LESSON 1

The word ‘Entrepreneur’ is derived from the French word ‘Entreprendre’ meaning “to undertake”. The word was
originally used to describe people who “Take on the risk”, between buyers and sellers or who “undertake” a task such
as starting a new venture. Inventors and entrepreneurs differ from each other. An inventor creates or invents something
new. An entrepreneur transforms the new invention into a commercially viable business proposition. A entrepreneur
assembles and integrates all the resources required – money, people and business model, the strategy and the risk
bearing ability – for converting the invention into a business.

Entrepreneurship is the process by which individuals pursue opportunities without regard to resources they currently
control. The essence of entrepreneurship is identifying opportunities and putting useful ideas into practice. This requires
creativity, drive and a willingness to take risk.

This definition has four key elements. First, entrepreneurship involves a process. This means, it is manageable, can be
broken down into steps or stages, and is ongoing. Second, entrepreneurs create value where there was none before,
they create value within organizations and they create value in the marketplace. Third, entrepreneurs put resources
together in a unique way. Unique combinations of money, people, procedures, technologies, materials, facilities,
packaging, distribution channels, and other resources represent the means by which entrepreneurs create value and
differentiate their efforts. Fourth, entrepreneurship is opportunity- driven behavior. It is the pursuit of opportunity
without regard to resources currently controlled. The abilities to recognize new opportunities in the external
environment, evaluate and prioritize these opportunities, and then translate these opportunities into viable business
concepts which lies at the heart of the entrepreneurial process.

who is an Entrepreneur?

An entrepreneur is defined as a person who innovates, organizes, operates, and assumes the risk for a new business
venture. A venture is a business enterprise involving risk in expectation of gain.

The above definition of entrepreneur has four components, which highlight the facets of an entrepreneur. Firstly, an
Entrepreneur innovates, i.e. comes up with a new concept, product or service. Secondly, an entrepreneur organizes a
new business venture, i.e. initiates or starts a new business enterprise. Thirdly, an entrepreneur operates, i.e. runs a
new business venture and strives hard to sustain and grow it. Fourthly, an entrepreneur assumes the risk, i.e. takes the
responsibility of the (positive or negative) outcomes of a business enterprise.

Some essential qualities for entrepreneurs are:

1)A strong desire to win. (NEED FOR ACHIEVEMENT): Most people dream of success, but seldom do anything to
implement it. In contrast, entrepreneurs have a strong desire to continuously hit new goals and will not rest till they
win.
2) An approach of never-say-die. (PERSEVERANCE): Once committed to a goal and a course of action, entrepreneurs
never retract. Difficulties do not deter them and they work hard till the entire project is successfully accomplished.

3) Entrepreneurs prefer a middle-of-the-road strategy while handling tricky situations. (MODERATE RISK TAKER): They
don’t take high risks; they are not gamblers. They prefer a moderate risk to a wild gamble, high enough to be exciting
and containing a reasonable winning chance.

4) Alert to opportunities and seizing them to their advantage. (ABILITY TO FIND AND EXPLORE OPPORTUNITY):
Entrepreneurs are innovative and can convert crisis into opportunities. But they are realistic enough to ensure that the
opportunity suitably dovetails into realizing their goals.

5) They have a dispassionate approach to problems. (ANALYTICAL ABILITY): Entrepreneurs will not let personal likes or
dislikes come in the way of their taking a business decision based on ground realities. They seek out experts for
assistance rather than friends and relatives. Their decisions are objective and not emotional or impulsive.

6) It is important for them to know how they are faring when they work on their goals. (USING FEEDBACK):
Entrepreneurs take immediate feedback on performance and prefer prompt and accurate data, irrespective of whether
they are favourable or not. Unfavourable news spurs them into making amends to attain their goals.

7) They are flexible. (FLEXIBILITY): Successful entrepreneurs have an open mind and do not hesitate to change their
decisions, if after weighing the pros and cons, find that the situation so demands.

