THE CONCEPT OF ENTREPRENEUR

Introduction:

After finishing your graduation you will be at the crossroads of life. You will face the dilemma of choosing what you have to do in life. The vast majority of human beings direct their activities towards earning a living, generating wealth and improving their standard of living. You can choose your career from two broad categories of options – Wage Employment or Entrepreneurship. The term ‘career’ signifies a continuous, ever evolving, ever expanding opportunity for personal as well as business growth and development.

We may refer entrepreneurship as a career in your own business [YOB] rather than wage employment [JOB] .If you opt for a job then you will work for others. In case you opt for entrepreneurship you will be your own boss.

In case of wage employment one is engaged in routine work carried on for others for which he receives salary or wages. He has to follow instructions and execute plans laid down by his superior. One can choose to be employed in Government Service or the Public Sector or the Private sector. Some of the main differences between entrepreneurship and wage employment career options are as under

Differences between entrepreneurship and wage employment

Wage Employment / Entrepreneurship
  • Work for Others
  • Follow Instructions
  • Routine Job
  • Earning is fixed, never negative
  • Does not create wealth
  • Can choose from-
  • Government service
  • Public Sector
  • Private Sector
/
  • Own Boss
  • Make own plans
  • Creative activity
  • Can be negative sometimes, generally surplus
  • Creates Wealth, contributes to GDP
  • Can choose from-
  • Industry
  • Trade or
  • Service Enterprise

Entrepreneur - Concept and Meaning:

The term “Entrepreneur”is derived from the French verb“entreprendre”which means “to undertake a business venture”. An entrepreneur is onewho plays a significant role in the economic development of a country.

Basically an entrepreneur can be regarded as a person who has the initiative skill and motivation to set up a business of his own and who always looks for high achievements. He is a catalyst of social change and works for the common good.

The word entrepreneur came into use in the 18th century with advent (coming) of industrial revolution in England. During this period people began to show an innovative spirit in their business activities. E.g. the invention of colour photography and colour television was the outcome of the innovative skills and efforts of those people, who had the ideas and developed them to their success.He evaluates a new situation for profitable investments.

The term entrepreneur is used in various ways and various views.

These views are broadly classified into three groups namely,

1) Risk-bearer2) Organizer 3) Innovator.

1) Entrepreneur as a Risk-Bearer

Richard Cantillon, an Irish man living in France was the first one to introduce the term entrepreneur in the early 18th century.

He defined entrepreneur ‘as an agent who buys factors of production at certain prices to combine them into a product with a view to selling it at uncertain prices in future’.

Thushe makes decisions aboutobtaining and using the resources while consequently admitting the risk ofenterprise.

There are two types of risks

  1. Insurable risks:

Risks that can be insured against fire, accidents, death, etc

  1. Non-Insurable risks:

Risks that cannot be insured.Eg. Risk of change in future prices, change in fashion, risks of loss, etc.

2) Entrepreneur as an organizer.

One who organizes or mobilizes the four factors of production (Man. Machine, Money and Materials also called as 4 M’s of production) for the production of the goods or services.

3) Entrepreneur as an Innovator:

In the year 1934 Joseph A. Schumpeter assigned a crucial role of innovation to the entrepreneur. He defined an entrepreneur as “an individual who introduces something new in the economy.

According to J. Schumpeter innovation touches the following situations.

  • The introduction of a new product in the market
  • Instituting of new methods or new technologiesof production,which are not yet tested by experience in the field of concerned manufacturing.
  • The opening of a new market into which the specific product has not previously entered.
  • The discovery of a new source of supply of raw material.
  • Bringing out changes in the organization and management.

Entrepreneurship

According to Peter Drucker “Entrepreneurship is defined as ‘a systematic innovation which consists in the purposeful and organized search for changes, and it is the systematic analysis of the opportunities, such changes might offer for economic and social innovation.’

