Being an Entrepreneur (Unit 1) u UNIT 1 Being an Entrepreneur nl fue Mitaeita sis 1.1.1. Meaning and Definition of Entrepreneur ‘An entrepreneur is a rare person who can visualise and materialise water in the desert. His foresightedness, Vision, motivation, persistent efforts, the ability to presume the risks involved and their outcomes, and the thrust to achieve the desired goal, facilitate him to convert his ideas into reality. The water in the desert here refers to @ svarce commodity, hence an entrepreneur visualises this need or the need arising in near future and grabs this opportunity or challenge, before others can think about it. Entrepreneur refers to an individual who has the ability to organise and manage a business idea or a new enterprise, considering the in-built risks and consequences. They also act as leaders assuming their responsibility towards the Suocess and failure of the enterprise. An entrepreneur has the ability to identify the needs of consumers and the society at large, and the ambition to set up an enterprise for fulfilling these needs through producing and marketing new products and services by bringing together the available land, wealth, and labour, According to Richard Cantillon, “An entrepreneur is a person who buys factor services at certain prices with a view to selling its product at uncertain price”. According to International Labour Organisation (ILO), “Entrepreneurs are those people who have the ability to see and evaluate business opportunities, together with the necessary resources to take advantage of them and to initiate appropriate action to ensure success”. ‘According to McClelland, “An entrepreneur is someone who exercises some control over the means of produetion and produces miore than what he can consume in order to sell (or exchange) it for individual (or household) incom« In other words, an entrepreneur is one who discovers innovative ideas, advances them into products and services, and follows its feat persistently with untiring spirit. In this way, they taste the success and show the Teal meaning of the word ‘entrepreneur’ These entrepreneurs, having the initiating and action-taking ability, are responsible for the existence of different successful ventures. ‘There is a misconception about entrepreneurs that they are opportunity-seekers and selfish people, but in reality they are highly driven people trying to find solutions to the “needs of the people”. 1.1.2. Characteristics of a Successful Entrepreneur ‘Any successful entrepreneur should have following characteristics: Characteristics of « Sucessor Rnteprenea Darnton oSmsed |_| | ——Trepntose Tak Taking SLY Abitgy to Contor Perseverance “Analtieal ABNy of Mind Confronting Uncertainty [| ‘Sven Takers Teste antcrive |] Trio Noni Resouroes Tendership 8 ¥ Scanned with CamScannerMBA Second Semester (Start up and Nev: Venture Management) SPPU jon fo Succeed: Entrepreneurs are determined towards achieving success as well as growing their i picture to achieve their desired target and stay focussed, imespective of hurdles in their ave the ability to visualise the broader scope and an aspiring personality. 1) Deter venture, They set a cl way to success, They Entrepreneurs are independent persons who like to be “decision makers” rather than being ‘They prefer to initiate with their own effort. They always like to give direction ns from others. They feel comfortable with profits or even losses arising out of 2) Independ “decision implementer rather than taking dire their own decisions. 3) Risk-Taking: Entrepreneurs never step back while taking a chance of risk. Their decision-making is not influenced by uncertainty. They make a sincere and honest attempt to ensure that the eventual result is favourable instead of leaving the things on fate. 4) Ability to Control: In case of dealing with the post-establishment issues of any venture, entrepreneurs do not depend on their destiny. They have the ability to alter the socio-economic setting of their enterprise, in order to control their impacts. They have a firm belief that their destiny is regulated and designed by their own actions. sane: ‘This is the most demanded quality in the entrepreneurs. Once they commit a goal, they put icipate in every activity of the enterprise and are totally engaged ues related to the venture by their self. 5) Persever their best efforts to accomplish it. They ps in completing these activities. They look after all the concerned i 6) Analytical Ability of Mind: Personal preferences are not entertained by entrepreneurs. They prefer to analyse the given environmental conditions and proceed as per the situation, Emotional approach is generally neglected in order to deal with business decisions or a particular issue. Generally, they think logically instead of getting involved emotionally. 7) Confronting Uncertainty: Optimistic approach enables an entrepreneur to deal with uncertainties. They treat ‘every uncertain condition as an opportunity to them. They are known to complete the given work sensibly even under the odd conditions. Therefore, the unusual insight and talent enables an entrepreneur to get success. 8) Stress Takers: They have the ability to face all the difficult situations and take corrective actions against them, Along with performing for extended work hours, entrepreneurs also resolve variety of complications. As a commander, they face the issues of their enterprise and take appropriate decisions at appropriate time even at very short notices. They are called stress takers as they deal with psychological as well as physical stress in operating their enterprises. 9) Innovative and Creative: Entrepreneurs are innovative and creative. They think unique and better to become iccessfil and different from the crowd. There generate new thoughts and ideas to develop new products or services, or new suppliers in order to establish a new market or redesign the organisation. This new enterprise comprises of creative production methods and marketing channels designed by the entrepreneurs. 10) Ability to Mobilise Resources: An entrepreneur possesses the ability to exploit all its resources to its maximum, It is important for an entreprencur to make available the required resources and mobilise them efficiently. Generally, there are 6 Ms, i.e. Man, Machinery, Material, Money, Market and Method to convert a raw input into a final product. 11) Leadership: Leadership means to organise a group of people to achieve a common goal through proper communication, Leadership qualities found in an entrepreneur include team work, shared target, huge admirers, accurate guidance, and responsiveness towards co-workers. 1.1.3. Types of Entrepreneurs ‘The types of entrepreneurs can be classified on different grounds, which are as follows: 1) According to Functional Characteristic .ccording to functional characteristics entrepreneurs are as follows: i) Innovative Entrepreneur: These types of entrepreneurs are individuals who have the desire and ability to create and implement something new for the enterprise. Such entrepreneurs are visionaries who can think much earlier and much beyond than others. They try to bring new products, new production technologies, identify new market, and restructure their organisation by introducing several changes. ‘These entrepreneurs are involved in collecting plenty of information and ideas for generating innovative products and services. This can only be done when entrepreneurs have acquired a certain level of growth in their business and are ready to invest for innovative activities. Scanned with CamScanner‘Being an Entrepreneur (Unit 1) B ii) Imitative or Adoptive Entrepreneur: These entrepreneurs are not directly involved in innovation, but imitate successful innovations of other people by using their ideas, methods and technology. They are also known as ‘adoptive entrepreneurs’, who are highly enthusiastic in adopting innovations of successfull entrepreneurs, Since helpful in reducing the cost of trial and error, they may be appropriate for underdeveloped economies. iii) Fabian Entrepreneur: These types of entrepreneurs have no desire for innovations. Such entrepreneurs show a high level of uncertainty during any modification in their enterprise. They have no interest to bring-in changes to the business enterprise until there is an urgent need to do so for the sake of survival of the enterprise. iv) Drone Entrepreneur: Such entrepreneurs do not believe in making any changes in their production system. They can even bear losses but refuse to change their prevailing methods and techniques. 2) According to the Types of Business: Entreprencurs vary based on their nature of business, which are as follows: i) Business Entrepreneur: These are the individuals who dream about a completely different product or service and try to convert that notion into reality by establishing a business enterprise. ii) Trading Entrepreneur: Such entrepreneurs do not manufacture but purchase the product from the ‘manufacturer and sel it straight to customers o use retailers. iii) Industrial Entrepreneur: These entrepreneurs are manufacturers or producers who analyse the current market demands and needs of the consumers, and produce goods and services to satisfy them in an efficient manner. iv) Corporate Entrepreneur: These are the entrepreneurs who have the capabilities to organise and ‘manage a corporate enterprise. y) Agricultural Entrepreneur: Such entrepreneurs are skilled and experienced to manage all related activities of agriculture such as acquiring Jand, crops cultivation, arranging fertilisers, technologies used, etc. vi) Retail Entrepreneur: These entrepreneurs directly sell all kinds of products to the consumers or retail buyers. They do not manufacture these items. A large number of retail entrepreneurs are prevalent in India, They are like owners of shops of medicine, fruits, vegetables, house hold utility items. vii) Service Entrepreneur: Entrepreneurs belonging to the service sector are known as service entrepreneurs. They are engaged in delivering all types of services to the customers. For example, restaurants, hotels, hospitals, beauty parlours, ete. 3) According to Technology Used: Today the world is growing with much faster pace than earlier. The new technologies developed and adopted by the people are bringing miraculous changes and growth to the business. The people like Narayan Moorthy and Stephen Joe, who use modera technology, stay ahead of “others. On the basis of level of technology used, the entrepreneurs can be classified as: i) Technical Entrepreneur: These entrepreneurs are similar to craftsman. They possess craftsmanship ability to create new and improved products in all technical aspects. The technical entrepreneurs usually apply all their innovative abilities for production of goods and services. Designing new and technical production methods is the major talent of these entrepreneurs. They are more inclined towards production than marketing. The objective of using promotion strategies for increasing the organisational sales is not preferred by these entrepreneurs. ji) Non-Technical Entrepreneur: Unlike technical entrepreneurs, they are not related with the technical activities of production. Such entrepreneurs concentrate on designing marketing strategies for the effective distribution and promotion to boost up the sales of the products or services. iii) Professional Entrepreneur: Professional entrepreneurs are those people who start new business enterprises but do not run or manage it. They. sell their enterprise and proceed with establishment of another such business enterprise. They are also known as ‘managing agents’. In modern time, these types of entrepreneurs are rarely available, ‘These are imaginative and energetic individuals who regularly develop new ideas and convert them into entrepreneurial ventures. Scanned with CamScannerMW MBA Second Semester (Start up and New Venture Management) SPPU 4) According to Growth: Growth refers to the process of positive changes towards success. The growth of business provides various opportunities to entrepreneurs to expand widely. A significant level of profit and psychological satistaction is achieved by entrepreneurs, when their products and services are accepted and approved by target customers, The entrepreneurial enterprises are categorised as high, medium, and low growth enterprises. Therefore, entrepreneur may be categorised as: i) Growth Entreprencur: Such entrepreneurs certainly choose the business enterprise with high growth prospects. This enables the entrepreneurs to sustain and expand their business in future. i) Super-Growth Entrepreneur: Those entrepreneurs who have experienced extensive growth in the business are known as super-growth entrepreneurs. High rate of profitability, capital gearing and liquidity of funds determine the status and growth of the enterprise. 5) According to Area: Entrepreneurs are also categorised in accordance with their area of performance. These are as follows: i) Urban Entrepreneur: They belong to urban areas and establish their business in the same location to avail the regional advantages. These types of entrepreneurs are mostly corporate or industrial entrepreneurs. ii) Rural Entrepreneur: Rural entrepreneurs are usually involved in trading or agricultural activities. ‘They belong to rural areas and establish their business in the same location. Various government assistances are provided to the rural entrepreneurs to encourage and accelerate such activities. These government schemes are targeted to remove the differences between rural and urban areas. 6) According to Gender: According to gender, entrepreneurs may be of two types: i) Men Entrepreneur: The male individuals involved in establishing and managing entrepreneurial enterprises are called men entrepreneurs. Mostly, new business enterprises are run by males ii) Women Entrepreneur: The female individuals involved in establishing and managing entrepreneurial enterprises are called women entrepreneurs. Women entrepreneurs were an exception few years back, but in present time their numbers are increasing day by day with success. Like any general entrepreneur, all the women entrepreneurs have to face a tough competition from already established businesses, 7) According to Level of Motivation: Level of motivation defines two types of entrepreneurs: i) Pure Entrepreneur: Pure entrepreneurs are those individuals who are attracted to establish a business enterprise because they are really interested in doing so, So, they choose this path only for their self-satisfaction, They have a strong desire to become entrepreneurs, like Aditya Birla, Dhirubai Ambani, etc. ii) Induced Entrepreneur: Induced entrepreneurs are those people who get attracted to the incentives and assistances provided by the Government for entrepreneurship. All the aspects related to business enterprise such as financial, managerial and technical activities are supported by various schemes and policies of the Government. A number of entrepreneurs get induced by Government rules and assistance, that have been introduced after the economic reforms and liberalisation of India, 8) According to the Capital Ownership: According to capital ownership, entrepreneurs are of following types: i) Private Entrepreneur: Private entrepreneur is a person or a group of persons, engaged in starting @ new venture, arranging the sources of finance, implementing the modern technologies in it, and taking risks to gain profit. Here, all the venture establishment related activities are performed by these persons on their own, ii) State Entrepreneur: When the Government or state undertakes any entrepreneurial project; then they ~ are known as ‘state entrepreneurs’. All the capital and production technologies are arranged by the Government. )) Joint Entrepreneur: When private and state entrepreneurs combine together to form a business enterprise, then they are referred to as ‘joint entrepreneurs’. 