8) Entrepreneurs think ahead of others and plan for the future. (PLANNER): Most successful people set goals for
themselves and plan to realize them in a time frame.

9) Entrepreneurs can deal with people at all levels. (INTERPERSONAL SKILLS): An entrepreneur comes across all kinds
of people. He has to make them work for him and with him to help realize his objectives. He likes working with people
and has skills to deal with them.

10) They can influence others. (MOTIVATOR): A successful entrepreneur can influence others and motivate them to
think and act in his way.

11) Entrepreneurs think ahead. (ORIENTATION FOR FUTURE): They have the ability to look into the future. They won’t
allow the past to bother them and think only of the present and the future.

Four main characteristics of Successful Entrepreneurs:

The following are the four most important characteristics of a successful entrepreneur:

1. Passion for the business

2. Product / customer focus

3. Tenacity despite failure

4. Execution intelligence

1. Passion for the business: The number one characteristic shared by the successful entrepreneurs is a passion for the
business, whether it is in the context of a new firm or an existing firm. In this passion stems from the entrepreneur’s
belief that the business will positively influence people’s life. This passion makes the people to life secure jobs and to
start their own firm. However it is important to be enthusiastic about a business idea, but it is also important to
understand its potential flaws and risks. An entrepreneur must also remain flexible enough to modify the idea when it
is necessary to do so.

2. Product/Customer Focus: A second defining characteristic of successful entrepreneurs is a product/customer focus.

The two most important elements in any business are - products and customers. While it’s important to think about the
management, marketing, finance and the like, none of these functions makes any difference, if a firm doesn’t have good
products with the capacity to satisfy the customers. Most successful entrepreneurs are passionate in making products
that meet their customer’s needs. Successful entrepreneurs create products that meet unfilled needs of the customers.

3. Tenacity despite failure: Because entrepreneurs are typically trying something new, the failure rate associate with
their effort is naturally high. Further, the process of developing a new business is somewhat similar to what a scientist
experiences in the laboratory. Developing a new business idea requires certain degree of experimentation before
success is attained. Setbacks and failures inevitably occur during this process.

4. Execution intelligence: The ability to convert a solid business idea into a viable business is a key characteristic of
successful entrepreneurs and is called “Execution Intelligence”. In many cases execution intelligence is the major factor
to determine whether a start-up is a successful or failure one. The ability to execute a business idea means developing
a business model, creating a new venture team, raising money, establishing partnerships, managing finances, leading
and motivating employees and making arrangements for marketing the product or service and so on. It also demands
the ability to translate thought, creativity and imagination into action and measurable results. Ideas are easy but
execution is very hard.

Five Common Myths about Entrepreneurs:

There are many misconceptions about who entrepreneurs are and what motivates them to launch firms to develop their
own ideas.

Myth 1: Entrepreneurs are born, not made.

Myth 2: Entrepreneurs are gamblers.

Myth 3: Entrepreneurs are motivated primarily by money.

Myth 4: Entrepreneurs should be young and energetic.

Myth 5: Entrepreneurs want public attraction.

Entrepreneur Vs Manager

Entrepreneur Manager
1. Owner: An entrepreneur is the owner of 1. Servant: A manager is acting in the capacity
the enterprise which he establishes of a servant in the enterprise.
himself.
2. Salary: The reward for a manager is salary
2. Profit: The reward for an entrepreneur is
and his salary is certain and fixed.
profit which is highly uncertain.
3. No risk bearing: As a servant, the manager
3. Full risk bearing: As a owner, the need not bear any risk involved in the
entrepreneur has to bear all risks and enterprise.
uncertainties involved in running the
4. Managerial functions only: A manager
business.
renders only the managerial services in an
4. All functions: An entrepreneur has to
enterprise.
perform many functions in order to run the
5. Executor: A manager mainly acts as an
enterprise successfully.
executor of plans prepared by the
5. Innovator: An entrepreneur mainly
entrepreneur.
acts as an innovator and prepares plans for
execution.

