and all these factors are so essential for the economic development of a country.

Factors affecting Entrepreneurship:

Entrepreneurship is a complex phenomenon influenced by the interplay of a wide variety of factors.

Some of the important factors are listed below:

1. Personality Factors:

Personal factors, becoming core competencies of entrepreneurs, include:

(a) Initiative (does things before being asked for)

(b) Proactive (identification and utilization of opportunities)

(d) Problem-solver (conceives new ideas and achieves innovative solutions)

(e) Persuasion (to customers and financiers for patronization of his business and developing & maintains relationships)

(f) Self-confidence (takes and sticks to his decisions)

(g) Self-critical (learning from his mistakes and experiences of others)

(h) A Planner (collects information, prepares a plan, and monitors performance)

(i) Risk-taker (the basic quality).

2. Environmental factors:

These factors relate to the conditions in which an entrepreneur has to work. Environmental factors such as political climate, legal system, economic and social conditions, market situations, etc. contribute significantly to the growth of entrepreneurship. For example, political stability in a country is absolutely essential for smooth economic activity.

Frequent political protests, bands, strikes, etc. hinder economic activity and entrepreneurship. Unfair trade practices, irrational monetary and fiscal policies, etc. are a roadblock to the growth of entrepreneurship. Higher-income levels of people, desire for new products and sophisticated technology, need for faster means of transport and communication, etc. are the factors that stimulate entrepreneurship.

Thus, it is a combination of both personal and environmental factors that influence entrepreneurship and brings in desired results for the individual, the organization, and the society.

Types of Entrepreneurs:

Depending upon the level of willingness to create innovative ideas, there can be the following types of entrepreneurs:

1. Innovative entrepreneurs:

These entrepreneurs have the ability to think of newer, better, and more economical ideas for business organization and management. They are the business leaders and contributors to the economic development of a country.

Inventions like the introduction of the small car ‘Nano’ by Ratan Tata, organized retailing by Kishore Biyani, and making mobile phones available to the common may by Anil Ambani are the works of innovative entrepreneurs.

2. Imitating entrepreneurs:

These entrepreneurs are people who follow the path shown by innovative entrepreneurs. They imitate innovative entrepreneurs because the environment in which they operate is such that it does not permit them to have creative and innovative ideas on their own.

Such entrepreneurs are found in countries and situations marked by weak industrial and institutional bases which creates difficulties in initiating innovative ideas.

In our country also, a large number of such entrepreneurs are found in every field of business activity and they fulfill their need for achievement by imitating the ideas introduced by innovative entrepreneurs.

The development of small shopping complexes is the work of imitating entrepreneurs. All the small car manufacturers now are imitating entrepreneurs.

3. Fabian entrepreneurs:

The dictionary meaning of the term ‘fabian’ is a person seeking victory by delay rather than by a decisive battle’. Fabian entrepreneurs are those individuals who do not show initiative in visualizing and implementing new ideas and innovations and wait for some development that would motivate them to initiate unless there is an imminent threat to their very existence.

4. Drone entrepreneurs:

The dictionary meaning of the term ‘drone’ is a person who lives on the labor of others. Drone entrepreneurs are those individuals who are satisfied with the existing mode and speed of business activity and show no inclination in gaining market leadership. In other words, drone entrepreneurs are die-hard conservatives and even ready to suffer the loss of business.

5. Social Entrepreneur:

Social entrepreneurs drive social innovation and transformation in various fields including education, health, human rights, workers’ rights, environment, and enterprise development.

They undertake poverty alleviation objectives with the zeal of an entrepreneur, and business practices and dare to overcome traditional practices and innovate. Dr. Mohammed Yunus of Bangladesh who started Gramin Bank is a case of a social entrepreneur.

Functions of an Entrepreneur:

The important functions performed by an entrepreneur are listed below:

1. Innovation:

An entrepreneur is basically an innovator who tries to develop new technology, products, markets, etc. Innovation may involve doing new things or doing existing things differently. An entrepreneur uses his creative faculties to do new things and exploit opportunities in the market. He does not believe in the status quo and is always in search of change.

