Table of Contents:-
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- What is Entrepreneurship?
- Definitions of Entrepreneurship
- Entrepreneurship Definitions
- Definitions of Entrepreneur
- Overview of Entrepreneurship
- Characteristics of Entrepreneurship
- Types of Entrepreneurship
- Elements of Entrepreneurship
- Importance of Entrepreneurship
- Determinants of Entrepreneurship
- Forms of Entrepreneurial Organization
- Reasons for Starting an Enterprise
- Entrepreneurship Development
- Measuring Entrepreneurship
- Barriers to Entrepreneurship
- Entrepreneurship Opportunities
What is Entrepreneurship?
Entrepreneurship is the practice of starting a new business or developing new product or services with the motive to generate profit. Entrepreneurship is a difficult task which concerns not only production but also plays multiple roles in attracting consumers towards the product. Another important aspect is to maintain the consumers through reputation and trust building.
Starting a business is not only important given profit generation but also in terms of self-respect and dignity in society. This makes you a person with self-reliance and independence. Entrepreneurship at the individual level is the basis for national growth and economic development. Hence, nowadays there is a great appreciation for entrepreneurship development at national and international levels. Though the words entrepreneur, enterprise and entrepreneurship look similar, they have different meanings.
Definitions of Entrepreneurship
Many general definitions of entrepreneurship revolve around the identification (or creation) of business opportunities and the mobilization of resources to exploit them.
According to Shane and Venkataraman, “Entrepreneurship is an activity that encompasses the discovery, evaluation, and exploitation of opportunities to introduce new goods and services, ways of organising, markets, processes, and raw materials, through organizing efforts that previously did not exist.”
The underlying concept behind broadening the definition of entrepreneurship is that the “discovery, evaluation, and exploitation of opportunities” can also occur outside the business sphere.
Entrepreneurship is a multidimensional concept, and there is considerable diversity among its definitions:
(i) It appears closely connected to notions such as innovation, opportunity recognition, profit, economic growth, venture creation, and change.
(ii) It has been conceptualized as a characteristic, a behaviour, an activity, and a social role, each reflecting the content domain of a specific discipline. For example, while the characteristics of entrepreneurs are of interest to psychologists, economists focus on their behaviour.
(iii) There is some confusion about whether entrepreneurship involves a single or multiple actors or if it is an organizational-level phenomenon.
Entrepreneurship Definitions
According to Cole (1968) – “Entrepreneurship is purposeful activity to initiate, maintain and develop a profit-oriented business”.
According to Drucker (1985) – “Entrepreneurship is an act of innovation that involves endowing existing resources with new wealth-producing capacity”.
As per Gartner (1985) – “Entrepreneurship is the creation of new organisations”.
According to Hisrich and Peters (1989) – “Entrepreneurship is the process of creating something different with value by devoting the necessary time and effort, assuming the accompanying financial, psychic and social risks, and receiving the resulting rewards of monetary and personal satisfaction”.
As per Stevenson et al. (1989) – “Entrepreneurship is the pursuit of an opportunity irrespective of existing resources”.
According to Kaish and Gilad (1991) – “Entrepreneurship is the process of first, discovering, and second, acting on a disequilibrium opportunity”.
As per Herron and Robinson (1993) – “Entrepreneurship is the set of behaviours that initiates and manages the reallocation of economic resources and whose purpose is value creation through those means”.
Definitions of Entrepreneur
According to Schumpeter (1934) – “An entrepreneur is a person who carries out new combinations, causing discontinuity. The carrying out of new combinations can include a new good or quality of a good, a new method of production, the opening of a new market, the conquest of a new source of raw materials or the reorganisation of any industry”.
As per Hoselitz (1960) – “The entrepreneur is one who buys at a price that is certain and sells at a price that is uncertain”.
According to Leibenstein (1968) – “An entrepreneur is one who marshals all resources necessary to produce and market a product that answers a market deficiency”.
As per Kirzner (1985) – “An entrepreneur is one who perceives profit opportunities and initiates action to fill currently unsatisfied needs”.
According to Bygrave and Hofer (1991) – “An entrepreneur is one who perceives an opportunity and creates an organisation to pursue it”.
Overview of Entrepreneurship
Entrepreneurship development needs many factors such as Enterprise, Entrepreneur and Entrepreneurship.