9) According to the Entrepreneurial Acti can be categorised into three: i) Novice Entrepreneur: The one who starts his enterprise for the first time is called a novice eatreprencur. They should not to be mixed up with young starters. ‘The novice entrepreneur can be an aged man having enormous experience in industry. : a Scanned with CamScanner ity: On the basis of the entrepreneurial activity, entrepreneursBeing an Entrepreneur (Unt 1) 7 ii) Serial Entrepreneur: The entrepreneur, who starts with one enterprise but in course of time héads many enterprises producing different products, is known as ‘serial entrepreneur’. Such entrepreneurs are interested only in the start-up activities of the venture. As soon as the venture is established, they may find it unattractive, therefore shifting the ownership to others. Now, they focus on some other entrepreneurial venture and this process keeps on going. ; iii) Portfolio Entrepreneur: Such entrepreneurs own as well as run several entities. They enjoy diversity in their business and are eager to grab new opportunities as well. This can also be a keen approach towards risk-sharing and maintaining equilibrium between profit and loss. A significant level of coordination can be observed between these establishments 1.1.4. Skills Requirement of an Entrepreneur The following are some important skills that are required in an entrepreneur: 1) Administration Skills: Usually, entrepreneurs appoint office assistant for administrative work. But, itis teconomical for new entrepreneurs. Therefore, all entrepreneurs must possess administrative skills alongwith the management of the business. They need to be capable of handling all the activities such as bi n, managing receivables, invoices printing, etc. 2) Financial Knowhow: Basic knowledge about finance is essential for every entrepreneur. One must know to manage check-books and invoices related to business. Keeping track of cheques issued, pending dues auzainst the services or goods supplied with schedules of receipts enables to know the cashflow and cash ready in hand. I also important to recognise and manage time with finance. Having sufficient knowledge Sf accountancy is enough to handle finance. There is no compulsion that an entrepreneur must be highly qualified to handle financial matters. Focusing on vision is the important requisite for successful entrepreneurs. cessful entrepreneurs focus on vision. Vision 1g, payment collect 3) Vision and Leadership Skills: Instead of caring about tasks and operations of the enterprise, succt implies the status that a particular organisation wishes to achieve in future. In order 1 effectively canmunicate this vision to entire workforce, leadership skill is required. The entrepreneur would be able fo Id assist in the development of the new venture. Through effectively share his vision with his team, and it woul communicating the vision, the entrepreneur makes the process of achievement of shared vision very simple. 4) Conflict and Consensus Management Skills: Conilict is state of disagreement between persons, interests or ideas, The conflict can be in two forms, that is: {) -Emotional/AfTective Conflict: This type of conflict directly affects person or object. ‘The state of annoyance ‘and hatred is comparatively higher than normal. This kind of conflict ends up giving adverse outcomes. si) Cognitive Confliet: Contrary to the above type of conflict, no one is directly involved as a person. They just have disagreement towai ‘his kind of conflict ends up finding rds one’s ideas or plans. TI appropriate solutions which is mutually agreed by both the parties. Consequently, ‘an entrepreneur must be capable of handling all types of conflicting s the business. | with different people present in the 5) Interpersonal Skills: In every business, entrepreneurs have to deal organisational hierarchy. Therefore, itis important for entrepreneurs to OWn interpersonal skills in order to communicate with them effectively. 6) Communication Skills: Generally, entrepreneurs us employees, suppliers, bankers, ete. This includes Seminars, etc. Thus, entrepreneurs must kave good writing, time. These are as follows: 2 3) Writing Skills: Entrepreneurs need to have good writing skills so as to effectively commmuntcile with Their employees, customers and supplies. A good writing skill leads to better understanding of thoughts tnd ideas. Readers should be able to understand what the writer is trying to convey. Speaking Skills: Mostly business people communicate verbally over telephone or face-to-face. The Speaking skills greatly influence the person the entrepreneur is dealing with. ii) Listening Skills: One of the biggest reasons of misunderstandings between persons or 8 group is the lack of listening skills. jtuation taking place in .e basic means to communicate with their customers, ‘elephone calls, e-mails, memos, letters, meetings, speaking and listening skills, all at the same Scanned with CamScanner| 16 [MBA Second Semester (Start up and New Venture Management) SPPU 7) Problem-solving Skills: Every business faces number of problems. Thus,’ entrepreneurs must Iave a ability o take and solve every problem by suitable decision-making, Usually, entrepreneurs are unable make decisions and fail to solve problems. One must use formal techniques to problem-solving and also consider alternatives to evaluate decisions. Entrepreneurs may also face situations where they have to one decisions on their own, Sometimes they may have to involve employees to discuss a certain problem, where brainstorming und consensus-building methods may be appropriate to make decisions. 8) Technical Skills: The entrepreneur should have a reasonable level of technical knowledge to understand the technical terms spoken by the staff during the discussion to enable him to understand the problem. Entrepreneurs need not be masters in technical skills but must possess basic technica! knowledge. This helps the entrepreneur to appreciate and discuss the efforts of the technical staff. 11 Entrepreneur’s Role/ Task . ‘An entrepreneur performs all the necessary functions which are essential from the point-of-view of establishment and expansion of the enterprise, Entrepreneue's Role/Task Mea Generation, HLT” petermianon of Objectives Fund Rabiag TAL Procurement of Raw Materials Procurement of Machinery | Market Research Deteminaton oF Ownership TTL Resnitment of Manpower Project Implementation 1) Idea Generation: Idea-generation is the process of building new ideas, bringing out the idea into an innovative way, developing the process and converting the idea into reality. Broadly, it refers to the selection of a product and identification of project. Ideas can be generated by following the entrepreneur's vision, perception, experience, observation, education, exposure and training. Generally, market study and environmental analysis tools are used for idea generation. The major function of the entrepreneur is to select the best out of the many alternative ideas such that it is most appropriate idea to be applied for the organisation, 2) Determination of Objectives: One of the main functions of the entrepreneur is to define the objectives of the business. The business objectives should be laid-down clearly. Most appropriately, the entrepreneur must specify few things in a clear manner: i) The business nature, and ii) The business type. ‘The nature and type of business identifies the industry it belongs to i.., manufacturing, trading or service. This helps the entrepreneur to focus on the business more effectively keeping in view the objectives. 3) Fund Raising: Finance isthe life-blood of any business. It isthe function of the entrepreneur to arrange the Sources of funds for the business. There are two sources to raise funds, that is, internal and external sources. Entrepreneur must be aware of formalities and guidelines to be followed for raising funds. Governmental assistance can be provided in form of seed capital, fixed capital and working capital. There are several Sovemnment schemes also which are provided to the entrepreneurs such as Swarnajayanti Gram Swarozgat Yojana (SGSY), Prime Minister's Rozgar Yojana (PMRY), Rural Employment Generation Programme (REGP), etc. There are also various financial assistances provided by banks and financial institutions, | 4) Procurement of Raw Material: | the entrepreneur. Entrepreneur i ls: The acquisition of quality raw materials is also one of the functions of must recognise and allocate economical and constant supply of raw ess to reduce their production cost and increase their profit-margins materials. This helps the busin¢ against competitors. _ Scanned with CamScannerBeing an Entrepreneur (Unit 1) "7 5) Procurement of Machinery: Another function of entrepreneurs is to obtai i required for the production of goods and services. Before the procurement of machineries, -Sapeaoer must consider following specifications: . i) Technology description, ii) Installed capacity of the machines, iii) Description of manufacturers and suppliers, iv) Origin of machines, whether indigenously made or foreign made, ¥) After-sales service facilities, and vi) Warranty period. 6) Market Research: Market research refers to process of gathering relevant information about products, ‘customers and target markets. Intensive research is to be made to ascertain the demand of the product which the entrepreneur intends to manufacture, the estimated rate of consumption and also the existing suppliers if any. If an entrepreneur has to manufacture a product, he must have a detailed market analysis of the product, The information about a product must include demand and supply of a product, price, size of the target market, ete. 7) Determination of Ownership: partnership, joint stock company, suitable form of business depending upon the product investment, types of operations, human resources quality, basis of ownership by the entrepreneurs. 8) Recruitment of Manpower: An entrepreneur is also responsible for the manpower planning. of the “organisation. During the recruitment procedure, an entrepreneur has to function the following activities: i) Manpower forecasting. ii) Outlining of selection process. iii) Formulating scheme of compensation. iv) Defining the rules of training and development. 9) Project Implementation: Entrepreneur has to prepare a detailed plan for execution of the project Itisa time bound process. It is the function of the entrepreneur to execute the process from conception 0 commissioning stage based on prepared agenda so as to evade extra cost, time and competition. There are mainly four forms of ownership, i.e., sole proprietorship, ‘and cooperative society. It is the role of an entrepreneur to find out the (characteristics, types, quality), size of capital etc. The legal title of assets is obtained on the 1.1.6. Advantages of being an Entrepreneur ‘Advantages of being an entrepreneur are as follows: 1). Self Confidence: The trust thatthe entrepreneur has in his abilities facilitates the birth of entrepreneurial spirit within hiner, ‘The entrepreneur strongly hopes for success because of the presence of combination oF this entrepreneurial spirit and his efforts engaged towards establishment and_ maintenance. of the enterprise, This success generates more success, which in return inculeates greater faith in himself/herself. ‘As a result, this imparts self-confidence in entrepreneurs. 2) Flexibility: Entrepreneurs are independent enough to take their decisions in regard with the working Rhedulo. They themselves manage their duration of work and same way plan their business goals. In contrast, corporate businesses, do not consider employees while make their own rules and regulations for the work schedule. 3) ‘Tax Benefits: Being an entrepreneur, one can avail various tax benefits which are applicable for business managers or owners-suppliers or for office area utilities. Hence, costs incurred on travel, rent paid, lettieity, phone bills etc. for the office space and other activities that are involved in expansions and furthering. of business interests are directly deductible from the income. This provides significant tax benefits fo such entrepreneurs. All these benefits can be availed by the entrepreneur by hiring a tax advisor or consultant. 4) Monetary Freedom: The mon their hard work and sincerity towards business rather than being fixed amount. most secure business organisations. And entrepreneurs can sell thei business at high price a tary freedom of an entrepreneur and his co-workers largely depends upon ‘the business. The salary varies according to the success of the ‘There are many entrepreneurs who have proved themselves as iff there are certain: issues which are complicated, then ind once again start-up with a new business. Scanned with CamScanner18 MBA Second Semester (Start up snd New Venture Management) SPPU 5) Personal Growth himself/herself, This. helps All management and administrative work is handled by the entrepreneur him to directly deal with different people and develop interpersonal skills, ty built-up due to which entrepreneur feels more independent and Consequently, there is. a person confident than before. 6) repreneurs have the opportunity to do something for the society. They do this g Wealth and offering job opportunities to people in the society. This way an entrepreneur is able ute much for the betterment of the society. Therefore, they feel a sense of responsibility and which cannot be sensed by wealth-centric individuals yy ere: to contri motive in lif 1.1.7. Problems Faced by Entrepreneurs ‘Some of the problems faced by entrepreneurs are as folfows: 1) Unethical and Unsupportive Business Environment: There are many countries worldwide where there is no rule of law, poorly defined property and contract laws, widespread corruption, inconsistent enforcement of regulations, ete. All these unethical practices hamper the growth and smooth functioning of the entrepreneurial venture. 