Entrepreneurship is a discipline with a knowledge base theory. It is an outcome of complex socio-economic, psychological, technological, legal and other factors. It is a dynamic and risky process. It involves a fusion of capital, technology and human talent. Entrepreneurship is equally applicable to big and small businesses.

In simple words Entrepreneurship can be described as a process of action an entrepreneur undertakes to establish his enterprise.

The above description of entrepreneurship brings out the following points:

  • Entrepreneurship is a process of systematic and innovative actions.
  • Entrepreneurship is a creative activity.
  • Entrepreneurship is the ability to create and build something from practically nothing.
  • Entrepreneurship is the art of sensing opportunity where others see chaos, contradiction and confusion.
  • Entrepreneurship is the attitude of mind to seek opportunities, take calculated risks and derive benefits by setting up a venture.
  • Entrepreneurship comprises of numerous activities involved in conception, creation and running an enterprise.
  • Entrepreneurship is the purposeful and organized search for change, conducted after systematic analysis of opportunities in the environment.

Enterprise:

Entrepreneur is a person who starts an enterprise. The process of creation is called entrepreneurship. The entrepreneur is the actor and entrepreneurship is the act. The outcome of the actor and the act is called the enterprise.

An enterprise may be defined as ‘the business organization that is formed as the outcome of entrepreneurs actions and which provides goods and services, creates jobs, contributes to national income, exports and overall economic development.’

Differentiating Entrepreneurs and Intrapreneurs

Who are Intrapreneurs?

The term Intrapreneur was first used byMacre in the year 1976 to refer to those Entrepreneurs who emerge form with in the existing enterprises and organizations.

Recently, a new breed of entrepreneurs is coming to the forefront in large industrial organizations, whoemerge from within the confines or boundaries of an existing enterprise.They are commonly referred to asintrapreneurs.

In big organizationsthe top executives are encouraged to catch hold of newideas and then change these into products through research and development (R & D) activities within the framework of organization. These top officials are known as “Intrapreneurs”. The concept of “Intrapreneurship” has become very popular in developed countries.

It is found that an increasing number of intrapreneursis leaving their jobs in big organizations and starting own enterprises.And many of such intrapreneurs have become exceedingly successful in their ventures.

Differences between Entrepreneur and Intrapreneur:

Points of Differences / Entrepreneur / Intrapreneur
Dependency / An entrepreneur is an independent business man. / An intrapreneuris dependent on the entrepreneur. He works under the chief executive / promoter.
Funds / Capital / An entrepreneur himself raises the funds / capital needed. / Funds are not raised by the intrapreneur. He uses the capital raised by the company.
Risk / Entrepreneur bears the risk involved in the business. / An intrapreneurmay not be required to fully bear the risk involved in the enterprise.
Operation / An entrepreneur operates from outside. / An intrapreneur is an organizing man operating from within the organization itself.

2) Entrepreneur andManager:

Are all small entrepreneurs managers? Are all small business managersentrepreneurs? The terms entrepreneur and manager are many times usedinterchangeably yet they are different. An entrepreneur starts a venture then amanager takes over to organize and co-ordinate continuous production. Anentrepreneur is being enterprising as long as he starts something new then theroutine day-to-day management of the business is passed on to the manager.

Thus, an entrepreneur is a person who finds out an idea of doing the business. He invests his funds, starts the business, takes the risk, and organizes business activities.

A manager is appointed by an entrepreneur as an employee to look after administrative activities.