Enterprise
‘Enterprise’ is an entity or a business initiated by an entrepreneur. It may be categorized into public or private enterprises and small-scale or large-scale enterprises. Enterprise is a purely economic term, most of the time it is commonly mentioned as ‘business’. You may be familiar with the business in your place and their activities.
Entrepreneur
The term ‘Entrepreneur’ is derived from the French word ‘entreprendre’ which represents undertaking. This means entering new areas to explore something new for the benefit of the society. According to Webster’s dictionary, the entrepreneur is defined as “one who undertakes business/enterprise, by assuming responsibility, control and risk”. Based on the role of an entrepreneur, he assumes different forms. According to Schumpeter, four forms of entrepreneur are:
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- The Achiever
- The Salesperson
- The Manager
- The Inventor
This categorization is based on the role of entrepreneur and their contribution towards the development of enterprise.
Nowadays, a new concept of entrepreneur i.e., social entrepreneur is gaining importance. An entrepreneur who recognizes a social problem and solves it innovatively is called a social entrepreneur. He is the change agent of the society. The main focus of social entrepreneurs is towards solving major social issues which affect the society as a whole. In society, there is the emergence of social entrepreneurs due to increasing demand for the service and lack of information.
Entrepreneurship
Entrepreneurship is the quality of an entrepreneur which is needed for the effective functioning of business by utilizing the available opportunities. It is the art of running a business with some logic and analytic thinking. Entrepreneurship is an activity towards empowerment by starting a business of their own and efficiently managing resources and people.
Entrepreneurship is one of the economic factors implied in factors of production other being land, labour and capital. Most of the time, entrepreneurship is interchangeably used for profit, as they are mainly involved in wealth generation through profit-making over some time.
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Enterprise cannot exist without entrepreneurs who in turn cannot perform well without entrepreneurship qualities. A proper enterprise can function well with a good vibrant entrepreneur with the necessary entrepreneurship skills.
Characteristics of Entrepreneurship
Characteristics of Entrepreneurship are as follows:
Apart from a “few necessary characteristics, such as energy level and basic intelligence, no single set of attitude and behaviour is essential for every successful entrepreneur.” The following, highlighted by Thomas W. Zimmerer and Norman M. Scarborough in their book Entrepreneurship and New Venture Formation (Prentice Hall, New Jersey, 1996), is prevalent among successful entrepreneurs.
1. Commitment and Determination
For an entrepreneur to be successful, these attitudes are crucial, especially in the case of new ventures. The entrepreneur has to fully immerse themselves in the enterprise. Without this total commitment, the entrepreneur might end up compromising all the effort for small errors that could have been avoided with adequate care. The undiluted determination of successful entrepreneurs is evident in the sincerity with which they perform their tasks.
2. Desire for Responsibility
Entrepreneurs have a keen desire to access and control resources that they would utilize effectively to achieve their self-determined goals. They prefer to bear the responsibility for the outcome of the ventures they are associated with. This willingness to accept responsibility is closely related to entrepreneurs’ deep desire to maintain an internal locus of control.
3. Opportunity Obsession
An entrepreneur is constantly on the lookout for opportunities that enable them to set achievable goals. Even during periods of crisis, there is an opportune moment to realize some goals. Out of chaos, the entrepreneur recognizes and seizes an opportunity, eventually proving themselves successful. The successful entrepreneur is also skilled at distinguishing between an idea and an opportunity, constantly on the lookout for ideas that genuinely present opportunities.
4. Tolerance for Risk, Ambiguity, and Uncertainty
Entrepreneurs do not gamble; they avoid taking unnecessary risks. They are risk managers who only take calculated risks. High rates of risks, change, and ambiguity are accepted as normal in their world. Uncertainty is treated as a given condition. One has to live with it. “In such a world, it is important for entrepreneurs to learn to manage risk and ensure that the risks taken are reasonable and commensurate with the perceived rewards.
Entrepreneurs manage risk, in part, by transferring part of the venture’s risk to others (investors, bankers, customers, suppliers, and so forth).” Entrepreneurs express a tremendous capacity to tolerate ambiguity and uncertainty. They are quite used to conflict and view conflict as a means to an end in examining uncertainties, risks and potential rewards. Successful entrepreneurs leverage the positive impact of stress and minimize the negative reactions of exhaustion and frustration”.
