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| Prof. Udayakumar Kollimath, Sri Sri Agribusiness Academy, Bangalore |
Prof. Udayakumar Kollimath has been working in Agriculture sector over 25 years. Currently he is dealing with the subject entrepreneurship and entrepreneurship development. In this course he desires the students to have knowledge such aspects as what is entrepreneurship, what are the salient features of an entrepreneurial person. Types of entrepreneurs, Entrepreneurial theories, difference between entrepreneur and manager, Entrepreneurship training, the role of government of in promoting entrepreneurship and the contribution of entrepreneurship in economic development. The current challenges for an entrepreneur etc.,
Meaning: Entrepreneur is a person who promotes a business. He establishes a new venture by organizing necessary factors of production like Land, Labour and Capital. Organizing of resources and assumption risk of promoting a business are the two important activities of an entrepreneur.
The word Entrepreneur has its origin in French term 'Entrependre', means to 'undertake'. In 16th century, it was applied to the men who undertook a military expedition, Oxford dictionary gives the meaning of entrepreneur as a " a director of musical institution, who gives entertainment to the public by assembling and organizing musical instruments and people to play those instruments." Om 17th century it was applied to architecture and public contractors, who assembled men and material in construction activities.
Richard C Cantillon, in 18th century, was the first economist to introduce the term entrepreneur in business. He called entrepreneur as a person who undertakes the risk of establishing a new enterprise. He defined entrepreneur as "an agent who buys factors of production at certain price in order to combine them into a product with a view to selling it at an uncertain price in future." Cantillon described an entrepreneur as 'a dealer who purchases the means of production for combining them into marketable products." Etrepreneur assembles and organizes necessary resources to establish a profitable venture.
Definitions:
J.B. Say: "Entrepreneur is one who combines the land of one, the labour of another and capital of yet another and then produces a product,, by selling the product in the market, he pays interest on capital, rent on land and wages to labourers and what remains is his or her profit."
J.B. Say has given a simple definition of an entrepreneur. According to him, an entrepreneur is a person-
1. Who organizes necessary factors of production to start a business i.e. assem bling of land, labour and capital.
2. He undertakes production and sells the product in the market for a profit.
3. He retains profit on sale after paying for rent on land, wages for labourers and interest on capital.
David Ricardo: "Entrepreneur is a person who has entrepreneurial ability, an indepedent factor of production. Profit is the reward of entrepreneurial ability."
As per Ricardo, entrepreneurship is afactor production. There are four factors of production, Land, Labour, Capital and Organization. Entrepreneur as a factor, organizes the remaining factors, that is Land, Labour and Capital, Entrepreneur has ability of starting the business by organizing the necessary resources. He is rewarded with profits for organizing these factors into a business unit.
Encyclopedia of Britannica defines entrepreneuship as an individual who bears the risk of operating a business in the face of uncertainity about the future conditions. This definition identifies risk as an important feature of an entrepreneur. Business is always full of uncertainitities, an entrepreneur accepts such risk by starting a business.
Shumtperian View: Joseph Schumpeter has stressed on innovation as an innovation as an important feature of an entrepreneur. According to him entrepreneur in an advanced economy is an individual who introduces something new in economy- a method of production not yet tested the experience in the branch of manufacturing concerned a product with which consumers are not yet familiar a new source of raw material or of a new market and like.
Schumpeterian conept of entreprneur has stressed on two importants
1. He has defined the concept of an enterpreneur with reference to a developed economy. Innovation is the basic feature of such entrepreneur. He introduces new concept or new styles or new methods of doing business and an entrepreneur is aperson who introduces
a) a new method of production
b) a new source of raw material.
c) explores a new market
Novelty is the important feature of an entrepreneur. Schumpeter further says that reform revolutionize the pattern of production by exploiting an invention or more generally and try technological possibilities for producing new commodity. According to Schumpeter an entrepreneur brings revolution in the business. He introduces new concepts which are not tested by any person. Such new concepts or methods may be in the form of
a) a new method of production by using new technology.
b) a new source of raw material or new type of raw material.
c) new method of marketing
 |
| Michel Dell.......an innovative entrepreneur |
An innovative entrepreneur takes the risk of manufacturing and marketing a product that is invented by a scientist. He accepts the challenge of taking the product idea from the lab to market. Inventions and discoveris made by scientist are meaningless benefits of such inventions reach the common man. Entrepreneur accepts the challenge of taking these new goods or concepts to the public by organizing necessary factors.