2) Lack of Business Opportunities: For start-up of a business enterprise, the entrepreneur must be aware of the business opportunities in the prevailing marketplace, But, due to unstable and adverse market conditions, itis not possible to create business opportunities constantly. 3) Lack of Entrepreneurial Capacity: Becoming an entrepreneur is not a cup of tea for everyone. Along with the opportunity, a person also needs to have the required entrepreneurial qualities, métivation and willingness to commence a new business enterprise. Often, a business opportunity remains unutilised due to lack of entrepreneurial capacity. 4) Inadequate Entrepreneurship Training: Proper education and training is a must for new ventures. An entrepreneurial training covers up various areas which help to develop entrepreneurial skills, managerial skills and technical skills. 5) Lack of Business Experience: The education and work experience of a person drive him to start a business. An entrepreneur can become a leader only when he is a good learner. Setting up a new business only because it looks rewarding and attractive can prove to be disastrous, if one does not have a proper knowledge and experience of it. 6) Fear of Failure: The fear of failure is the biggest fear of any entrepreneur or businessman. This act as a major barrier to entrepreneurship. Many entrepreneurs lose several opportunities due this fear, 7) Risk Aversion: One of the major qualities of an entrepreneur is risk taking, Entrepreneurs must have the capability to take initiative, build a structure applying appropriate mechanism and accept the risk of failure. But, there are many individuals who create a psychological barrier towards risks, which restricts them to become successful entrepreneurs. 1.1.8. Managers Versus Entrepreneurs Entrepreneur is an individual involved in developing his/her own business based on an innovative idea. All the resources and essentials related to business are arranged by hinv/er, On the other hand, people undertaking the tasks of management in the organisation are managers. The manager is requited to maintain the flow of duties and activities of employee(s) as well as department(s) as per the needs of the organisation Depending on its size, a single management level or hierarchy of management level is present in an organisation. Generally, three levels of management are reported in large-sized organisations, ic., op, mid and lower management. The top or senior management of the organisation comprises of its owners, i.e., Board of Directors or shareholders who are basically concerned with the key strategic decisions regarding the organisation. Mid or middle level management supervises the lower management and is responsible for preparing reports. And the lower level of management includes the functional managers who are engaged in performing basic organisational functions. Scanned with CamScanner—_— ‘Being an Entrepreneur (Unit 1) 3 ‘The responsibility attached to the managers at any level is far more than ordinary employ y i fees and therefore higher wages are served to them. Different organisations have different managenal requirements and work structure, yet a basic degree and level of experience is required for top management positions. Basis of Difference Managers Entrepreneurs ‘Strategie Orientation |i) Driven by controlled resources. j) Driven. by, perception of] i) Social contracts. ‘opportunity. it) Performance measurement criteria, Diminishing opportunities. liv) Planning systems and cycles. Rapidly changing technology. ‘Consumer economics. Social values and political rules. Revolutionary, with short duration. Action orientation. Narrow decision windows. | Acceptance of reasonable risks. | Few decision constituencies. 3 Commitment to Seize|i) Evolutionary, with long duration, Opportunities i) Acknowledgement of multiple} constituencies. Negotiation about strategic course. iv) Risk reduction, 1) Coordination with existing resource base. 5) Commitment of i) A single stage, with complete commitment|i) Many stages, with minimal Resources out of decision, ‘exposure at each stage. ii) Need to reduce risk. Lack of predictable resource needs. {ii) Incentive compensation. Lack of control over — the! iv) Tumover in managers. ‘environment. 1) Capital budgeting systems and formalliv) Social demands for appropriate use planning systems. of resources, 1v) Foreign competition. vi) Demands for more efficient use. fy Controlof Resources |i) Ownership or employment of required|i) Episodic use or rent of require] resources, resources. Power, status, and financial rewards. Increased resource specialisation. Coordination of activity. Long resource life compared with Efficiency measures inertia and cost of] need. change industry structures. iv) Risk of obsolescence. js) Risk inherent in the identified| opportunity. 1i) Inflexibiity of |_—_permanent| commitment to resources, 5) Management Structure |i) Hierarchical structure. j) Flat with multiple informal ii) Need for clearly defined authority and} networks it) Coordination of key non-controlled responsibility. ii) Organisational culture. resources. iv) Reward systems. ii) Challenge to hierarchy. 1v) Management theory. iv) Employee's desire for independence. 1.1.9. ‘Dilemmas of an Entrepreneur for Success The dilemmas of an entrepreneur for success are as follows: ; 1) Early Career Dilemmas: There are a number of confusing and new roles which has to be encountered by aninividual while starting their career as entrepreneurs. Management of stress and tension associated with this career is mainly dealt in personal dilemmas. Apart from this, there is @ Sense of insecurity and confusion which arises due to the new roles of being business owners as well as managers which is encountered by these entrepreneurs. This career also has its effect on the family of entrepreneur. In the funding of new setup, financing is ier pressure. Individuals generally start with their done from the family funds which can put the family und re. id { entrepreneurial endeavours between the ages of 20 to 30 years. This is the time when the people generally plan for getting married and have babies. Thus, individuals who are working as an entrepreneur have to face the pressure of maintaining the balance between their family and work. There are many entrepreneurs who say that they did not manage this dilemma effectively and gave importance to business over their families. Scanned with CamScanner20 MBA Second Semester (Start up and New Venture Management) SPPU ‘The main concerns in the initial phases of business are related to resource management such as labour, cap- ital, raw materials, etc., for effectively initiating the new venture. The most significant problems faced in the initial stages were found in the study of Kazanjian as related to sales, marketing, and finance problems. The time management of the entrepreneurs depends upon the stage of the development of the enterprise as suggested by McCarthy, Kruger and Schoenecker. The main focus remains on the issues related to the customer in the beginning than in the later stages. For having a successful entrepreneurial career, the individuals should manage their role of being the owner effectively and should interact regularly with the ‘owners of other enterprises. 2) Mid-Career Dilemmas: We can observe a change in the roles of entrepreneurs during their mid-career. ‘These roles generally involve the activities such as administrative tasks, solving employee problems, business growth and strategic planning. More tension and stress of changing roles are experienced by the entrepreneurs when they start dealing with the greater administrative responsibilities. Such type of stress due to increased responsibilities results in building a feeling of isolation among the entrepreneurs. A Tecurrent sense of profound loneliness was found in almost 54 per cent of entrepreneurs in the study conducted by Boyd and Gumpert (1984). With the help of information, system and culture, new forms of control can be implemented in the growing organisation for having a better control over operations. The feeling of not having control over the expanding business is experienced by many entrepreneurs. In order to accomplish higher growth rate of business, the entrepreneur should be able to efficiently delegate work to his employees. Sometimes, in order to manage the growing operations of the developing firms, some external managers who have expertise in their field can be hired. ‘This will also result in some kinds of issues as these managers may have different orientation and values than the entrepreneurs. In many studies, it is found that the failure or success of many firms depends upon the ability or inability of entrepreneurs to combine the skills of professional managers with their business. 3) Late Career Dilemmas: A lot of stress is experienced by individuals during the time of retirement or sudden separation from their career. These experiences include adopting a set of new roles at the personal, professional, and family front. Many times, we can sec cases where these frustrated entrepreneurs tend to ‘commit suicide and end their lives. Ina study conducted on the entrepreneurs who had graduated from Harvard University, it was revealed that 25 per cent entrepreneurs were not interested in retiring or were not planning retirement before the age of 65 and more than 48% individuals were not planning to retire in their entire life. The phase of anger, denial, depression, acceptance and bargaining may be faced by the entrepreneurs, However, there ae various entrepreneurs who never accepted their mortally and they started preparing both their family and the business to operate efficiently in their absence. Ina study conducted by Trow in 1961, it was concluded that those businesses which have not planned well for their succession had to suffer financial losses as a consequence, in comparison with thowe busiaeces which had appropriate plans regarding the same. Infact, it was found in many studies that if the suocescien is not planned adequately, it would hamper the business in a great deal. 1.1.10. Handling Doubts on Survival of Business: Survival Strategies for Entrepreneurs The Various strategies which can be used by entrepreneurs for the survival of theit ventures are as follows: 1) Management of Cashflow: One of the important strategies to be followed by entrepreneurs is managing the cashflow. The firm is bound to fail due to non-payments of bills irrespective of the amount of surplus fands they may have. In order to pay rents, electricity charges and other dues, itis important to have earn ty hhand. In events where cash is required on an urgent basis, the firm will face many difficulties no matte howe Inuch capital is with it in the form of bank loan promises, property, clients who owe money, forthcoming guiers, etc. The overall financial health ofthe firm can be managed effectively with the help of appropriate accounting and cashflow management. 2) Target the Sales: The rate of survival can be improved with the help of better sales but it does not mean to avoid the other functions, however, sales is the most important function among all. Merely having an attractive salesman skill will not help in boosting the sales level. However, enhacing the sales level he the $i ere Scanned with CamScannering an Entrepreneur (Unit 1) Fone a a business can be achieved through effective CRM (Customer Relationshi i i 5 tionship Managemer 18, havit important customers and other potential customers. elp,in identifying 2) Prepare a Financial Strategy: Often it happens that during the time of some urgent needs; entrepreneurs are if with ofnanee, tough itis realy availabe i rnary tne period. Thus, they shuld prepare a nancial a ein pe is ex tes to face the uncertainties in future. Some of these financial plans may include: ji) Account opening with the suppliers, jij) Having credit cards, and jv) Extending the business overdraft by bank loan. 4) Look for New Clients: Most of the firms feel comfortable in having two or three main clients as these firms know each other well; their requirements and the main issues, but one should not forget the uncertainty of the business. One should always look for new clients or customers so that the business keeps running despite the failure of one of the major clients. '5) System Development: Almost all the activities have to be handled by the entrepreneurs in the initial phases of the business and it is very important for them to spare time from all these activities so that they can focus ‘on expanding business. This can be done by having some systems in line which will help in delegating Various functions such as Customer Relationship Management (CRM), bookkeeping, accounting, ‘marketing, production management, and so on. This will help the entrepreneur to handle the main activities and delegating other activities of less sensitive nature to others. 6) Improve Business Skills: For a successful business, an entrepreneur not only needs to focus on the craft Put alse on enhancing the business skills. He can learn such skill with the help of various product-related training programmes available around him, For example, no matter how delicious food is served by a South-Indian Pestaurant, but if the owner does not own required business skills, he is ikely to fail in his business. commitment are the essence of any business, but entrepreneurs should not ignore the much needed break. They should go for holidays from time to time which wii) not only oritelise their enthusiasm and creativity, but will also test the stability and strength oftheir business: If ‘he Feeeee® remains in motion in the absence of entrepreneur, it ean be taken as a positive sign regarding the strength of the business. Instability and vulnerability can be experienced in that business where constant supervision from the businessman is required. 4.2. ENTREPRENEURSHIP 1.2.1. Concept of Entrepreneurship Performing the activities of an entrepreneur is called as entrepreneurship, {ts 8 French word, which means “to undertake”. In this, all the available resources Jike innovative ideas, cap! il, labour, and business intelligence tte utilised in effective manner to produce innovative products and services, Iemay also involve creation of new enterprises or diversifications in established enterprises due to available opportunities in the market. develop and establish a business enterprise and perform all the functions involved the particular activity. Just like managers perform ‘management, entrepreneurs perform entrepreneurship. It is a process involving different activities to set-up an enterPAT Itstarts with discovering of opportunities, designing a business plan, applying resources and techniques, and finally implementing the ideas. Not only this it also involves managing and controlling of various risks ‘and uncertainties, and turning it into a successful business venture. 