Classification of Entrepreneurs

Innovative Entrepreneurs As per Schumpeter, only the innovating persons are designated as entrepreneurs. The
ordinary producers repeat the same production for years whereas innovators produce new goods in new ways and enter
into new markets by undertaking new methods of organisation.

An innovative entrepreneur is one who always looks at providing an opportunity for introducing a new technique of
production process or a new commodity or a new market or arranges reorganisation.

Adoptive or Imitating Entrepreneurs: What these persons do is to just imitate the successful entrepreneurs in
techniques, technology innovated by others. Due to lack of funds, technology and technical skills, the entrepreneurs in
developing nations would find it most convenient to imitate rather than to innovate and hence these persons imitate
the successful innovators of developed nations. Further, Innovation takes more time.

Fabian Entrepreneurs: These are traditionally bounded entrepreneurs who would always be cautious and they neither
introduce new changes nor adopt new methods innovated by the most enterprising entrepreneurs. They are lazy, follow
old customs, traditions, sentiments etc. Hence they are totally uninterested in taking risk and imitating successful
entrepreneurs.
Drone Entrepreneurs: These entrepreneurs never allow any change in their production and the style of functioning.
They never explore opportunities nor are prepared to take any risk. They may even meet losses due to obsolete methods
of production but do not change their production methods and continue to adopt traditional ways in the production
process. Also called as ‘Laggards’, who would be pushed out of the market when the product losses its marketability.

Classifications on the Basis of Type of Business

On the basis of type of business, the entrepreneurs can be classified as follows:

1. Trading Entrepreneur: An entrepreneur who undertakes trading activities only is called trading entrepreneur. He
identifies potential markets, and creates demand for his chosen product line.

2. Industrial Entrepreneur: An entrepreneur is a product-oriented person who starts his industrial unit for
manufacturing some new products.

3. Business Entrepreneur: The business entrepreneur conceives idea for a new product and create a business to
materialize his idea into reality. He engages in both production and marketing activities.

4. Corporate Entrepreneur: An entrepreneur who demonstrates his skills in organising and managing a corporate
undertaking is known as corporate entrepreneur.

5. Agricultural Entrepreneur: These entrepreneurs undertake agricultural activities. They raise the productivity of
agriculture through modernisation and application of modern technology.

Role of Entrepreneurs in Economic Development

Create employment opportunities

By creating a new venture, entrepreneurs generate employment opportunities for others. Unemployment is a major
issue, especially in the context of developing economies like India. Educated youth often are unable to get a suitable
employment for themselves. Thus, entrepreneurs do a Yeoman’s service by not only employing themselves into their
Entrepreneurial ventures, but also by employing others. Within the last 15 years, Fortune 500 companies and large
corporations have endured major retrenchment and eliminated millions of jobs, whereas discoveries in the
Entrepreneurial sector have yielded new incorporations and generated millions of job opportunities.

Inspire others towards entrepreneurship

The team created by an entrepreneur for his new venture often provides the opportunity for the employees-cum-
teammates to have a first-hand experience of getting involved in an entrepreneurial venture. This often leads eventually
for these employees to become entrepreneurs themselves after being inspired by their earlier experience of working
for an entrepreneur. Thus, this process helps in forming a chain reaction of entrepreneurial activity which directly
contributes to the health of the economy.
Create knowledge spillovers

When a scientist, an engineer, or a knowledge worker (i.e. an economic agent with endowments of new economic
knowledge) leaves an organization to create a new firm, he will bring the expertise and experience from the old firm
and spreads knowledge to his new firm. Hence, entrepreneurship serves as a mechanism by which knowledge spills over
to a new firm in which it is commercialized. Naturally, the new firm gets benefited by the experience and knowledge
gained by founder in his/her erstwhile organization.