Peter Drucker has given a sikilar derfinition of entrepreneur. According to him "Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or different service. It is capable of being presented as a discipline capable of being learned and practiced. Entrepreneurs need to search purposefully for the source of innovation their changes and their symptoms that indicates opportunities for successful innovation and they need to know and to apply the principles of successful innovation.
According to Drucker innovation is the basic character of an entrepreneur. He says that the entrepreneur should be in seach of innovative ideas that can be successfully converted into profitable business opportunities.
Schumpeterenian view on entrepreneur stresses on entrepreneur in a developed economy according to this school of throught an entrepreneur ina developed economy is an innovator. If the business started by a person is not innovative or novel he cannot be called entrepreneur.
ENTREPRENEUR IN DEVELOPING ECONOMY
Entrepreneur in a developing economy like India need not to be an innovator. Any person who starts the business by organizing the necessary resources can be called as an entrepreneur. Jon Tinbergen has given definition of entrepreneur in a developing economy. According to him the best entrepreneur in a developing country is not necessarily the man who uses much capital but rather a man who knows how to organize employment and training of his employees. Whoever concentrates on this is rendering a much more important service to his country than the one who uses his capital.
According to Tinbergen an entrepreneur is a person who
a) Employs necessary factors and people to start the business.
b) Use adequate training to his employees to handle the facators or resources.
c) He need not to be a person who contributes more capital but he should be good organizer of man and material.
The above definitions reveal different opinions regarding the entrepreneurs. There are various concepts of the term entrepreneur which are summarized as follows:
- Entreprneur is a person who assembles necessary resources to start the business and assumes the risk of promoting such business.
- Entreprneur in a developed country should be innovator and only those persons should be called as entrepreneurs who start a novel or new type of business.
- Entreprneur of a developing economy need not to be an innovator. Any person who organizes necessary resources will start the business is an entrepreneur.
Qualities and characteristics of an entrepreneur.
The basic ingredient of an entrepreneur : he is a doer not a dreamer. According to Gordon and Natarajan to be an entreprenur not necessary he should possess a professor intelligence, a politician power, a film star magnetic personality and so on. An entrepreneur need to be an expert in each and everything but he should possess all necessary qualities that are essential to organize resources, assemble men and assume risk of starting a business. An entrepreneur to achieve success must possess following qualities and characteristics:
- Risk taking: Business is always full of uncertainties. Conditions of business always keep on changing and it is always exposed to risks. Business risk cannot be transferred to some other person. Owner has to bear such risk. An entrepreneur should have courage and confidence to accept the risk arising out of business.
- Innovative: An entrepreneur to achieve desired succes must be innovative in his approach. His method of doing business that is his product and marketing style etc.,. Should be differnet from his competitor and he must continuously introduce new ideas and concepts in his business. An entrepreneur who is innovative can be different from his competitors and he can attract customers by being innovative.
- Business Acumen: An entrepreneur must possess the skill of business acumen. Every person cannot become an entrepreneur. A person who has business acumen can become entrepreneur/ This may include qualities like courage, dynamism risk taking organization skills knowledge about decision making etc. A person who possess such qualities can become successful entrepreneur.
- Determination: An entrepreneur must have strong determination. He should have determine to achieve success and reach goals of his business. Conditions of business do not remain constant he has to face regular problems in managing business. And there is fear of suffering loss. He should not be disturbed by this problem. He should possess strong will power to face the difficulties successfully and achieve the desired objective of business.
- Organization skill: One of the important task of an entrepreneur is to assemble to necessary resources to start a business the various "M" Money Men Material Mechanics etc., should be collected in right proportion at less cost. An entrepreneur must have the skill of organizing this resources.
- Foresight: An entrepreneur must have the ability to foresee the future he must have the ability of predciting the future happenings based on his knowledge past experience he must anticipate the likely changes in the business. The character of foresight helps him to design his business to changing conditions in the future.