7) Time-Out: No doubt hard work and Entrepreneurship is an ability of an entrepreneur to In a Conference on Entrepreneurship held in United States, the term ‘entrepreneurship’ was defined as, “Entrepreneurship is the attempt to create value through recognition of business opportunity, the management of risk-taking appropriate to the opportunity, and through the communicative and management skills to mobilise human, finareiat and material resources necessary to bring a project to fruition" ‘Entrepreneurship as defined essentially consists in doing things that are ¢ of business routine”. According to Joseph Schumpeter, not generally gone in the ordinary cours ee Scanned with CamScanner7 [MBA Second Semester (Start up and! New Venture Management) SPPU According to Peter F. Drucker, “Entrepreneurship occurs when resources are redirected to progressive Opportunities not used to ensure administrative efficiency”. He further states that entrepreneurship is not natural, it is not creative, It is work. Entrepreneurship requires entrepreneurial management. a Entrepreneurship is, generally regarded as setting-up new enterpriies, but, in recent times, social as well as Political entrepreneurial approaches have also developed, When an entrepreneurial approach is implied within ‘an enterprise, itis called intrapreneurship. This intrapreneurship may be utilised for enabling the enterprise for corporate venturing and developing spin-off organisations. 1.2.2, Characteristics of Entrepreneurship ‘The main characteristics of entrepreneurship are as follows: Characteristics of Entrepreneurship Economic Activity Hf (——Giiccroienea Pecsjonking FHF ceping Challenges Risk-taking FJ] Building Organisation Dynamic Process} H Gap Filling Function ‘Skill Management Hf — | innovation ‘Mobilisation of Resources 1) Economie Activity: Entrepreneurship is an economic activity which encompasses start-up and ‘management of a business enterprise. This process is totally value-oriented as well as profit-oriented, 2) Object-oriented: Entrepreneurship is an object-oriented process where a person or a group of persons Works under an objective to carn profit by producing and selling different innovative products and services. 3) Decision-making: Decision-making is a thought process of selecting a logical choice from the available options. It is a tough task as every business enterprise comprises of risks and uncertainties which affect the decision-making process. it is the most essential characteristics of entrepreneurs to effectively start and manage the entrepreneurial enterprise. 4) Accepting Challenges: In entrepreneurship, entrepreneurs already know that they will be facing several challenges in regard with the business. It is not a bed of roses but a bed of thorns in the form of challenges Which may be related to finance, raw material, labour, distribution, salary, market competition or arrival of a new and better product in the market. They accept the challenges and put in their best efforts to overcome them in favour of the enterprise, They utilise the available resources to make the complex situations favourable for the enterprise. 5) Risk-taking: Entrepreneurs are whole sole responsible for the business toss arising out of unpredicted incidents of the future. Whenever an enterprise is set-up there are always uncertainties of maker ‘The Drogiet may or may not be liked by the public, or a new competitive product may also arrive in the market, Pree Dour employed may be Tured away by the competing entrepreneurs, or sudden depletion of funds mey take place due to unseen circumstances, These are a few very common risks, Therefore, entrepreneurs we ‘Fal to take risks, Risk taking is an inevitable feature of entreprencurship. In this, entrepreneure analyse the situation with the help of their unique insight and scientific atitude, and develop innovative products and services to reduce risks and gain profit. 9) Building Organisation: It is most obvious role of entrepreneurship to build an organisation efficiently. Btfective leadership and delegation of authorities are required for building organisation, This fesuve of enurepreneurship utilises the innovations in economic manner and thus regarded as crucial for entrepreneurial spit, . Scanned with CamScanner‘ing an Entrepreneur (Unit 1) 2B +) Dynamic Process: Entrepreneurship is dynamic in nature, as it analyses the changing environment on regular basis and adapts the favourable opportunities. This enables the entrepreneurs to Keep pace with the current trends and helps in the growth of the business. §) Gap Filling Funetion: Entrepreneurship acts as gap filler. The basis of entrepreneurship isto cater for the needs of the society. It generates suitable products and services for the use of the consumers and the society dtlarge. It provides information about the availability of desired products and services. 9) Skilful Management: It is crucial for entrepreneurs to be efficient and ercative while managing the business enterprise. They should scan and administer all the on-going projects and prevailing opportunities so as to exploit them successfully. 10) Innovation: The most influential feature of entrepreneurship is ‘innovation’. Entrepreneurs always try fo find out new and better ways. They know it very well that the one who does not improve, depending upon the changing times, perishes very fast. 11) Mobilisation of Resources: In order to accomplish the desired goa, entrepreneurs must recognise, collect and allocate resources, dispersed in the environment. The mobilisation of resources isa crucial task which must be ddone properly so that it can be fully utilised. This quality of entrepreneurs differentiates them from others. 4.2.3. Role of Entrepreneurship in Economic Development “This section discusses about the connection between the entrepreneurship and the economic development of the country, how the entrepreneurship is beneficial forthe nation and which role does it play in the development of the country. All this is explained through following point 1) Creates Large-Scale Employment Opportunities: The economy is unemployment. Entrepreneurs play an important role is providing job opportunities to large portion ofthe population. As more and more entrepreneurial enterprises are developed, both small and djarge Fee job offerings are provided. The units of employed persons Keep on increasing withthe growth of he business, With the passage of time and success of the business, entrepreneurs set-up more industries which tifers more employment opportunities to the economy, In this way, entrepreneurs contribute efficiently towards the economic development of the country. F 2) Balanced Regional Development: The social benefits like transport facilities, education, health, aaeininment, ete, take place with the growth and expansion of the business. But these economic Gevelopments are limited to the specific areas where the industries are situated. With the changing time and snoreacing competition, large industries are enforced to start-up their industries in Tess developed as well as rural areas. This leads to the development of such areas. 4) Increase in National Income: The total oviput of all goods and services produced annually including ail imports ofthe country is known 2s national income. The country produces goods and services according fo the Gemands of domestic customers and number of exports. The country's demand increases with the rowing population and their personal income. Whereas, level of export also increases due to the urgent requirement of imports in various countries. With the increasing demand, the total output of the nation also increases rapidly. Entrepreneurs convert the raw material into goods through manufacturing process which tan be coneamed by the customers in house and the excess produets can be exported to foreign countries. Hence, entrepreneurs are indirectly liable for their nal income. most crucial problem of any underdeveloped ‘contribution in the ni 4) Promotes Country’s Export Trade: Entrepreneurs also help in promoting export of goods and services in order to bring in huge foreign exchange reserves. Other than this, flow of foreign exchange reduces the import dues requirement, AS a result, export trade promotion and import substitution accelerate economic growth. 5) New Products, New Services, and New Business: Economic development is encouraged through new products, services and technology introduced by the entrepreneurs. Entrepreneurs through their innovations try to bring always new products in the market to fascinate the customers. They focus on increasing varieties and volumes of new and innovative products. 6) Dispersal of Economic Power: The. limited and specific industrial development leads to the creation of ‘market monopoly. Here, the economic power remains in the hands of few business people. This brings with it the evils of monopoly and exploitations. The entrepreneurial development breaks down the economic power and disperses it equally among new and emerging entrepreneurs, consequently, reducing the + monopoly of few industries in the market. Scanned with CamScannerMBA Second Semester (Start up and New Venture Management) SPU 7) Better Standards of Living: Entrepreneurs are essential for improved economic growth. This economic growth also improves the living-standards of the society. Entrepreneurs usually aim to produce quality goods at reasonable prices and satisfy the customers according to their tastes and preferences. This increases the purchasing power of the consumers and ultimately generates higher standard of living. 8) Creating Innovation: Through innovation, entrepreneurs bring in new ideas, products and techniques for the enhancement of the society at large. They explore the world and introduce new concepts and philosophies to become more competent and upgraded. In this way, they share their part in economic development. 9) Production Evolution Process: Entrepreneurs always keep their eyes and ears open for new inputs. They constantly look forward to improve their processes. Production evolution involves the creation of innovative production processes. The entrepreneurs identify and merge potential technologies in order to use them for the creation of new products and services. Finally, these new products and services are offered to target market customers. 10) Enhancing Welfare Amenities: Entrepreneurs develop products and services capable of serving the society. Different welfare services are provided by entrepreneurial enterprises like insurance, healthcare, and comfort facilities, ete. Personal needs and problems enable the entrepreneurs to identify the required products and services in the market. This condition works as a stimulator for generating new products and services, and finally provides platform for practicing entrepreneurship. 1.2.4. Forms of Entrepreneurship Entrepreneurship can be of two types: ; | 1) Small Business Entrepreneurship: Small business entrepreneurship acts as the fuel for private enterprises. It provides competitive zeal, creates job, sets up new ventures and opportunities are others. It also improves economic growth and social fibre. It isa start-up process for new enterprises. 2) Corporate Entrepreneurship/ Intrapreneurship: Corporate entrepreneurship is generally believed to refer to the development of new ideas and opportunities within large or established businesses, directly leading to the improvement of organisational profitability and an enhancement of competitive position or the strategic renewal of an existing business. 1.2.5. | Entrepreneurship Process Entrepreneurial process is a defined sequence of ideas, techniques, plans and programmes essential for establishing a new venture. The entrepreneur is responsible for identifying, evaluating, developing and managing different resources. Entrepreneurs must also overcome the restraints involved in the process. Mainly, the process comprises of four stages, they are: 1) Identifying and Evaluating Opportunity: The first stage of = entrepreneurial process is to identify the potential opportunities and SS evaluate them effectively. It is a crucial task for all entrepreneurs to find out T feasible opportunities. It is very essential for entrepreneur to remain attentive and conscious while searching options. These opportunities should Developing Business Plan match the skill and expectations of the entrepreneur. Every entrepreneur + must devote required time and determination to exploit opportunities [— Dacmining Resouces Requca efficiently. Altough, for majority of entrepreneur, this determination and 7 _] focus develops alongwith the growth of the enterprise. A strong belief is developed for the evaluated opportunity, and the entrepreneur is ready to Managing the Enterprise utilise the opportunity alongwith making all the necessary sacrifices. aan Entrepreneurship Process 2) Developing Business Plan: A well-defined business plan is essential for starting a new venture. A business plan is a detailed layout of entrepreneurial activities in the form of a document based on detailed assessments and significant facts and figures. Alongwith describing the business proposal, a business plan also explains the technical viability and success chances of the business ‘dea. It also suggests different actions to be performed in different sections to realise the business opportunity. It is an extensive stage, but it must be done properly to make best use of all resources and opportunities efficiently. As the entrepreneur is going to develop the business plan for the first time and he does not have required resources, this business plan development stage is very.time-consuming. This business plan enables the entrepreneurs to be familiar with the venture related issues. . Scanned with CamScannerBeing an Entrepreneur (Unit 1) ib Determining Resources Required: After designing the business plan, entrepreneurs must carefully determine the required business resources. The first step towards organisi ng and determining the resources js to identify and evaluate the available resources, Entrepreneurs are required to identify essential, critical and desirable resources for the actualisation of the business plan. The importance of variety and quantity of fesources should not be ignored. The entrepreneur is also required to deal with improper resources. The issues related to shortage of resources must be dealt beforehand and managed properly. All the estimated ‘amount of resources must be readily available with the entrepreneur on time. Entrepreneur is also engaged jn identifying alternative dealers of required resources along with observing their terms and conditions. 