5. Self-Confidence
Entrepreneurs are generally optimistic by nature, as they have great faith in their ability to take initiative and ultimately succeed in a venture. They are confident in performing what is necessary, firmly believing that things are well within their control, and they are capable of accomplishing the task. Their level of self-confidence is quite high. “The majority of research also indicates that successful entrepreneurs actively pursue and seize opportunities by taking initiative. This is evident by their consistent willingness to assume personal responsibility for the success or failure of the operation.”
6. High Level of Energy
Entrepreneurs are extremely energetic. They are so immersed in their business that long hours of work become a daily routine for them. During the launch of an enterprise, the extra energy that an entrepreneur puts in becomes a critical factor for its success.
7. Motivation to Excel
Entrepreneurs like to excel in whatever they do. Most often, they are self-starters and have an inner desire to continuously improve upon their previous performance. We have closely observed David McClelland as he develops his thesis centred around the concept of the need for achievement. The drive is from within. Entrepreneurs are rarely motivated by external indicators of status and power. Rather, they derive satisfaction from the challenge of being innovative and creating their chosen venture. They appear to have a keen understanding of their strengths and weaknesses.
8. Orientation to the Future
Entrepreneurs are not inclined to remain idle for extended periods, even when everything appears to be going smoothly for them. They are constantly either on the lookout for new opportunities or trying to improve upon their established standards. They have to be very proactive to live up to the needs of the hour. Entrepreneurs engaged in high-growth ventures, with more at stake, are consequently more concerned about the future.
9. Willingness to Learn from Failure
An entrepreneur is not scared of failure. She may have tried to set up a venture and may have failed, but the failure would, more likely, make her further determined to taste success. It is important, in studying entrepreneurship, to determine the failure of a business from the failure of the entrepreneur. They are not the same. Failure of a certain business is not necessarily a loss. Although the specific business no longer exists, the resources, in the macro sense, are most often redistributed. Furthermore, and most importantly, people learn from business failure. The pain of not learning from experience is even greater than the discomfort associated with learning from it.
10. Leadership Ability
Typically, entrepreneurs possess relevant experience related to the enterprise they are involved in. They hold intimate knowledge about the required resources, technology, and the market. “It is indeed rare for a successful venture to be initiated by an individual lacking experience in the chosen field. Successful entrepreneurs possess the ability to exert influence without relying solely on power. This approach demands that the entrepreneur act more as a mediator or negotiator than a dictator.”
With their extensive knowledge and experience, they often emerge as visionary leaders, not mere dreamers. “It has been observed that the distinction between a dreamer and a visionary lies in the fact that when a dreamer awakens, there is nothing concrete to show for their aspirations. However, a visionary possesses the ability to transform their dreams into tangible realities. Such visionary leaders are not loners; they do not feel the need to insist on receiving all the credit. Instead, they recognize that it is seldom possible to build a successful venture alone.”
Types of Entrepreneurship
Entrepreneurship can be classified into nine types based on the opportunity available and the purpose of its activity.
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- Opportunity-based entrepreneurship
- Necessity-based entrepreneurship
- Technological entrepreneurship
- Geographical entrepreneurship
- Social entrepreneurship
- Rural entrepreneurship
- Women entrepreneurship
- Group entrepreneurship
- Ecopreneurship
i) Opportunity-based entrepreneurship
A person who chooses his/her career based on the opportunity available and knowledge acquired from society is called an opportunity-based entrepreneur. This is real entrepreneurship as the idea and interest have been initiated by himself. External forces do not generate this through compulsion. It is established based on one’s interest and enthusiasm. Hence, in this type, the entrepreneur will be innovative, enthusiastic and able to do things differently with their creative thinking.
ii) Necessity-based entrepreneurship
Person who chooses his/her career as a last chance, due to their family circumstances or due to disappointment from their earlier job. They may choose these as an option only to get a job. It is not of choice and interest but of pressure and compulsion. This kind of entrepreneur is not having any creative, innovative thinking. Hence, they are not able to stand in the field due to a lack of interest. Finally, they get frustrated resulting in a loss of business. Ultimately, they close the business in very early stages. In India, the majority of entrepreneurship is based rather than opportunity-based.
iii) Technological entrepreneurship
Technological entrepreneur introduces new technology to the market. The contribution of this entrepreneur is in two ways. One is by introducing new products and the other by introducing new processes in the existing product. In this kind, the person should give more emphasis on the new technology and update knowledge in this aspect. The success and failure of an enterprise depend on the extent of exposure to new technologies.