- Optimistic: An entrepreneur must be optimistic positive and dynamic in his thinking and approach. Business is exposed to so many uncertainties . Entrepreneur has to face many adversities in managing the business. He must not loose heart. He must adjust himself to changing conditions of business, manage the business with courage and confidence.
- Good communication skills: An entrepreneur has to regularly interact and keep in touch with the society government, employees and customers. He has to communicate with these people the organization objectives activities policities achievements etc. Sharing necessary information with these people on regular basis will avoid communication gap and misunderstanding. It helps to build better understanding and image.
- Self Confidence> An Entrepreneur must have confidence in his abilities. A person who is self confident can instill confidence in others. Self confident entrepreneur can make his subordinates confident and entire organization becomes confident. Confident organisation can face any challenge of business.
- Flexible: An entrepreneur must be flexible. He must adopt and adjust himself to changing conditions of business as conditions of business are always are fluid. Flexibility can make entrepreneur to adjust himself and his organization to such changing conditions.
FUNCTIONS OF ENTREPRENEUR
Vasant Desai defines entrepreneur as “One who starts an industry (old –new), undertake risk, bears uncertainties and also performs managerial function of decision making and coordination. “The important functions that an entrepreneur undertakes promotion of the business, assumption of its risks and management of such venture. Some of the important function that are undertaken by an entrepreneur are as follows:
1. Assumption of risk
2. Promotion of ventures
3. Organization and assembly of necessary factors.
4. Form of ownership.
5. Determination of business objectives.
6. Raising of finance.
7. Innovation
8. Human Resource Management (HRM)
9. Market research
10. Managerial functions
a. Planning
b. Organizing and coordinating
c. Directing
d. Communication
e. Motivation
Classification and types of entrepreneurs: Clarence Dunholf has classified entrepreneurs into 4 categories;
1. Innovative
2. Imitative
3. Fabians
4. Drone
Innovative Entrepreneur: An innovative entrepreneur brings in novelty and new concept in business. Such innovation is in the form of new product, then new technology, new marketing method etc., He is not stereotype in his approach. Through such innovation he brings revolution in business. Entrepreneur s of this kind are bold, dynamic and willing to accept challenges. They are ready to face risk starting a new kind of venture.
Imitation or adoptive entrepreneur: This type of entrepreneur starts a type of business which is already in practice. There is no novelty. This product, technology, organization, marketing style etc., are not new to the business world his copying or imitating the business style of existing entrepreneurship.
Fabians’ Entrepreneur: He is similar to imitative entrepreneur. There is nothing new in his business. He adopts such business practices that are time tested and foolproof. He is not willing to take any risk by bringing innovation or change in business.
Such kind of entrepreneurs is influenced by customs and tradition of society.
Drone entrepreneur: This kind of entrepreneurs is a blind follower of existing business practices. He follows the old style of business, whether in results in profit or loss. The artisans, handicrafts, small businessmen can be classified under this category. They are not willing to take risk by innovative or introducing new things in business.
Classification of entrepreneur by Arthur Cole:
1. Empirical entrepreneur
2. Rational Entrepreneur
3. Cognitive Entrepreneur
1. Empirical entrepreneur: is similar to Drone Entrepreneur. He is empirical in his approach i.e. he is guided by experience or experiments of others in starting the business. He follows those business practices that are empirically tested. Such entrepreneur is traditional in his approach, not innovative.
2. Rational Entrepreneur: He is an entrepreneur who exercises rationality or sound judgement before starting a business. He does not blindly follow old business methods and practises. He makes his own assessment, takes his own decision based on his knowledge, experience and prevailing business conditions.
3. Cognitive Entrepreneur: He is a person with modern outlook. He takes the help of professional and experts in starting a business. He does not hesitate to introduce new methods and technology in starting the business.