3) Observing terms and conditions of these dealers enable the entrepreneur to make a reasonable deal in order to procure the resources.at least probable price with minimum loss of control. The resources may be as follows: j) Technical resources needed for production purpose in order to develop quality products. Financial resources like cash-in-hand, equity and borrowing authorities. 4ii) Physical resources in the form of assets such as buildings, machinery equipment, and vehicles. jv) Human resources, including skilled and experienced employees and workers with emotional and intellectual abilities. jl ¥) Intangible resources such as information, networks, protected patents, latest technology, and brand recognition. 4) Managing the Enterprise: In the last stage of entrepreneurship, procured resources are utilised for effective implementation of business plan. Along with implementing business plan, management of the enterprise is also crucial, For effective management of the enterprise, entrepreneur develops an appropriate “organisational structure and style. Key suecess factors are also determined in this stage. loped for handling functional issues related to the enterprise. In licies are designed by the entrepreneur for the growth of the ip as some entrepreneurs fail to manage and ‘An effective control mechanism is devel addition to this, different strategies and pol ‘enterprise. This is the most challenging stage of entrepreneurshij ‘grow the enterprise 1.2.6. Factors Impacting Emergence of Entrepreneurship ‘The various factors influencing the emergence of entrepreneurship are as follows: Factors Impacting Emergence of “Entrepreneurship ‘Economie Factors Non-economic Factors Social Factors Availability of Economic Resources (Cultural Factors Economic Conditions Personality Factors Psychological and Economic Policies Labour Policies ‘Sociological Factors ‘Trade Policy Technological Factors ‘Tariff Policy ‘Educational Factors Incentives Motivation Subsidies 1) Economie Factors: Its of mult-dimensional nature. 1t includes all those actions which make the economic activities possible in the country. i) Availability of Economic resources encourages. entreprenew entrepreneurs to earn more profit an Economic conditions govern the enterprise income, consumer purchasing power, ide sufficient symptoms about the conditions prevailing in the Resources: Availability of adequate quantity of natural and physical ts to undertake more entrepreneurial activities. Tt helped the retain the profit for further expansion program, ii) Economic Conditions: ability to remain viable. Inflation, interest rates, unemployment, per capita i some of the important factors which provi economy as a whole. Scanned with CamScanner and exchange rates are___ 2s MBA Second Semester (Start up axl New Venture Management) SPPU iil) Economic Policies: Economic policies determine the direction and volume of the business, For example, in socialist economies decisions with regard to whit to produce, how to produce, for whom to produce, and how much to produce are to be taken by the government or central planning system like Indian Planning Commission, iv) Labour Policies: Labour is an important and active factor for production or service process, Volume of production and costs are governed by the productivity of labour to a large extent. If entrepreneurs think that labour policy is favourable then they will be motivated to undertake entrepreneurial activity. ¥) Trade Policy: The major objectives of trade policy are to ensure sufficient supply of goods and services in the country and controlling the adverse balance of payments, Entrepreneurs are motivated to install new piant of initiate action for expansion, if trade policy formulated by the government, is going to increase the supply as per the demand available in the market vi) Tariff Policy: Effective tariff policy provides a base for entrepreneurs to undertake more ‘entrepreneurial activities. High tariff rates affect demand level as well as margin available to the entrepreneurs. vii) Incentives: Incentives are necessary to encourage entrepreneurial activities in the country. It ensures a high margin at low risk. Interest free loan, exemption from wealth tax, rebate to NRI's, rebate to women entrepreneurs, tax holiday, viii) Subsidies: Under this scheme, government creates favourable environment by particip economic assistance in economic activities already undertaken by the entreprencurs. ig in terms of 2) Non-economie Factors: Non-economic factors include social factors, technological factors and so on. Psychological and sociological factors view that the influence of economic factors on entrepreneutiai ‘emergence largely depends upon the existence of non-economic factors which are as follow: ') Social Factors: Social factors play a vital role in encouraging Entrepreneurship. A society, which is ional, in decision-making would be favourable to entrepreneurial growth. In rational society, decisions regarding the uses of resources and the process of production would be taken based on eritieal assessment of facts and on scientific standards, ‘) Cultural Factors: Entrepreneurial levels are highly influenced by culture. Religion is also highly influential, with Protestant countries being more prone to entrepreneurial growth than other nations. This is due to the Protestant “work ethie,” which emphasises the value of working, Entrepreneurship Wwould be appreciated and praised in a country with economically or monetarily oriented culture and accumulation of wealth would be treated as a way of life, iti) Personality Factors: Inthe less developed/developing countries entrepreneut is viewed as an exploiter. ‘This greatly affects the personality of the entrepreneur. It is difficult for an entrepreneur to werk neg Planned economy, as he has to adjust his altitudes and activites within the socio-economic framewern set by the state, 'v) Psychological and Sociological Factors: Psychological and sociological factors are. not easily distinguishable and can be analysed together. Many entrepreneurial theorists have put forward theesic, of entrepreneurship that specially concentrate psychological factors, ¥) Technological Factors: Countries with high levels of technological growth also tend to have high levels of entrepreneurial growth. This is because new technology offers people the opportunity to exploit these opportunities for commercial benefit, v) Educational Factors: There are high levels of entrepreneurship in highly educated societies, as well as under-educated countries, The distinct difference is the level of growth and success that entrepreneurs experience, vii) Motivation: Motivatiortis the act of stimulating someone or oneself to get a desired course of action, to Push the right button to get the desired results, Scanned with CamScanner27 Being an Entrepreneur (Unit 1) 1.2.7, Entrepreneur versws Entrepreneurship The term entrepreneurship and entrepreneur are almost identical. Hence, they can be used interchangeably. Entrepreneurship can be understood as an intangible concept whereas entrepreneurs are regarded as a tangible person. It is difficult to differentiate the two terms. But, some of the fundamenal differences bet entrepreneur and entrepreneurship are as follows: iifsences Ibelwreet Basis of Entrepreneur i Distinction ae ‘Meanin; Entrepreneur is a person wi it i i | Bniepreneur i a person who combines all he | Enereneurhip is proses of wasfoming Hops nto marketable products so as 10 the businesses into an enterprise. Therefore. lish a profit -oriented venture bearing all | entrepreneurship is considered associated risks, Therefore, enteprencut is ° ST considered to be a person, Definite Qualities | Entrepreneur must possess qualities such as | Entrepreneurship is an inherent quality in a creativity, efficiency, flexibility, decision- | successful entrepreneur which makes him to making ability, leadership, management, etc. _| establish his enterprise. This is a driving force to all the qualities of entrepreneur. Role ‘The main role of an entrepreneur is to set-up an| The main role of entrepreneurship is to enterprise. He is considered as the initiator of | encourage the entrepreneur. The process starts the process. with the objectives and plans Iaid down by the entrepreneur. Economic Point | From economic point of view, entrepreneur is [From economic point of view, of View | an initiator, planner, innovator, leader, risk- | entrepreneurship means creativity, innovation, taker, organiser, manager, etc. initiative, risk-taking, planning, management, etc. Thus, it makes clear that entrepreneur and entrepreneurship together nun an industry and are inseparable. 1.2.8. Sustainability of Entrepreneurship ‘Sustainability of entrepreneurship encompasses social entrepreneurships core objectives, creating social impact, solving societal problems and enhancing social wealth. Sustainable Entrepreneurship embodies the objective to enhance social wealth, with the goal to create profit, and to ensure financial viability to pursue other opportunities that may arise to be exploited outside the realm of the social objective. Sustainable entrepreneurship encompasses both environmental and social objectives, with the goal to be profitable and economically viable. This proposes a competitive advantage over Ecopreneurs and Social Entrepreneurs as they are restricted and by definition limited to focusing only on one core sustainable issue - either environmental or social - that may or may not be financially driven. the entrepreneur in a standard business are critical to the successful to All the factors that are important to d sustainable business. Sustainability entrept i encompass addressing ecological and social concerns through the creation of n existing enterprises. reneurship builds on the basics of entrepreneurship and extend: ew enterprises and innovatio Sustainable businesses recognise change in the form of the increased scientific evidence about the effects of ecological disruption on human populations and the environment and increasing evidence of rising social inequities that are disruptive to the business environment and global society. Sustainable businesses recognize change by understanding that the consuming pul becoming increasingly concemed about these challenges toa sustainable world, Entrepreneurship as a mind-set, or kind of behaviour, lends itself well to sustainable business practices. For sustainable business practice, entrepreneurship is about constantly looking for innovative ways 10 protect the environment or improve societal conditions by providing new goods, services, or methods that reduce detrimental activities while also generating profits for the entrepreneur. By always thinking about doing things in new and better ways, entrepreneurship is highly relevant to individuals and organizations interested in sustainability. Scanned with CamScannerMBA Second Semester (Star up and New Venture Management) SPPU “Transformation of Industries towards Sustainability Recent research into the transformation of sectors towards sustainability has derived from the identification of Sustainability-related market failures as opportunities for Sustainable Entrepreneurs. Hockerts and Wiistenhagen have conceptualised this understanding. They set out how the transformation of an industry towards sustainability takes place. ; 1) First stage: A sustainable entrepreneur (who is highly motivated idealist) launches a sustainability innovation and initiates the transformation of an industry towards sustainability. Second stage: The Sustainable Entrepreneur grows their business and is followed by incumbents that catch ‘up with the growing trend. The transformation of an industry towards sustainability continues. ‘Third stage: Business minded Sustainable Entrepreneurs emerge with start-ups backed up by professionat investors. These understand their market niche well and are able to implement both product innovation as well ay process innovation, These Sustainable Entrepreneurs achieve profitable growth and will extend market share, while defending it against incumbents, 4) Fourth Stage: In this: maturity Sustainable Entrepreneurs and wil towards sustainability further. ass-market brands see the growing competitive threat from the try to gain market share as well, taking the transformation of an industry Throughout the whole the cycle, costs have decreased and are now efficient, completing the cycle. Some researchers have strengthen this notion, stating that start-ups and incumbents need to sort out of which type of sustainability innovation they engage in (cadical or incremental). Doing so they could excel in their activities, \which is contributes to the transformation of industries to sustainability. Ultimately, when an industry has gone through the life eyele, the process could start over again, as new Sustainable Entrepreneurs identify new opportunities in sustainability niches contributing in solving sustainability-related problems. From this theory Sustainable Entrepreneurs can be expected to target market niches with innovative solutions to a sustainability-related problem, initiating the transformation of an industry towards sustainability. lu aS SU TCO mney watt 13.1. Introduction repreneurial behaviour refers to the study of human behaviour displayed during the establishment of any new venture. It also studies the way in which an individual creates and explores prospective opportunities iy case of growing organisation. Innovation within the existing organisational system and social change (at large le) are promoted by entrepreneurial behaviour. ig the entrepreneurial skills only does not necessary for exploring the opportunities and con: which initiates the entrepreneurial behaviour. Suarantee the entrepreneurial behaviour. Motivation is very verting them into success. Motivation is the compelling factor A number of factors are closely related with the entre} such as unemployment and dissatisfaction with the emerging in mind, de entrepreneurial behaviou preneurial motivation; a few of them Job and others are ‘pull factors’ to act independently, etc. For exam, in a society is the economic condition, are ‘push factors", such as a new idea ple, the major motivating factor behind The word ‘motivation’ has originated from the term ‘motive’ which relates to wants, needs, impulses and drives with ‘tion zaers to the process of inspiring people for doing tasks and achieving goals and desires. Motivation is a psychological occurrence that originates from the wants and needs of people. It initiates a goal-oriented behaviour. : Scanned with CamScannerBeing an Entrepreneur (Unit 1) s In the entire entrepreneurship development program package, training is regarded as the most crucial integrated element. It is very important for the development of entrepreneurial motivation and competene’ However, attaining entrepreneurial motivation through training is a complex process, ‘The findings of David Me Clelland reflect that: 1) Motives can be acquired by individuals and can be developed through appropriate training and education. 