2. Assumption of Risk:

An entrepreneur, by definition, is a risk taker and not a risk shirker. He is always prepared for assuming losses that may arise on account of new ideas and projects undertaken by him. This willingness to take risks allows an entrepreneur to take initiative in doing new things and marching ahead in his efforts.

3. Research:

An entrepreneur is a practical dreamer and does a lot of groundwork before taking a leap in his ventures. In other words, an entrepreneur finalizes an idea only after considering a variety of options, analyzing their strengths and weaknesses by applying analytical techniques, testing their applicability, supplementing them with empirical findings, and then choosing the best alternative. It is then that he applies his ideas in practice. The selection of an idea, thus, involves the application of research methodology by an entrepreneur.

4. Development of Management Skills:

The work of an entrepreneur involves the use of managerial skills which he develops while planning, organizing, staffing, directing, controlling, and coordinating the activities of the business. His managerial skills get further strengthened when he engages himself in establishing equilibrium between his organization and its environment.

However, when the size of a business grows considerably, an entrepreneur can employ professional managers for the effective management of business operations.

5. Overcoming Resistance to Change:

New innovations are generally opposed by people because it makes them change their existing behavior patterns. An entrepreneur always first tries new ideas at his level.

It is only after the successful implementation of these ideas that an entrepreneur makes these ideas available to others for their benefit. In this manner, an entrepreneur paves the way for the acceptance of his ideas by others. This is a reflection of his willpower, enthusiasm, and energy which helps him in overcoming society’s resistance to change.

6. Catalyst of Economic Development:

An entrepreneur plays an important role in accelerating the pace of economic development of a country by discovering new uses of available resources and maximizing their utilization.

To better appreciate the concept of an entrepreneur, it is desirable to distinguish him from an entrepreneur and promoter. Table 4.1 outlines the distinction between an entrepreneur and entrepreneur, and Table 4.2 portrays basic points of distinction between an entrepreneur and promoter.

Basis Entrepreneur Intrapreneur

• Capacity• Status• Decisions

• Reward

— Owner— Own boss— Takes own decisions

— Uncertain and unlimited

— An manager— Salaried employee— Executes decisions with the concurrence of the owner

— Fixed rewards and salary

Basis Entrepreneur Promoter

• Stage of business• Owning business• Nature of job

• Example

— From conception to continuation— Owns the enterprise— Includes everything

— Any business

— To bring a business into existence— May or may not own— Highly specialized

— A consultant or a chartered account offering services

Some Myths about Entrepreneurship:

Over the years, a few myths about entrepreneurship have developed. These are as under:

(i) Entrepreneurs, like leaders, are born, not made:

The fact does not hold true for the simple reason that entrepreneurship is a discipline comprising of models, processes, and case studies.

One can learn about entrepreneurship by studying the discipline.

(ii) Entrepreneurs are academic and socially misfits:

Dhirubai Ambani had no formal education. Bill Gates has been a School dropout. Therefore, this description does not apply to everyone. Education makes an entrepreneur a true entrepreneur. Mr. Anand Mahindra, and Mr. Kumar Mangalam Birla, for example, is educated entrepreneurs and that is why they are heroes.

(iii) To be an entrepreneur, one needs money only:

Finance is the life-blood of an enterprise to survive and grow. But for a good idea whose time has come, money is not a problem.

(iv) To be an entrepreneur, a great idea is the only ingredient:

A good or great idea shall remain an idea unless there is the proper combination of all the resources including management.

(v) One wants to be an entrepreneur as having no boss is great fun:

It is not only the boss who is demanding; even an entrepreneur faces demanding vendors, investors, bankers, and above all customers.

An entrepreneur’s life will be much simpler since he works for himself. The truth is working for others is simpler than working for oneself. One thinks 24 hours a day to make his venture successful and thus, there would be a punishing schedule.