4. Entrepreneur can be of various types, detailed classification and types are presented in the following tables.
CLASSIFICATION AND TYPES OF ENTREPRENEURS
1. Nature of business | 2. Form of business | 3. Scale of operations |
a. Industrial b. Trading c. Agricultural (Horticulture/Diary/Farming etc. d. Service e. Professional | a. Sole-owner b. Partnership firm c. Joint Hindu Family d. Joint Stock Company | a. Large scale b. Small scale c. Medium scale |
4. Technology Used | 5. Gender | 6. State of Growth |
a. Technical b. Non Technical | a. Male b. Female | a. First generation b. Modern entrepreneur. c. Classical entrepreneur |
7. Area wise a. Rural Entrepreneur b. Urban Entrepreneur c. Entrepreneur of backward region | 8. On the basis of Age a. Old Entrepreneur b. Young entrepreneur c. Middle Age Entrepreneur | 9. Others a. Immigrant b. Bureaucrat c. Intrapreneur d. Net-preneur e. Paper entrepreneur f. Academic |
I. Classification on the basis of Nature of Business
Entrepreneur can be of following types based on nature of business practiced by them.
a. Industrial Entrepreneur: An industrial entrepreneur promotes a business that is engaged in manufacturing activities. He makes use of all the factors of production in conversion of raw material into finished product. Such industrial entrepreneur may be engaged in manufacturing capital goods like heavy plant and machineries or consumers goods like TV’s Soaps etc., which are used for final consumption.
b. Trading Entrepreneur: a trading entrepreneur is a middleman between produces and consumer/ He promotes an enterprise that is engaged in buying and selling goods. He may be a wholesaler, retailer or a commission agent. Compared to an industrial entrepreneur he requires less factors and his investment is less. Such trading entrepreneur may be a domestic entrepreneur who is engaged in trading operation within a country or an overseas entrepreneur, who is engaged in import or export of goods.
c. Agricultural and Allied Activities: These kind of entrepreneurs set up a business unit in the field of agriculture and allied activates like Farming, Plantation, Diary, Horticulture, Floriculture, Sericulture etc., They undertake
d. Service Entrepreneurs: Promotion of new ventures is their profession. They are not interested in its management. They promote a business and sell such business for management to some other people. These people have got professional knowledge in promotion of firms.
II. Classification on the basis of form of Business Organization
An entrepreneur based on his financial and organizational capacity and size of business may start the venture, in the form of Single Owner, Partnership Firm, Joint Hindu Family and Joint Stock Company.
a. Sole or Individual Entrepreneur: A small scale business, which requires less capital, l;imited organisational skills and management can be started by a single owner. Single person promotes, manages and takes risk of such business.
b. Partnership firm: A partnership is an association of persons, who come together, contribute capital and share profits or loss of such business. Business of such firm may be managed by them all or one of the partners may manage as managing partner. Risk of business is shared by all partners.
c. Joint Hindu Family: It is a business that is promoted by a family. Male members of the family are called as coparceners manage such business. Kartha is the senior co-parcener who controls such family business.
d. Joint Stock Company: Business that requires large amount of capital, expertise in management and organization ie promoted in the form of Joint Stock Company. A company is association of share hoders, who contribute capital in the form of shares. Company is managed by board of directors, who are experts in management and they are elected representatives of share holders. Companies are formed by professional people called promoters.
III Classification on the basis of Scale of Operation
Entrepreneur on the basis of scale of operation may be classified as:
a. Large Scale Entrepreneur: They operate on large scale by establishing big business. Such kind of entrepreneurs are resourceful i.e. they have got abundant knowledge, skill and finance. They have capacity to organize things on a large scale and capacity to assemble various factors. Using their knowledge and skill they establish a business empire. Their operations may extend throughout state or nation.
b. Small Scale Entrepreneur: People who have limitation of finance, knowledge and ca[pacity to orgtanize, start business on a small scale. They restrict the size of their business to their financial and organization capacity. In due course of time they may e expand the business as they accumulate more resources and gain more knowledge.
c. Medium Scale Entrepreneur: As the name suggests he is neither big nor small. He starts a business of medium size. He has got adequate capital and knowledge to start a business on medium scale. Business started by such entrepreneur will have reach in local and surrounding area.