2) New stimulated motives are highly expected to influence future thoughts and actions, Gartner, Bird and Starr have defined entrepreneurial motivation as the force within a person that stimulates ‘an emerging entrepreneur to grow and expand his venture, 1.3.2. Factors Motivating Entrepreneurs ‘The emergence of entrepreneurs was marked in the hum: jon era, when individuals used to have their own independent businesses and the same trend is still being followed. From the last few decades, entreprencurs are considered as the value givers as they contribute towards the overall development of the society. There are three main factors which motivate the entrepreneurs to start their businesses. These factors are discussed below: 1) Compelling Factors: Often, the individuals are forced to become entrepreneurs. Therefore, it is viewed as a compulsion rather than their own ambitions. Compelling factors leave no other choice for an individual which directs them towards entrepreneurship. Some the compelling factors are as follow i) Unemployment: Unemployment is the main reason for individuals to adopt entrepreneurship. This ‘one of those compelling factors where becoming an entrepreneur is the first and last option for a person. ii) Make Use of Idle Funds: used f0 set-up a new venture. iii) Make Use of Technical/Professional Skills: Instead of working for others who do not recognise the technical or professional abilities of a person, individuals prefer to become entrepreneurs. This acts as ‘one of the compelling factors as it helps them to exploit their technical and professional skills. iv) Family Circumstances: Many times, the family circumstances force the individuals to choose entrepreneurship as their profession. ing an entrepreneur, one can effectively utilise his idle funds. It can be 2) Facilitating Factors: These factors facilitate the individuals to utilise their idle resources and easily start a particular business. Hence, they are known as facilitating factors. These factors are as follows: i) Acquired Experience: The experience and skills of an individual facilitate him to become an entrepreneur. By doing so, an entrepreneur can eam profit by effectively utilising his skills and experience for oneself. ii) Moral Support: Sometimes, a person may face problems in commencing his own business, and having material support from friends and family is not just enough. At that time, moral support is the most significant need, which facilitates a person to become an entrepreneur. iii) Influence of Success Stories: Many individuals get highly motivated by the success stories of va ‘entrepreneurs. This is one of the important factors to start one’s own business. iv) Availability of Finance and Especially Risk Capital: The required finance and risk capital for start- up ventures is readily available to individuals in form of grants and subsidies. This acts as a motivator for individuals to become entrepreneurs. IS \ividuals to start their 3) Ambitions Factors: Often it is the internal drive and ambitions that motivate the own businesses. Following are some of the ambitions factors: i) To Make Money: The ambition to earn money and make profits is one of the major factors that stimulate individuals towards entrepreneurship. It may also include the desire to innovate something new or to transform a concept into reality. ii) To Secure Self-Employment/Independent Living: In order to secure self-employment and independency, many individuals start their own business. iii) To Gain Social Prestige: There are some people who establish a business enterprise to gain social prestige and recognition. iv) Desire to be Creative: A desire to be different from others and to create something new is the characteristic of a successful entrepreneur. He is never satisfied with his performance and is always ready to learn new things. re Scanned with CamScanner OOre Management) SPPU a0 MBA Second Semester (Start up and New Ven 1.3.3. Elements of Entrepreneurial Behaviour . - aime As different behaviour is shown by different entrepreneurs under different situations, it is, very dificult to draw-out a general entrepreneurial behaviour. With every entrepreneur counted, a new entrepreneurial behaviour is highlighted. nown social psychologist, David MeClelland, the creators of well-established onality tr According to a well: organisations possibly have common pe Elements of Entrepreneurial Iehaviour Personal Lificacy ‘Culture and Values Risk-Taking Behaviour Technology Backup 1.3.3.1, Self-Analysis 7 5 Self-assessment or self-analysis refers to a process of self-introspection to explore the factors which are crucial for the personality of an individual. Self-analysis is one of the driving forces behind self-evaluation, self- verification as well as self-enhancement, Its vital to assess one’s personality as it helps in revealing the clear picture about one’s abilities, wi ingness and Treen Souncnes ata crucial point of time. A comprehensive assessment helps in depicting the business idea of the entrepreneur, his/her strategies and how he/she would associate with the society at large. It is one of the crucial factors that help in finding out how an entrepreneur can be assisted for succeeding in his business endeavour. ‘Types of Assessments ‘There are a number of assessment tools, which can help in evaluating different aspects of the behaviour of the entrepreneur, such as his area of interest, abilities and skills, values and personality type. The self-assesement fools can be mainly of «wo types, namely, Self-directed or Requiring Interpretive Assistance. These tools have been explained below: 1) Self-Directed: It refers to the assessment tool which has been designed in such a way that it can be used by an individual without the need of any professional or licensed trainer forthe purpose of interpretation, Although, there is no need for involving any professional for analysing the results, yet some questions may remain Unanswered fo the entrepreneurs In such colton, the service offering too! may be helpful forthe entresrerenns 2) Fools Requiring Interpretive Assistance: It refers to the assessment tools which require the assistance {fom the professional for analysing the data. The expenses of ths interpretive support would te included in the cost of the tool in some or the other way. Personal Efficacy in Gne's own abilities concerning the information organisation and execution of a i high level of self-efficacy. According to social psychologist Albert Bandura, ‘self-efficacy is a key component of the ; fee self-system, which consists of an individual's attitudes, abilities, and cognitive resources”, " Tt is Suggested through the psychological researches that entrepreneur must use the idea of sel ‘medium to assess the past experiences and make judgements abeut succeeding in future plans, An entrepreneur develops personal efficacy through his experiences with the outside world and framing judgments Of these experiences. Hence, we can say personal efficacy is max ator, is implies that an entrepreneur does not Tequire to be bom with self-confidence hese traits can be attained through his experience a Iter stages of life Scanned with CamScannerbang eee 1 : 31 “The four key ways for raising self-efficwey proposed by Albert I 1) Mastery of Experiences: When entrepreneur accomplishes a Hence, one should nev individual's experiences, re as follows: ask, his faith in his abilities to succeed ris Wherren his fa s to succeed rises. be afraid and should not show reluctance in trying something whick can add to an 2) Social Modelling: Another way to raise self-clf needs to find a role model, who has fruitfully developing trust in his capabilities regarding successfully accomplishing the task. 3) eee Pt ; ies —_ ; icy of the entreprencur can also be influenced by others. The self-efficacy of the entrepreneur considerably rises when the colleagues tell hi a e could § of the poner cons gues tell hinvher that he/she could successfully 4) Psychological Responses: Personal-etti the entrepreneur ata particular point of y 0 elling in which an entrepreneur ‘complished his tasks. ‘This helps the entrepreneur in icy of an entrepreneur is also governed by the fectings carried by \ ; me, The negative emotions such as distress, anger or nervousness might refrain the entreprencur from believing in his/her abilities for successfully accomplishing the task; however, the positive emotions such as cheerfulness and serenity helps him to embrace all the challenges with high levels of personal-efficacy, 13.3.3. Culture and Values Culture of the entrepreneur is expressed through the amalgamation of tradition and social behaviour in the process of development of the new venture, It acts as a primary factor responsible for exploring the entrepreneurial behaviour of the individual. It describes the manner in which the entrepreneur takes decisions, evaluates resources, determines market potential, compates the risks against opportunities, designs competitive strategy, etc. Entrepreneurship is not something inborn or instinctive; rather it comes out as a cesult of interaction with the outside environment. Both economic as well as social behaviours combine to form the entrepreneurial behaviour. A dynamic entrepreneur who shows responsibility to the entire society or environment surely gets success. It is difficult for entrepreneurship to sustain in all type of environment, and instead it needs an ideal environment for prospering, As entrepreneurship is a component of the complete system or society, its growth is influenced by the values, culture, rules, political setup, technology, financial status, traditions and laws, etc ‘Actually, it is difficult to separate the entrepreneurship from the changes in the social values and beliefs, novel and rising hopes, pressures within the environment, religious beliefs, desires of the customer and the needs of the society, etc. Business refers to a system which is made-up of some factors of the environment which calls for the need for adopting a dynamic attitude, and novel and distinctive strategy by the entrepreneur. ‘and traits which are favourable for the growth of entrepreneurship is referred to as 's well as economic development is greatly affected by cultural tive opportunities can be implemented into reality and also The set of values, norms, entrepreneurial culture. Entrepreneurship a values. It helps in determining if the prospec stimulates entrepseneurial development. ‘Thete is a close association between the values of the organisation and its culture. The starting point of any behaviour is value, while the end point is the culture, Fer example, a person or organisation might consider honesty as the basic value, but if most of the people fail to behave honestly, ultimately the culture of the organisation would turn to be a dishonest one. rnacted through its culture. Though values are something coming ff the organisation develops through the behaviour of all the recting the action of all the individuals is possible by clearly ne importance of imbibing them. Though itis simple to cially the higher authorities fail to adhere to them, the formed in an organisation and behaviour associated ‘The basic values of an organisation should be e from the higher authorities, yet the culture of individuals associated with the organisation. Di communicating the values to them and emphasising t dictate the values, yet if most of the employees, espe’ culture of the organisation would be ruined. The actions performe With its individuals drive the cultural environment of an organisation. falues of an organisation to its individuals and to keep a ‘Thus, it is and communicate the v: a ; Se ome an it would be difficult to implement the desired values in strict check on its reinforcement. In absence of doing so, accordance with the culture of the organisation. Scanned with CamScannerce eer eae ee | 32 MBA Second Semester (Start up and New Venture Management) SPPU In order fo control and develop values and culture, an organisation can follow the below mentioned process: 1) Identification:. The first step in the process is associated with identifying and listing the values of the organisation and highlighting the desirable values as per the authorities and other important personnel. 2) Communication: Here, the process of communication indicates conveying the values to the employees from time to time, However, over-communicating the values in the organisation is not permissible. 3) Recruitments: In the recruitment process, the organisation should try to recruit such individuals whose values match with that of the organisation, so that they can prove to be suitable for the organisation. 4) Training: In the process of training, the values of the organisation and its importance should be explained while providing training to the fresher and the existing personnel, 9) Presenting Role Models: Its vital to behave in a way that helps in endorsing and depicting the defined values, tis also important to support the communication with actual behaviour as ‘actions speak more than words’, ©) Reinforcement: In the process of reinforcement, positive reinforcement should be provided to personnel so that they adhere to the values of the organisation. 133.4, _ Risk-Taking Behaviour a Entrepreneurial life is not complete without risks and entrepreneurs are always ready to take such risks. Itis the key feature of entrepreneurs to plan their behaviour in a sensible manner to face the different risks involved in entrepreneurial life. But, it does not mean that they just take the risks; a proper evaluation is involved behind taking the risks. Every pros and cons are evaluated. They simply avoid the goals which are too simple or too ficult to achieve. The completion of the challenging tasks provides them a sense of achievement. Following are the factors which are included in calculated or moderate risk-taking: 1) Knowing the existing situation, 2) Collecting the sufficient information from the concerned environment. 3) Evaluating one’s own competencies. 