Augment the number of enterprises

When new firms are created by entrepreneurs, the number of enterprises based upon new ideas/ concepts/ products
in a region (say, a city, state, or country) increases. Not only does an increase in the number of firms enhance the
competition for new ideas, but greater competition across firms also facilitates the entry of new firms specializing in a
particular new product niche. Provide diversity in firms: Entrepreneurial activity in a region often results into creation
of a variety of firms in a region. These firms operate into diverse activities and it has been found that it is this diversity
in firms which fosters economic development and growth rather than homogeneity. According to Jacobs (1969), it is the
exchange of complementary knowledge across diverse firms and economic agents that yields as important return on
new economic knowledge.

Multiple Choice Questions:

1: Which of the following shows the process of creating something new?

A. Business model

B. Modeling

C. Innovation

D. Creative flexibility

Answer: Innovation, the act of introducing something new.

2: Which one of the following gives suggestions for new product and also help to market new products?

A. Existing products and services

B. Distribution channels

C. Federal government

D. Consumers

Answer: Distribution Channels: Members of distribution channels are excellent sources for new ideas because they are
familiar with the needs of the market. Not only do channel members frequently have suggestions for new product, but
they can also help in marketing the entrepreneur’s newly developed products.
3: Which of the following is used by entrepreneurs to acquire experience in an international market before making a
major commitment?

A. Merger

B. Joint venture

C. Minority interest

D. Majority interest Answer: Minority interest

4: The entrepreneur was distinguished from capital provider in:

A. Middle ages

B. 18th century

C. 17th century

D. 19th and 20th century Answer: 18th Century

Middle Ages: In this age the term entrepreneur was used to describe both an actor and a person who managed large
production projects. In such large production projects, this person did not take any risks, managing the project with the
resources provided. A typical entrepreneur was the cleric who managed architectural projects.

18th Century: In the 18th century the person with capital was differentiated from the one who needed capital. In other
words, entrepreneur was distinguished from the capital provider.

17th Century: In the 17th century the entrepreneur was a person who entered into a contract with the government to
perform a service Richard Cantillon, a noted economist of the 1700s, developed theories of the entrepreneur and is
regarded as the founder of the term. He viewed the entrepreneur as a risk taker who "buy[s] at certain price and sell[s]
at an uncertain price, therefore operating at a risk."

19th and 20th Centuries: In the late 19th and early 20th centuries, entrepreneurs were viewed mostly from an economic
perspective. The entrepreneur "contributes his own initiative, skill and ingenuity in planning, organizing and
administering the enterprise, assuming the chance of loss and gain."

5: A person who managed large project was termed as the entrepreneur in the .

A. Earliest period

B. Middle ages

C. 17th century

D. 19th and 20th century Answer: Middle Age

Earliest Period: In this period the money person (forerunner of the capitalist) entered into a contract with the go-
between to sell his goods. While the capitalist was a passive risk bearer, the merchant bore all the physical and emotional
risks.

Middle Ages: In this age the term entrepreneur was used to describe both an actor and a person who managed large
production projects. In such large production projects, this person did not take any risks, managing the project with the
resources provided. A typical entrepreneur was the cleric who managed architectural projects.

17th Century: In the 17th century the entrepreneur was a person who entered into a contract with the government to
perform a service Richard Cantillon, a noted economist of the 1700s, developed theories of the entrepreneur and is
regarded as the founder of the term. He viewed the entrepreneur as a risk taker who "buy[s] at certain price and sell[s]
at an uncertain price, therefore operating at a risk."

19th and 20th Centuries: In the late 19th and early 20th centuries, entrepreneurs were viewed mostly from an economic
perspective. The entrepreneur "contributes his own initiative, skill and ingenuity in planning, organizing and
administering the enterprise, assuming the chance of loss and gain."

6: What is the process by which individuals pursue opportunities without regard to resources they currently control?