IV Classification on the basis of Technology:
a) Technical Entrepreneur: They are entrepreneurs with technology background. They have professional qualification and knowledge to manage production system. They are also called as technocrats. Using their skills in technology they adopt latest Technology in establishing a modern business establishment. Technical entrepreneur can be further classified into:
i. Hi-tech entrepreneur: Entrepreneur who have sound knowledge in technology, they make large scale application of such technology in starting a business.
ii. Neo-technical Entrepreneur: Entrepreneur who have latest knowledge in the field of technology. They apply such advanced system of technology in starting a modern and latest enterprise.
b) Non-technical Entrepreneur: These kind of entrepreneurs do not have technology background. They depend on the advice of engineers so far as technology aspect of organization is concerned. They are experts in organizing resources like land, labour and capital. Using their skill to organization and taking the help of technologists, they establish enterprise.
V. Classification on the bases of Gender
VI Classification on the basis of stage of growth
Entrepreneur on basis of the stage of growth can be of following types:
a. First Generation Entrepreneur
b. Modern Entrepreneur
c. Classical Entrepreneur
VII Area wise Classification
i. Rural Entrepreneur
ii. Urban Entrepreneur
iii. Global Entrepreneur
iv. Entrepreneurs of the backward region.
VIII Classification based on the basis of age:
a. Old entrepreneur
b. Young entrepreneur
c. Middle aged entrepreneur
IX) Others
a. Immigrant entrepreneurs
b. Public/Bureaucratic Entrepreneur
c. Intrapreneur
d. Net preneur
e. Paper Entrepreneur
f. Academic entrepreneur
Distinction between Entrepreneur and Intrapreneur
Sl | Point of distinction | Entrepreneur | Intrapreneur |
1. | Status | He is independent master of his own | He is dependent on the organization where he is serving |
2. | Education | He may not possess formal education or degree | He has formal educational background, he possesses required degree. |
3. | Organization of resources | Entrepreneur is basically organizer of resources of factors. | He depends on entrepreneur or institutions for resources. |
4. | Risk bearing | Assumption of risk is an important function of an entrepreneur | He does not take any risk, unless he starts his own independent organization. |
5. | Nature of work | a. Assumption of risk b. Organization of resources | a. Planning and management b. B. Organization of activities |
6. | Area | He functions from outside the organization, liasoning or acting as link between organization and outsiders i.e. investors, suppliers etc. | He functions within the organization, he will coordinate functioning of organization by giving necessary directions. |
7. | Control | He is the boss of organization. He has absolute control over entire organization. | His degree of control is limited to his area of operation or his department. |
8. | Style of Management | Authoritarian, full power of the organization is in the hands of entrepreneur. | Democratic in the approach. He shares his authority with his subordinates. |
9 | Object/Ambition | Main object is to start the business | His main ambition is to exploit his new ideas into a business proposition |
10. | Community | He normally belongs to business community who are experts in promoting the business. | He normally belongs to middle class and working community. He comes from family which has sound educational background. |
ENTREPRENEUR V/s MANAGER
An entrepreneur is a manger of business, but his capacity and role is more than that of a routine manager. A manager is an executive of the organization, who may be in charge of the entire organization i.e. CEO (Chief Executive Officer) or manager of particular department or section. A manager is an employee of the organization, who is given specific task for the performance of which he is paid regular salary. An entrepreneur is founder of the organization, who organizes factors of production and assumes risk of managing the business, with an objective of making profit. There are various distinctions between an entrepreneur and manager which are presented below.
Distinction between Entrepreneur and Manager:
Sl | Point of distinction | Entrepreneur | Manager |
1 | Task/motto | Promotion of the business | Management of organization |
2 | Risk | Assumes risk of establishing and running the business. | He does not take any risk, aprt from his job performance. |
3 | Responsibility | Responsible for promotion and management of entire organization | His responsibilities are defined by the entrepreneur |
4 | Reward | Profit | Salary |
5 | Education | He may not have any formal education or any degree. | Manager has formal education, he has required degree to manage his area. |
6 | Organisation | He is responsible to organize all factors of production necessary to run business. | He has to organize his department Organization of resources is not his task. |
7 | Commitment | An entrepreneur is committed for the growth and development of organization | Manager remains loyal to and committed to the organization, until his personal objective are satisfied |
8 | Objectives and planning | Basic objectives, important plans and strategies are decided by entrepreneurs | He has to design plans and policies within broad objectives and parameters decided by an entrepreneur. |
9 | Role | Innovation and organization of business | Administration of business. |
ROLE OF ENTREPRENEUR IN ECONOMIC DEVELOPMENT
Economic development depends on two factors:
a. Gross Domestic Product (GDP), that is amount of goods and services produced in a year.
b. Standard of living of the people, that is consumption of comforts and luxuries.