Example: An entrepreneur producing dried fish products by using a solar drier is an example of a technological entrepreneur. Producing dried fish products is an existing technology, but the process of drying using a solar drier is a new process.
iv) Geographical entrepreneurship
An entrepreneur who distributes technology or products from one place to another place is known as a geographical entrepreneur. The geographical place may be at the national level or international level. This entrepreneur should know how to assess the correct time to sell their products. The major challenge of this entrepreneur is analyzing consumer demand. It is well evident that demand forecasting and consumer behaviour studies are very difficult due to changing consumer preferences over time. Hence, more attention should be given to consumer surveys and demand analysis.
Example: A person producing canned fish products in Kerala and selling them in Uttar Pradesh is a kind of geographical entrepreneurship. From this, you come to know that other than production, an entrepreneur should concentrate on a wide range of activities i.e., identifying new technology, context and consumer demand to gain good returns.
v) Social entrepreneurship
Social entrepreneurship is described as an approach in which start-up companies and entrepreneurs develop, fund and implement ideas resulting in solutions for social, cultural, as well as environmental issues faced by society. The concept of social entrepreneurship is widely applied to a range of organisations, varying in size, belief and aims. It usually generates a positive “return to society” motto. Social entrepreneurship is thus a process which tries to create a connection between the broad social, cultural, and environmental goals often associated with the voluntary sector in terms of areas under reference such as poverty alleviation, health care and community development.
vi) Rural entrepreneurship
Rural entrepreneurship may be defined as a form of entrepreneurship wherein the operations are carried out in rural areas. It has a lot of opportunities to develop endeavours in agriculture, retail industry etc. India is known to be a country with numerous villages. Almost 70% of India’s population lives in villages and they are dependent for their livelihood on agriculture and allied activities. It can be very well said that the economic development of a country largely depends on the standard of population living in rural areas as well as the extent to which the development has taken place in rural areas.
Rural entrepreneurship can be seen as a tool for enhancing the country’s economic development. It can be beneficial in numerous ways. At the outset, it will augur well for providing employment opportunities to the people belonging to the rural area and thereby enhancing the standard of living of such people. Rural enterprises are labour-intensive and they offer large-scale employment avenues and thus tackle the growing issue of unemployment in rural areas.
Similarly, the establishment of industrial units in such areas in the form of rural entrepreneurship will have similar prospects for generating employment and creating income opportunities. This will lead to the development of modern infrastructure and other facilities in rural areas. Promoting rural entrepreneurship can help bridge the gap in income level among people belonging to rural and urban areas. Further, it can keep a check and balance on the large-scale migration of rural people to urban areas in search of employment.
vii) Women entrepreneurship
Women entrepreneurship may be defined as the business entity being established and run by a woman or group of women who are passionate about their idea and want to make them a big success. As an entrepreneur, the female entrepreneur also has to carry out all the activities involved in setting up an enterprise, right from idea generation and screening to formulation of objectives, preparation of project reports, and market analysis. Determining the forms of business to be established, fundraising, recruiting manpower, purchasing raw materials and machinery, and operationalising the business.
The Indian economy has seen steady growth over the past few decades and on parallel lines there has been an increase in the count of new businesses and startups in the country. A majority of these businesses have been founded by men. While many Indian women have ambitions towards entrepreneurship, it is often more challenging for them to succeed.
Rather, India is listed to be in a group of countries wherein it is a challenge for women business owners in the form of pronounced cultural biases, lack of business resources such as finances and capital, as well as the training and development of the human resource. A society in which women cannot realise their full potential loses out on the significant potential for economic growth, innovation, and job creation. The Government of India have started putting a special focus on women’s entrepreneurship.
vii) Group entrepreneurship
Group entrepreneurship is the activity in which a group of individuals come together and establish an entity wherein the weightage of the stake of different members is predefined by mutual agreement between the members of the group. All the members of the group are responsible for the growth and development as well as the results of the enterprise. Group enterprises account for varied ideas and thoughts for the smooth conduct of activities in group entrepreneurship.
viii) Ecopreneurship
Ecopreneurs are a unique form of entrepreneurs whose business ideas are not just confined to profit, but they act as a concern for the environment around us. Ecopreneurship, which is also called environmental entrepreneurship as well as eco-capitalism, has become a more widely accepted approach for identifying opportunities and at the same time improving environmental quality and utilising them for driving profits.
Ecopreneurship initiatives invariably span a wide range of problems from ocean pollution to food waste recycling. Drivers of this form of entrepreneurship include global population growth, climate change, resource scarcity, increasing life expectancy etc. It is focused towards initiatives for finding high-impact solutions for various environmental challenges.