Themain differences between the two are summed up below:

Differences between a manager and an entrepreneur:

Points of Differences / Entrepreneur / Manager
Motive / The main motive of an entrepreneur is to start a venture by setting up an enterprise. / The main motive of a manager is to render his services in an enterprise already setup by someone else.
Status / An entrepreneur is the owner of the enterprise. / A manager is the servant in the enterprise owned by the entrepreneur.
Risk - bearing / An entrepreneur being the owner of the enterprise assumes allrisks and uncertainty involved in running the enterprise. / A manager as a servant does not bear any risk involved in the enterprise.
Rewards / The reward an entrepreneur gets for bearing risks involved in the enterprise is profit which is highly uncertain. / A manager gets salary as reward for the services rendered by him in the enterprise. Salary of a manager is certain and fixed.
Innovation / Entrepreneur himself thinks over what and how to produce goods to meet the changing demands of the customers. Hence he acts as an innovator also called a change agent. Or catalyst of social change. / But what a manager does is simply to execute the plans prepared by the entrepreneur. Thus a manager simply translates the entrepreneursideas into practice (a new product /service)
Qualification / An entrepreneur needs to possess qualities and qualifications like high achievement motive, originality in thinking foresight, risk bearing ability and so on. / On the contrary a manager needs to possess distinct qualifications in terms of sound knowledge in management theory and practices.

Characteristics of an Entrepreneur

There are certain characteristics of entrepreneurs which are found usually prominent in them. The principal ones are discussed below:

Hard Working:

Willingness to work hard distinguishes a successful entrepreneur from unsuccessful one. His tireless, tedious and laborious work enables him to revive his business, even at the face of failure.

Desire for high achievement:

The entrepreneurs have a strong desire to achieve high goals in business. This high achievement motive strengthened them to surmount the obstacles suppress anxieties repair misfortunes and run a successful business.

Highly Optimistic:

The successful entrepreneurs are not disturbed by the present problems faced by them. They are Optimistic for future that the situations will become favorable to business in future. Optimism means seeing good side or brighter side of life or business.

Independence:

One of the common characteristics of the successful entrepreneurs has been that they don not like to be guided by others and to follow their routine.They like to be independent in the matters regarding their business.

Foresighted:

The entrepreneurs have a good foresight to know about future business environment. They will visualize the likely changes to take place in market.Consumer attitude, technological developments and take actions accordingly.

Organizing Capacity:

An entrepreneur must have the ability to organize all production resources like man, money, material an to channel them in such a way as to star up the enterprise and produce goods.

Innovative skills:

Production is meant to meet the customer's requirement. In view of the changing taste of customers from time to time the entrepreneurs must initiate (to start) research and innovative activities to produce goods to satisfy the customers changing demands for the products.

Entrepreneurial Competencies or Traits

Introduction:

A competence is referred to the characteristic of a person which leads to his or her effective or superior performance in a job. A job competence is a good combination of one's underlying characteristics such as one's knowledge, skill, motive, etc which one uses to perform a given job well. The underlying characteristics possessed by an entrepreneur which result in superior performance are called the entrepreneurial competencies or trait.

Knowledge: It means collection and retention of information in one's mind. It is necessary for performing a task but not sufficient.

Skill: It is the ability to demonstrate a system and sequence of behavior which results in something observable and something that one can see.

Motive: It is an urge to achieve ones goal. This continuous concern over goal achievement directs a person to perform better and better.

Thus in order to perform any task effectively and successfully including establishing and running an industrial unit a person needs to possess a set of knowledge, skill and motive which could be together.

Major Entrepreneurial Competencies:

People used to believe that entrepreneurs are born not made. In other words, persons with business family background could become successful entrepreneurs. Subsequently the sharpened knowledge of entrepreneurial competencies over the last four decades made people believe that entrepreneurs are made and not born. According to this view, persons possessing proper knowledge and skill acquired through education and experience can become successful entrepreneurs. The following are the major competencies that led to superior performance of the entrepreneurs:

  1. Initiative: It is entrepreneur who initiates a business activity. He does things before being asked by events.
  2. Looking for opportunities: He looks for an opportunity and takes appropriate actions as and when arise.
  3. Persistence: He follows the Japanese Proverb "Fall seven times; stand up eight". He makes repeated efforts to overcome obstacles that get in the way of reaching goals.
  4. Information seeker: Takes individual research and consults experts to get information to help reach the goal.
  5. Quality Conscious: He has always strong urge to excel to beat the existing standard.
  6. Committed to Work:Does every sacrifice to get the task completed.
  7. Efficiency Seeker: Makes always tenacious efforts to get the task completed with in minimum costs and time.
  8. Proper Planning: Formulates realistic and proper plans and then executes rigorously to accomplish the task.
  9. Problem Solver: Always tries to find out ways and means to tide over the difficult times.
  10. Self –Confidence: A strong believer in his strength and abilities
  11. Assertive: Good in asserting his issues with others for the cause of his enterprise.
  12. Persuasive: Able to successfully persuade people to do what he actually wants from them.
  13. Efficient Monitor: Personally supervises the work so that it is done as per the standards laid down.
  14. Employees' Well Wisher;; Has great concern and also takes necessary measures to improve the welfare of the employees working in his enterprise. Treats employees as a factor of production having emotions and feelings.
  15. Effective Strategist: Introduces the most effective strategies to effect employees to achieve the enterprise goals whatsoever it may be.

Developing Competencies: Competency results in superior performance. This is exhibited by one's distinct behavior in different situations. Entrepreneurial competency development is discussed as below:

  1. Competency Recognition: Acquisition of a new behavior begins with understanding and recognition of what a particular behavior means.
  2. Self – Assessment: Once the particular competence is understood and recognized, the next sep towards acquiring a particular behavior is to see whether one possesses the particular competence or not. If yes, then to see how frequently one exhibits the same in his practical life.
  3. Competency Application:Having known where one stands with respect to a particular competency one needs to practice the same on a continuous basis in various activities. In order to make a new behavior as a part of one's personality. the particular behavior or competency needs to be applied frequently even in the simplest activities that one performs in ones day-to day life. This is because practice makes a man perfect.
  4. Feedback: After understanding, internalizing and practicing a particular behavior or competency, one needs to make an introspection of the same in order to sharpen and strengthen one's competency. This is called 'feedback'. In simple words feedback means to know the strengths and weaknesses of one's new behavior. This helps to know how the new behavior has been rewarding.

Thus the underlying characteristics of an entrepreneur which result in superior performance are called the entrepreneurial competences. Knowledge, skill, and motive are the components of competencies. Competencies can be injected in human being through education and training. Practice helps develop competencies.

Entrepreneurship & Small Business

Introduction:

The importance of small business was highlighted by many thinkers like Schumpeter, and others.

Schumpeter’s famous book: “Small is beautiful”, stressed on to convert big industries into smaller, flexible business units due to its advantages.

The Small Scale Sector is the natural habitat ofentrepreneurs. Most entrepreneurs start small and then nurture their units intolarge industries. The SSI Sector provides an opportunity for them to hone theirskills and talents, to experiment, to innovate and transform their ideas into goodsand services needed by the society.

Over the last six decades the Small Scale Industry sector has emerged as a highlyvibrant and dynamic sector. It has acquired a prominent place in the socioeconomicdevelopment of the country. Mostly this sector exhibited positivegrowth trends even during periods when other sectors of the economyexperienced either negative or nominal growth.

A very fast growth of small business units is witnessed all over the world especially in USA, Japan, Taiwan, China etc.

The importance of small business:

1)Employment potential:Creation of maximum amount of employment opportunities, including that of self employment.

2)Low capital requirements:Creation of ventures (business) that requires small investment.

3)Quick yielding:Production of consumer goods on a large scale.The fruition lag (gestation period) is shorter than large industries.

4)Mobilization of local skill and capital.

5)Balanced regional development:Equitable (equal) distribution of industrial units into all areas of Oman.

Nature and Characteristics of Small Businesses:

Small-scale industries have certain unique features, which distinguish them from theLarge-scale sector. Some of the salient characteristics of small-scale businessesare given below.

1. Personal Character: In most small businesses the owners themselves aremanagers and so they can operate independently. They can give customizedservice to their clients, which in many cases is their USP.