In the light of the above the role and importance of an entrepreneur is economic development of a nation and at its people can be understood from following points.
1. Assumption of risk
2. Organization of resources
3. Arrangement of capital
4. Encouragement to innovation
5. Better standard of living
6. Balanced Economic growth
7. Export promotion
8. Efficient Utilization of Resources
9. Entrepreneur as social reformer
10.Entrepreneur as imitators.
ARE U AN ENTREPRENEUR? CHECK YOUR SELF
1. I try to take charge of matters when I am with people.
A. Always
B. Usually
C. Sometimes
D. Never
2. I press myself to meet dead lines
A. Always
B. Usually
C. Some times
D. Never
3. I dislike taking orders from others
A. Always
B. Usually
C. Sometimes
D. Never
4. I strike to make my subordinates content
A. Always
B. Usually
C. Sometimes
D. Never
5. Given the odds I can influence the outcome of a situation
A. Always
B. Usyally
C. Sometimes
D. Never
6. I am called upon to lead projects or teams.
A. Always
B. Usually
C. Sometimes
D. Never
7. I enjoy the challenge of being faced with a complex task
A. Always
B. Usually
C. Sometimes
D. Never
8. I doggedly see projects through to their conclusions.
A. Always
B. Usyally
C. Sometimes
D. Never
9. I achieve any thing that I set my mind on.
A. Always
B. Usually
C. Sometimes
D. Never
10. Others say I have sharp, analytical mind
A. Always
B. Usually
C. Sometimes
D. Never
11. Things that typically unnerve most people don’t raffle me
A. I strongly agree
B. I moderately agree
C. I strongly disagree
D. I moderately disagree
12. I seem to have much higher energy level than most people.
A.I strongly agree
B. I moderately agree
C. I strongly agree
D. I Moderately disagree
13. I belive things cannot be rushed
A. I strongly agree
B. I moderately agree
C. I strongly disagree
D. I moderately disagree
14. I would fire a subordinate even if I dislike the task
A. I strongly agree
B. I moderately agree
C. I strongly disagree
D. I moderately disagree
15. I would start a business even if it means tightening my belt
A. I strongly agree
B. I moderately agree
C. I strongly disagree
D. I moderately disagree
16. I will never balk from working long hours for lengthy periods.
A. I strongly agree
B. I moderately agree
C. I strongly disagree
D. I moderately agree
17. I have a high tolerance level and am not easily frustrated.
A. I strongly agree
B. I moderately agree
C. I strongly disagree
D. I moderately agree
18. I get bored easily routine tasks and thrive on challenges
A. I strongly agree
B. I moderately agree
C. I strongly disagree
D. I moderately agree
19. It is important for me to be the best in what ever I do.
A. I strongly agree
B. I moderately agree
C. I strongly disagree
D. I moderately agree
20. I don’t mind working for a difficult person if he is competent.
A. I strongly agree
B. I moderately agree
C. I strongly disagree
D. I moderately disagree
21. I fall in the following age bracket.
A. Between 20 and 28 years
B. Between 29 and 37 years
C. Between 38 and 46 years
D. Over 47 years
22. My experience in the industry I would start a business is
A. More than 2 years
B. Between 12-24 months
C. Between 6-12 months
D. Nil
23. In the past three years due to illness I have lost
A. 0-5 days of work
B. 6-10 days of work
C. 11-15 days of work
D. Above 16 days of work
24. I need the following amount of sleep to function effectively
A. 5 or less hours
B. 6 hours
C. 7 hours
D. 8 hours
(ಉದಯಕುಮಾರ್, ಕೃಷಿ ವ್ಯವಹಾರ್ ತಜ್ಞರು, ಬೆಂಗಳೂರು)
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