Elements of Entrepreneurship
To set up an enterprise and for it to grow successfully, several elements must be in place. Some key elements that are necessary for entrepreneurship are given below:
(i) Innovation
Innovation means doing something new or something different; transforming creative ideas into useful applications. Entrepreneurs use innovation to exploit opportunities available in the environment and overcome any threats. This innovation can be a service, new product, technology, production technique, marketing strategy, etc. Alternatively, innovation can involve doing something better and more economically. According to Schumpeter (a renowned economist), a person is an entrepreneur only when he is engaged in innovative behaviour.
(ii) Risk-Taking
Entrepreneurship is the propensity of the mind to take calculated risks with confidence to achieve a predetermined objective. Entrepreneurship and risk-taking therefore go hand in hand. The willingness of an entrepreneur to take risks gives a competitive edge in the economy. It helps to exploit the opportunities the economy provides.
A good entrepreneur should know how and when to tie and manage the risks of his business. He needs to be a risk taker, not a risk avoider but there should be a balance. Not taking any risks can make a business stagnant and excessive impulsive risk-taking can cause losses. If an entrepreneur does not have the willingness to assume risk, entrepreneurship will never succeed.
(iii) Vision
Vision or foresight is one of the main driving elements behind any entrepreneur. It is the positive energy that causes the business to grow by using the foresight of an entrepreneur. It is what gives the business an outline for the future tasks to complete, the risks to take, the culture to establish, etc. This helps in setting out short-term and long-term goals for the business and also plans ways to achieve these objectives.
(iv) Organization
The work of an entrepreneur involves the utilization of various managerial skills. His managerial skills get strengthened when he engages himself in establishing equilibrium between his organization and its environment. The entrepreneur bears all the risks and reap all the rewards. This requires impeccable managerial skills and a lot of organization. An entrepreneur must be able to manage and organize his finances, employees, resources, etc. So, organizational ability is one of the most important elements of entrepreneurship.
(v) Perseverance
The process of setting up an enterprise cannot be done in a few days or a few months. It may sometimes take years and during this period there will be both good and bad days. Being persistent and not giving it up when the going gets tough is what will eventually enable an entrepreneur to achieve his/her goals. Perseverance is an important element because if an entrepreneur gives up, that itself will be the end of the journey.
Importance of Entrepreneurship
Entrepreneurship is the process of creating incremental wealth. It provides the economy with goods and services and enhances the growth of social welfare. The importance of entrepreneurship is stated below:
(i) Creation of job opportunities
Entrepreneurship contributes to job opportunities. It provides entry-level jobs necessary for training or gaining experience for unskilled workers. Small businesses are the only sector that generates a large portion of total employment every year. Moreover, entrepreneurial ventures organise and supply experienced labour to large enterprises.
(ii) Gives impetus to innovations
Entrepreneurship nurses innovation that provides new ventures, products, technology, markets, quality of goods, etc., to the economy that increases national income and the standard of living of the people.
(iii) Impact on community development
Entrepreneurship leads to greater stability and a higher quality of community life. A community is better off when its employment base is diversified.
(iv) Enhances the standard of living
Entrepreneurship provides enormous kinds of products/services of various natures by the application of innovative ideas. In effect, entrepreneurship improves the standard of living for the people of a country.
(v) Promotes research and development
Entrepreneurship provides funds for research and development in collaboration with universities and research institutions. This promotes the overall economic development country.
Given the above significance, entrepreneurial development today has become very significant. The objectives of regional growth, industrial development, and employment generation depend upon entrepreneurial development. Entrepreneurs are, thus, the seeds of industrial development and the fruits of industrial development are greater employment opportunities for unemployed youth, increase in per capita income, higher standard of living and increased individual saving, revenue to the government in the form of taxes, and balanced regional development.
Determinants of Entrepreneurship
Harvard Business School considers entrepreneurship as the outcome of the combination of two forces: internal and external. They are shown in the image given below.
Internal Factors
The internal determinants refer to forces under the control of the entrepreneur no matter whether they are tangible or intangible. The internal factors make the personality of the entrepreneur. These generate an inclination to adopt entrepreneurial activity.