4) Choosing the risks as per the collected information and available resources. 5) Judging one’s own capabilities. 6) Changing the set goals as per the past experience. Risk-taking path is not a tried and tested path, Itis like practicing innovativeness. Most of the big risk-takers become the successful owners of different big ventures. Entrepreneurs, who are highly successful sn their lives With Iofty bank accounts and a chain of companies, are those who dare to take the risks. Ite difficult to taste the sweet fruit of success without taking any risk. The feature of risk-taking is closely associated with entre entrepreneurs are moderate ri risk-taking behaviour is also exhibited by managers and general public (i.., risk-taking is not a unique feature Possessed merely by entrepreneurs), Moreover, according to Begley and Boyd, those whe founded the firms (entrepreneurs) got higher Scores in their risk-taking inclination, in comparison to the non-founders. 1.3.3.5. Technology Backup Technological backup is very crucial for any organisation in today’s fast growing technolo; is a vital part of all types of firms, even for those which are “non-technological” firms, Technology is cxerythere, be it software for enhancing the yields, or security system, cooling system, marketing, networking, advertising, telecommunication, etc. In order to attain a significant position ig the global market and to have competitive advantage, different technological systems are required, be it simple exc register program (to track i daily purchases/inventory) or a deticate network system (to connect, people and places). al era. Technology Teese nuebreneurs can remain ahead ofall their competitors by keeping themselves well-informed about the latest technologies, and tooking for the information which facilitates in effective decision-making in regards to purchasing decisions, , Scanned with CamScanner_ - ‘Being an Entrepreneur (Unit 1) 3 13.4. Theories of Motivation Nowadays, most of the organisations make use of different motivational methods and programmes to motivate the employees. The availability of numerous motivational models and strategies has provided various alternatives to the organisations that can be experimented by them to motivate their work Prominent amon these theories and particularly relevant to entrepreneurship are as follows: =_— * 1) Maslow’s Need Theory 7 2) MoClelland’s N-Ach Theory 13.4.1. _Maslow’s Need Theory Human beings have categorised their needs into two types ~ first one is basic (pri ia Tn tal of tb men Bagh tad sted co begin) Goede) eo wach ae ee als compared to basic needs. ‘Though there are numerous needs or desires, but which one should be given priority is the important question. So, this question was answered by Abraham Harold Maslow through his theory which represents a hierarchy of needs. Need hierarchy theory mainly emphasised on following points: 1) Human beings are those animals whose desires never end. They always need some or the other things to satisfy themselves. 2) Oncea need is satisfied, it stops motivating an individual further. 3) Depending upon the importance, needs have a certain order. ‘According to Maslow, need hierarchy has following sequence: Self-Actualisation Needs (Self-fulfilment) Esteem Needs or Ego Needs (Prestige, status, self-respect) Social Needs (Affection, friendship, belongingness) Safety and Security Needs : (Protection, order, stability) Basic Physiological Needs (Food, water, air, sex, shelter) Figure 1.2: Maslow’s Need Hierarchy Theory 1) Basie Physiological Needs: Basic requirements of an individual such as food, shelter, clothing, air, water, ‘etc, are considered as basic physiological needs. Since these needs are essential for the survival and sustainability of human beings, hence, these needs are prioritised and placed at the initial stage of the Maslow’s need hierarchy theory. 2) Safety and Security Needs: After the fulfilment of basic needs, human beings expect safety and security of themeelves as well as of their family. These securities are in the form of job security, insurance (life insurance, vehicle insurance, etc.), old age security (pension, retirement fund, etc.), and security of income. In simple words, an individual requires an assurance in order to maintain his standard of living, 3) Social Needs: Social need is a kind of cognitive requirement of human beings. When this need is not met, it creates 2 lot of imbalance in the mind of an individual which adversely affects his health. Since man lives in a society, he socialises himself by interacting with other people, share his feelings with others, making friends, etc. That is why, it is said that the community and culture of an individual reflect his identity. 4) Esteem Needs or Ego Needs: Egoistic needs are of two types, Le. internal and external. Self-confidence, self-motivation, skills, abilities, competency, etc., are some of the factors that are based on internal egoistic heeds and are eamed after an immense hard work by an individual. Individuals having inward esteem needs always receive ‘eamed gratitude’ by the society. External egoistic needs focus on building goodwill and ‘status of an individual that is earned by achieving some higher position or if the individual becomes financially, socially and politically powerful. | a Scanned with CamScanneree * MBA Second Semester (Start up and New Venture Management) SPU, 5) Self-Actualisation Needs: It is a stage of self-fulfilment in which people realise their highest potential for self-development in a unique or creative way. In simple words, these needs are considered as aim of an individuals life. Once all the needs of an individual are met, he searches out for personal achievement that sives mental satisfaction to him. Individaal having the need for achievement wants to become better than others, takes challenging tasks in order to demonstrate his potential and becomes successfut which not only satisfies him but benefits the society as well. AS per Maslow’s need theory: 1) There exist five levels of human needs that he requires to satisfy. 2) These needs are organised according to their preferences, i.e., most important to least important. 3) Once a need is satisfied, it is no longer a motivator, and hence, the individual proceeds towards next need. 4) After the fulfilment of one need, the next stage of need evolves as a depressed need that an individual tries to satisfy. 5) Though the basic physiological needs and security needs are limited and can be satisfied easily but the other three needs are unlimited and have a great influence on the individuals working at senior levels. 6) All the five levels of Maslow's need theory are mutually dependent on each other as all of them have some common characteristics. An individual can move on to the next level of need, only after satisfying the previous need. Each level of need affects the behaviour of an individual that motivates him to move further. 7) The first two needs, ic., basic and safety needs, are considered as lower order needs and remaining three, ive., social, egoistic and self-actualisation needs, are considered as higher order needs, 1.3.4.2, McClelland’s N-Ach Theory David McClelland’s theory of need achievement is one of the most significant theories of psychology. According to this theory, an individual can acquire his/her specific needs from the culture of a society by earning from past incidences and events that have occurred in his/her early life. When these needs are learned by @ person, they are regarded as personal predispositions. These predispositions affect the way in which a person perceives his work or any other situation and this also impacts their unidentified goals, The needs that ‘can be learned by people are classified as follows: 1)_ Need of Achievement (nAch): According to McClelland, need of achievement is defined as “behaviour to- ward competition with a standard of excellence”. McClelland and his associates also stated four features of people having a high achievement need, which are as follows: 1) They prefer a work environment where they can assume personal respon: problem-solving, ii) They tend to set a level of moderate attainable goals and take calculated risks, iii) They strongly desire for a concrete feedback on their performance, and iv) They are focussed towards accomplishment of their task. ty for performing a task or ‘The need for achievement motivation highly contributes towards the success of entrepreneurial and economic growth. The mainstay behind the success of any organisation is achievement of motivated people. 2) Need for Power (nPow): The need for power is the concern for influencing other's behaviour, controlling the environment and being responsible. MeClelland states thatthe following characteristics are reflected by an individual possessing a high nPow: i) They want to influence and control others, iit) They seek to have a position of status and authority, iii) They are willing to confront others, and iv) They like to build and maintain a Ieader-follower relationship. 3) Need for Afiiation (nAff): Need for affiliation (nAff), can be defined as an “attraction to another person in order to feel seassured from the other thatthe self is acceptable”. Persons, whee Possess a high need for affiliation, usually, have a desire to create and sustain warm and healthy relations with other persons, i) They seek close relationships with others, i) They enjoy social activities and seek to belong, for that they join groups and organisations, iii) They te {© obey to the wishes and norms of others when pressured by people whose leadership they value, ani iv) They have sincere interest in the feelings of others. Scanned with CamScanner| eres being an Eatreprencur (Unit 1) : ‘According to McClelland, the major determinant of entrepreneurship development characteristics which are indicative of high need achievement, Here, “need achievement” ‘nentrepreneur 10 become successful when supported by the cultural factors a set of personality a social motive of ‘Asa result, high level of entrepreneurship development is expected within a soci i . 804 ° achievement in a society in reasonably high. ciety, if the average level of need In earlier times, it was believed that parents play a significant role in upbri i ed tha la in upbringing their children to be independent and powerful, especially the mother. But, McClelland stated that need achievement is accustomed more by the social and cultural factors compared to parental support. For an entrepreneur to bé successful, organisational climate must encourage high accomplishments. The manager must permit, liberation to subordinate, increase the level of achievement need of subordinates to develop a suitable business environment, increase the responsibility and make the task more competitive. Importance of Achievement Motivation Theory MoCielland’s theory of motivation has a broad perspective. He established achievement as motive for motivation. He also stated that itis very important (0 develop achievement motive among the employees, For this purpose, one has to go through a properly devised and deliberate learning process. Some of the points that reflect the importance of this theory are: 1) McClelland's theory of motivation can be taught and achieved by learning. Thus, his theory is important, | 2) Manager can raise the achievement need level of subordinates by making the tasks more challenging and interesting, building a healthy work environment, providing of adequate freedom to subordinates, and delegating more responsibilities. 3) High performance of subordinates lead to reward and appreciation which also help to raise the achievement need level of subordinates. 4) Developing a desire of high achievements in the mind of employees can also be used for achievement motivation. 5) For the survival and success of an entrepreneur and his business, achievement motivation is very essential. 6) Itacts as a motivating factor for the economic development of the country. Criticism of Achievement Motivation Theory This theory has the following criticisms 1). High achievement seekers cannot be effective managers and expect 2) The practice of protective techniques is objectionable, 3) The training for achievement motivation is a time consuming. process. 4) Not all needs motivate the workers. lar results from others. 13.5. Ways to Achieve Entrepreneurial Motivation For several persons, exploring the motivation for ataining the objective is nota oy job. A number of people have the ability to outshine without requiring external source of motivation, while several others need extra motivation from others. Inborn motivation to succeed varies from person 0 person 9° anything which might motivate an individual fails to do so in case of another person. In case a person iS satisfied with what he has, it would be very difficult to motivate him to excel. Following are the means through which motivation for excelling ean be attained: : 1) Maintaining an Optimistic Approad ‘The most optimistic person might also lose his/her objectives at times, But those who are really motivated entrepreneurs are determined in trie MENG they always | remember, “Never quit, irrespective of all the adversities”. Sometimes motivation is synonym to tletemination, A strong determination that nothing can interfere with the objective makes the entrepreneur truly motivated, At several occasions, itis not the consequences of a sualton which frighten a person, but Hoon oun atitade, Failure to accomplish a task in spite of continuous actions can be tumed into success by adopting an optimistic outlook. Scanned with CamScanner* MBA Second Semester (Stat up and New Venture Mana 2) Making an Appropriate Plan: Motivation till the end of the lengthy proj cult to mai absence of an organised plan, Setting up of the obje ‘ompanied with various key points for regaining the focus. For example, motivation to bu: house the next year should be with timely payment of all the dues and a regular Wing structure for the down payment. i small objectives instead of a bigger one helps the entrepreneur to regularly check his success and would help him to attain the desired goal eventually. 