A. Startup management

B. Entrepreneurship

C. Financial analysis

D. Feasibility planning Answer: Entrepreneurship

Entrepreneurship is a process by which individuals - either on their own or inside organizations - pursue opportunities
without regard to the resources they currently control. (Stevenson & Jarillo, 1990, p. 23). Stevenson's definition would
be as follows: The continuous process by which individuals pursue opportunities without regard to resources they
currently control, with the intent of increasing value and/or advantage. I have made the underlined additions because
entrepreneurship should never be considered a single event. It is a continuing, non–ending process in search of
increasing value and ever increasing advantage.

7: Having less than 50 percent of equity share in an international venture is called:

A. Minority interest

B. Joint venture

C. Majority interest

D. Exporting

Answer: Minority interest - Having less than 50 percent ownership position

8: Having more than 50% ownership position that provides the entrepreneur with managerial control is called:

A. Joint venture

B. Majority interest

C. Horizontal merger

D. Diversified activity merger

Answer : Majority interest. Having more than 50 percent ownership position

9:. Which one of the following is the process of entrepreneurs developing new products that over time make current
products obsolete?

A. New business model

B. Anatomization

C. Creative destruction

D. None of the given options

Answer: Joseph Schumpeter coined the term “Creative destruction” . Creative destruction occurs when something new
kills something older. A great example of this is personal computers. The industry, led by Microsoft and Intel, destroyed
many mainframe computer companies, but in doing so, entrepreneurs created one of the most important inventions of
this century

10. Which of the following factors is the most important in forcing U.S companies to focus on new product development
and increased productivity?

A. Entrepreneurship

B. Hyper competition

C. Governmental laws

D. Organizational culture

Answer: Hyper competition has forced U.S. companies to focus on new product development and increased
productivity.
11: Which of the following is alternatively called corporate venturing?

A. Entrepreneurship

B. Intrapreneurship

C. Act of stating a new venture

D. Offering new products by an existing company Answer: Intrapreneurship, also called corporate venturing.

12: Individuals influencing an entrepreneur’s career choice and style are known as which of the following?

A. Role model

B. Moral-support network

C. Professional support network

D. Support system

Answer: Role models - Individuals influencing an entrepreneur’s career choice and style Moral-support network:
Individuals who give psychological support to an entrepreneur Professional-support network : Individuals who help the
entrepreneur in business activities

13: The activity which occurs when the new venture is started is called:

A. Motivation

B. Business skills

C. Departure point

D. Goal orientation

Answer: Departure points - The activities occurring when the venture is started

14: The level at which an individual is viewed by society is called:

A. Financial status

B. Qualification

C. Social status

D. Achievement

Answer: Social status The level at which an individual in viewed by society

15: Which one of the following is the most important characteristic of a successful business website?

A. Speed

B. Innovation

C. Graphics

D. Products Answer: Speed

A successful website has three characteristics: speed, speed, and speed. Short download time should be the primary
concern of website developers.

16: Gazelles are the firms with:

A. High growth rate

B. Moderate growth rate

C. Zero growth rate

D. Low growth rate

Answer: High growth rate - Gazelles - Very high growth ventures.

17: Which of the following factor has allowed small companies to act like they are big ones?

A. Technology

B. Customers

C. Economic development

D. Competition Answer: Technology

A company needs to use technology to make itself faster and more flexible. Technology has allowed small companies to
act like they are big ones. Large companies can use technology to make them responsive and flexible

18. All but which of the following is considered to be a myth associated with entrepreneurship?

A) First ventures are always successful

B) Successful entrepreneurs are born but not made.

C) All entrepreneurs must significantly invest money.

D) An entrepreneur faces extraordinary business risks.

19. Which of the following is not considered a common characteristic of an entrepreneur?

A) External locus of control

B) Self confidence

C) Internal locaus of control

D) High need of achievement.

20.The entrepreneur who is committed to the entrepreneurial effort because it makes good business sense is classed
as a/an

A) Opportunist

B) Investor

C) Hacker

D) Craftsman