These are the traits of individuals which lead them to think and act entrepreneurial. Personal factors comprise personal initiatives of individuals who like to do things before somebody else translates that idea into a running enterprise. Personal factors also include the ability of individuals to identify and utilise resources in the wake of opportunities. There are a lot of people who can sense opportunities and it is usually challenging to translate those ideas into execution.
Another individual trait is perseverance, which influences the culture of entrepreneurship, where people like to take up challenging tasks, assignments or projects and they are less likely to be complacent about their prevailing status quo.
Another important individual factor is problem-solving behaviour and the quest for solutions in a new and better way. One can find a lot of entrepreneurs in India with varying degrees of success who got into entrepreneurship triggered by this problem-solving behaviour combined with a few other individual traits mentioned above.
Hence, they also need access to resources, including funds, at different stages of their entrepreneurial journey. They should have the art of persuasion to earn investor patronisation. However, investors or partners demand self-confidence of the entrepreneur or customers and suppliers demand confidence in the stability of the entrepreneurial setup or enterprise.
Hence ability of individuals to be confident in their decisions, make informed decisions and be self-aware is a desirable trait to audit a good entrepreneurial culture. Above all individual risk-taking behaviour is what it takes to get into an innovative entrepreneurial space.
The internal factors may be supplemented by the external factors. Contrary to internal determinants, external determinants are outside and under the control of the entrepreneur.
External Factors
External determinants refer to the surroundings governing the environment. Several forces govern this surrounding environment and relate particularly to culture, economics and policy. Culture is determined by the number of hours worked, likeliness to become an entrepreneur and social network (level of trust and strength).
They are also called environmental factors. The environment of a place is an essential ingredient of the entrepreneurial eco-system which provides a conducive atmosphere or otherwise that affects the growth of entrepreneurial culture positively or negatively. It includes technological advances, political environment, legal system, economic and social conditions, business circumstances, etc.
Political stability in a region, for example, is important to smooth economic activity which includes catalysing entrepreneurs to fructify their aspirations. Policy support for a market-driven competitive market encourages new players to enter markets as well as brushes off complacency among the incumbents. For example during the last couple of decades due to increased globalization and advances in technology, innumerable technology ventures have come up globally including India.
The conducive atmosphere may be created by the availability of finance by the financial institutions, supply chain network, ancillary industry, entrepreneurial culture etc. Hence, it is the individual traits and external influences that shape entrepreneurship and its growth in a place.
Entrepreneurship facilitates the accomplishment of goals envisaged by the individual, the organisation and the society. Entrepreneurship development will take place in a society where individual traits are supported by exciting and encouraging external factors.
The economic environment is determined by the chances that the venture will succeed and funding opportunities; whereas different policies that affect entrepreneurship are taxation policy, legal approval for starting a business, and government-sponsored programs for business initiation.
External determinants serve as a spark in the lightening of the entrepreneurial idea. To recapitulate, the external environment has the following dimensions:
(i) Government policies and procedures for example taxations, import/export restrictions, entry barriers, etc.;
(ii) Socio-economic conditions which relate to public attitude towards entrepreneurship, presence of experienced entrepreneurs, etc.:
(iii) Entrepreneurial and business skills cover entrepreneurial training programmes, availability of information, etc.;
(iv) Financial support to business includes venture capital, low-cost loans, etc.; and
(v) Non-financial support to businesses like counselling and support services, entrepreneurial networks, etc.
Entrepreneurial environments mediate the relationship between entrepreneurial resourcefulness and entrepreneurial intentions. Entrepreneurs are not only the product of their environment and ambitions, but also of the aspirations of their family members, relatives and friends. The encouragement received from family members, relatives and friends, and the assistance received from government agencies, and the experience, skills and knowledge gained are some of the important determinants which influence the entrepreneurs.
Forms of Entrepreneurial Organization
An enterprise can be owned by a single person or by a few groups of persons. There is no hard and fast rule to be of a particular form of entrepreneurial organization. It depends on the finance, knowledge, resources and capacity of the entrepreneur. Based on the pattern of ownership i.e., ‘who owns the enterprise?’, the enterprise can be classified into, Sole proprietor, Partnership, Co-operative form, Joint-stock company and State enterprise.
Among these types, sole proprietors, partnerships and co-operatives are most relevant to self-employed and small entrepreneurs. The other two forms are very relevant to large-scale industrial units. Each form has its own negative and positive aspects.