3) Being Accountable: The method of motivation varies from person to person, Some need motivation from Others, while some are determined to attain what they desire and act accordingly. As motivation to excel Would be eventually advantageous to the entrepreneurs, therefore they have 10 take the responsibility for their actions. The entrepreneurs also require proving themselves that they really want to achieve what they have aimed for and will give their best efforts in improving their actions and attaining success. This would eventually help the entrepreneurs to explore their own definition of excellence: however they should never forget that, ‘sweating and toiling would ultimately help in tasting the swect fruit of suc ‘4. Working for Others, Not for Self: Sometimes motivation comes from the feeling of doing something for pihers. Some entrepreneurs get tired of entrepreneurial life but they remain in this joumey just fo secure the future of their loved ones. In absence of personal motivation, this factor compels the entrepreneurs to being ‘engaged in entrepreneurial journey. Pre Ge 1.4.1, Introduction ‘The lean startup method was developed by American entrepreneur Eric Ries, founder, and CEO of the Long ‘Term Stock Exchange (LTSE). Lean startup is an example of consumers dictating the type of products they are offered by their respective markets, rather than those markets dictating what products will be offered to them, 1g of the es", ‘The lean startup is a method used to found a new company or introduce a new product on behalf of an existing company. The lean start up method advocates developing products that consumers have already demonstrated they desire so that a market will already exist as soon as the product is launched. As opposed to developing a product and then hoping that demand will emerge. By employing lean startup principles, product developers can gauge consumer interest in the product and determine how the product might need to be refined. This process is called validated earning and it ean be juilized (o avoid the unnecessary use of resources in product creation and development. Through lean startup, if an idea is likely to fail, it will fail quickly and cheaply instead of slowly and expensively, hence the term “fail-fast.” For example, a healthy meal delivery service that is targeting busy, single 20-somethings in urban areas might Jeam that it has a better market in 30-something affluent mothers of newborns in the suburbs. The company ‘might then change its delivery schedule and the types of foods it serves to provide optimal nutrition for new ‘mothers. might also add on options for meals for spouses or partners and other children te the household. ‘The lean startup method is not to be used exclusively by startups. Companies such as General Electric, Qualcomm, and Intuit have al used the lean start up method; GE used the method x develop a new battery for use by cell phone companies in developing countries where electricity is unreliable 1.4.2. Features of Lean Start-up 1) Lean startup is the process of developing a product or company based on the expressed desires of the market, 2) Lean startup uses validated learning, which isa process by which Companies assess consumer interest, 3) Lean startup methods focus heavily on customer related information such 8 customer chum rate, lifetime customer value, and product popularity. 2 In lean startup practices, experimentation is favored more than adherence to arigid plan, 5) Lean startup standards will involve the release of small form or early concept products in order to assess the customer reaction to the product, Scanned with CamScanner— spreneur (Unit 1) 31 sing an Ente 4.4.3. Requirements for Lean Start-up ‘The Tean startup method considers experimentation t be more valuable tha pusiness plans built around unknows cee insead of business plans, lean startups use a business model based on hypotheses that are tested rapidly. Data His not need 10 be complete before proceeding; it just needs to be sufficient. When ed not react 25 Jered, the startup quickly adjusts (o limit its losses and return to developing prod ours wan. Fall ie cclenon 1g products consumers want. Failure re considerc planning. Five-year we considered a waste of time, and customer reaction is paramount. Enireprencurs following this method test their hypotheses by engaging with potential custo chasers, Bnmpartners (0 gauge their reactions about product features, pricing, distribution, and customer acquisition, ane the information, entrepreneurs make small adjustments called iterations to products, and la adjustments dalled pivots correct any major concerns. This testing phase might result in changing the taney cinomedio? ce aiying the product to better serve the current target customer, ° ‘The lean startup method first identifies a problem that needs to be solved. It then develops minimum viable product cor the smallest form of the product that allows entrepreneurs to introduce it to potential customers for feedback. This method is faster and less expensive than developing the final product for testing and reduces the risk that star 3P® face by decreasing thei typkeal high failure rae, Lean startup redefines startup as an organization that is searching fora scalable business model, not one that has an existing business plan that it is determined to execute. 1.44. Key Tenets for Lean Start-up Fims spend a lot of time developing perfect products for customers just to realise that they want something erent, Ths issue is addressed by lean star up method. Star-ups risk missing important elements of what customers really want without customer input and feedback at critical development points. 1) Business Modelling: The foremost step in this direction is designing of appropriate business most! based on suitable hypothesis. A basic approach for this is the business model canvas which involves keeping the assumption if it approves the hypotheses, else reject it. In such case, there will be dramatic change in the business model, hence, the way in which business model evolves through business model canvas is important 2) Agile Development: For finding out the prospective customers, lean start-ups need to adopt a philosophy of “get out of building’ which helps in testing various hypotheses for viability in the market. 3) Customer Development: Customer development is possible only, by testing practicability of the hypotheses with all the stakeholders including customers ‘and suppliers. Based on these tests, the goods and services can be further ‘enhanced based on the feedback of the customers regarding their issues and needs. ‘Steve Blank remarked that the attempts of the manufacturers should be on modifying the core venture ina prompt manner, if required. PRM se wits Paty Ve ee Ut 15.1. Introduction ‘The entrepreneurial or start-up ecosystem is a very recent phenomenon in India. In 1982, before the aoe erene nthe National Seience and Technology Entrepreneurship Developmett (NSTEDB), the culture of promoting entrepreneurship and such ecosystem id not exist. The change came about in 1995-96 when the Faerretne ofthe economy took place and a large number of young IF professions began moving to Europe and US. providing a lot of expertise avid experience to Indie ‘With this India gained confidence that it can deliver excellent technological products and services, since the arrival of the 21" century there have been aaa a cadeavours to begin new ventures mainly in the technology sector Itis basically the people who form a Startup ecosystem ston with the Startups in different stages, and different types of organizations in a physical or ‘viral location, interacting with one another as a system to form new Start-ups. Both internal and external factors control the Start-up ecosystem. External factors such as big market disturbances, financial climate, and transition of big companies, manage the structure of an ecosystem and how it operates internally. Since the Startup ecosystems are dynamic entities, they are always in the formations phase and once they are es! siished, even then they face periodic disturbances. Later, they pass onto the process of recovering from those past tur ‘pulences (finance related troubles). Scanned with CamScannernester (Start up and New Venture Management) SPPU 38 MBA Second ‘The Internal fuetors control the proc cosystem and are also controlled by the ecosystem activities. ‘These factors and are often subject to feedback loops. Although, external processes such as market disturbances and financial climate control a few of the resource inputs, resource availability inside the ecosystem is fended by internal factors such as individuals ily of the organisation jn terms of Its contibuton 10 the ecosystem. ‘The other internall factors such as the dependence of oa ad fire ofthe sat on th sople and the skill set available, People exist within ecosystems and operate there’ cor are song enough to inypaet extemal factors such asthe final elimate of the ecosystem with a support of Start-up ecosystem, companies and communities are able to use innovative ideas for the dew opment ofthe Geanomy. Business incubation awd commerilisation, economic sustainability, and statogic planning a ficlds of expertise. With its help, communities are able to generate more jobs and develop comp 1.5.2. Elements of Entrepreneurial Ecosystem . a Organisations based on the entreprencurial ecosystem can be segregated into following categories: 8) Otherentepreneuril People 9) People from relied organisations Figure 1.3: Elements of Entrepreneurial Reosystem Several organizations like entrepreneurs, accelerators, non-financial and financial Support organisations, co-working spaces, technical experts, incubators and mentoring experts are part of start- Up ecosystem, Government programs and policies applicable to start-ups, educational institutions and various organizations and companies that support start-ups in different ways are all part of the support organisations. 2) Big Companies: Iti a well-known fact that in India, Start-up ecosystem is growing at a fast pace. Start-ups are established on a daily basis and entrepreneurs are striving to start something big. Some big start-up accelerators Tike Microsoft Ventures, GSF, TiE, Kyron and the Start-up Centre are gaining popularity in India and have proved that the need for such ecosystems does exist. 3). Universities: Talent is ideally created and developed at universities and educational institutions at the local level. Is even better if these educational insttations work to draw in talent and enrich the ecosystem with knowledge and learning 4) Funding Organisation: In order to reap profits the Start-ups need funding. Although the needed funding Gan be imported from different places. it is the local funding that isthe final element of a flourishing stare up ecosystem, This funding is reeycled from the achievements of the entrepreneurs of the previous generations who are well aware ofthe challenges faced in establishing a start-up. 5) Service Providers: These are companies that impart services to the organization in the form of consulting, Financial, legal, education, real estate, storage, communications, processing and other such sevviees, Te term service provider can also denote organizational sub-units and is also used to mention outsourced suppliers or third parties such as Telecommunication Service Providers or TSPs, Storage Service Providers or SSPs, Internet Service Providers or ISPs and Application Service Providers or ASPs, Scanned with CamScannerjg nweprencar (UnIC1) tiling 5 In previous years, research organisations hi cd -n boost and recognition due to olidation activities, an escalating, dom ition, /e assisted the start-up lors Fike massive funding, evolving tic market, and extreme support extended by tions jeuship development movement a career, In onler 10 is orimaiy bed om th bet tat rele cin seep elerte the speed of self-employment 3 i ‘ a 4 0 and entrepreneurshij dvelopme support organisations were established by government, These support sanatons eter deve fusiness noes tnd requirements of the enlreprenears, The term entrepreneurial support generally refers industry and business comprising authorities . i : ( s ‘authorities and support organisations whose isons ai operational amen fe the level of sess, These, pron organisations include eevermment owned agen, atte corporations ad semi-autonomous and autonomous organisations ‘the entrepe sushi ses spotting omansations provide not oly inca als ut other types of assistance ake such as, Wailbilty of eww materia, marketing of products, taining of personnel, developing infrastructure facilitating ports, ‘The network of institutions, such as, DIC, NABARD, IFCI, SIDBI, SFC, NSIC. ete., with main Suplusis on Fong and short term credit needs of entrepreneurial development, is ‘also available in the country. ‘The support organisations helpful in start-u iven below: re as ‘Support Organisattons Distt Industry Centres (DIC) | _[iraostat Finance Corporation of India ‘arcl ‘State Financial Corporation (SECS) ‘Small Indosres Development Bank of| India (SIDBI) ‘Natoaal Small Industries Corporation| (Nsicy National Bank for Agee ‘Developme (NAI | SERRee Rees 1) -Distriet Industry Centres (DICs): Various steps has been taken by Central as well as State Government in s which are small and are situated in village, but the outcome the direction of development of those indu was not as per the expect i Besides this, the prime focus was also on the industrial development in Tpetropotitan and capital cities which resulted nto the negligence of villages and small towns. Moreover, Facet procedures and arrangements as well as the involvement of various institutions in similar work of sitet’ development made the task of promotion of SSI units More difficult for the small-scale businessmen, These factors led to the need of a development agency, which in turn led to the setting-up of Dice in May 1978 so that all the small industries in villages can be assisted regarding their needs at one place. district has a DIC which is responsible for playing the role of multifunction SBe0°Y 2 ret voordinator with respect fo several governmental and non-governmental departments and agencies operating. in that district. The potential entreprencer ‘of small scale businesses can get any kind of ‘assistance related to establishment and functioning of business from these DICs. As per the data of 1991, ses were functioning in the country which benefited 1.5 lac business units with its valuable assistance, which in turn provide employment to ‘more than 10.3 lac individuals. The four metropolitan ae dias Le» Delhi, Mumbai, Kolkata, Chennai, are kept out of the scope of DICs. 2) Industrial Finanee Corporation of India (IPCI): The IFC Act was passed, by the Government of India in Toda, in order to establish the Industrial Finance Corperstcn of India. The IFCI was incorporated with a view to financially assist the industries in India by prov iding medium- and long-term loans to them. But, this corporation provide credit only to the companies that are registered and belong toa Timited set of industries which are as follows: i) Manufacture, preservation or proce: ii) The mining industry, iii) The shipping business, iv) The hotel industry, and \¥) The generation or distribution of electricity or any other form of power. Headquarter of every sssing of goods, Scanned with CamScanner