The first three forms are given below in detail.
i) Sole proprietor
The entrepreneur is the single person who has the ownership right over the enterprise. He is the sole person responsible for the profit and failure. Most of the time, all the activities are done by a single person. For example, selling dried fish in which all the activities are not so complicated, and can be managed by a single person. This type or form of organization is better known as individual entrepreneurship.
ii) Partnership
This form is established by two or more persons who have joined together to establish an enterprise. The profit and loss can be shared between the members i.e., partners. In this form, coordination and trust between partners are essential for success. For example, value-added fish products such as fish pickles and fish cutlet-producing units can be established by partnership by utilizing large resources and finance from the partners.
iii) Co-operative enterprise
Enterprise is established by a large number of persons collectively, through utilizing resources and finance collectively in a cooperative manner. The availability of resources and finance is more when compared to other forms. The decision making with the consensus of all the members is difficult. For example, the establishment of small-scale fish processing units exclusively for value-added and by-product production such as fish pickles, fish cutlets, chitosan etc.
The ownership pattern, advantages and disadvantages are very unique to a particular form.
| Forms of organization | Ownership Pattern | Advantages | Disadvantages |
| Sole proprietorship | Single ownership | 1. Efficient management 2. East to start and wind up |
Limited resources and finance availability |
| Partnership | Shared ownership | 1. Resource and Finance from partners 2. Decision making is easy |
1. Non-transparency between partners 2. Dominating character of partners |
| Co-operative Enterprise | Collective ownership | 1. Sufficient resources and finance 2. Division of work between members |
1. Convenience of the members 2. Group co-operation is difficult |
Organization
Reasons for Starting an Enterprise
The reason for starting an enterprise varies from one person to another. Somebody may be frustrated with their existing job and somebody may want to stand on their own or may want to achieve their goals by producing new products and services. It all depends on the situation and choice of an individual. But, there should be some basic reasons behind starting an enterprise.
i) Independent
Starting an enterprise can solve your financial worries and make you self-dependent to fulfil your needs. You can work independently in an environment which is preferable to you in a hassle-free domination of supervisors and bosses.
ii) Employment
It is best to do self-employment on your own and also provide employment opportunities to others in society. Mostly, it is an opportunity for those who are disappointed in the current competitiveness in jobs.
iii) Self-earning
It is an opportunity to earn money independently by making a profit in an enterprise. The freedom to spend and save depends on your earnings. This gives you the confidence to stand on your own.
iv) Personal satisfaction
The amount of satisfaction which a person attains through their enterprise is a good motivating factor. The ultimate satisfaction is also added through providing goods and services for the benefit of society.
Entrepreneurship Development
Entrepreneurship development can be understood from the following points:
Entrepreneurship – A Dynamic System
Entrepreneurship is not static over some time. It changes over some time due to the influence of various factors such as socio-economic factors, environment, support system and the individual himself. The skills can be developed through providing a good environment and technological services. For the successful functioning of the enterprise, the inter-relationship and inter-dependency of individual, socio-economic factors, environment and support system are necessary.
Entrepreneur’s Job
Entrepreneurs are those who engage in converting the possible opportunity in society into rewards (value). They utilize new technologies and available resources constructively to produce goods. The main role is to produce new products for the society. Because of this contribution, entrepreneurs are aptly called an inventor or a founder. The utilization and utility of technology have contributed equally well to the success of the enterprise. No one can deny the introduction of mechanization and its contribution to industrial production. In today’s technology-driven world, production without technology is meaningless.
Hence, learning new technologies is the prime concern of entrepreneurs to compete with the market competition. In the modern era, the role of entrepreneurs is becoming important because of their innovative creation towards changing customer satisfaction. Innovative thinking is the key to the success of an entrepreneur, which adds value to their products. The role of the entrepreneur does not end with producing products. It extends to initiation, innovation, selection, decision making and problem-solving and above all satisfying the customer. For the proper functioning of an enterprise, there are certain skills needed to make it a viable unit.
Entrepreneurship Skills
The qualities which are necessary to start an enterprise are called entrepreneurial skills. An entrepreneur should have basic skills i.e.
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- Starting a business.
- Develop the business for a journey toward success.
- Arrange finance for running the business.
- Production of products in an efficient way.
- Market the product in time.
But, in this competitive world, this basic skill alone is not enough to sustain the enterprise. There are special skills which an entrepreneur should possess. These are:
i) Sales and marketing skills
The success and failure of a business mainly depend on customers. They are the real judges to decide the quality of the product and bring the product to great success. Sales and marketing skill is needed to attract consumers, produce customer-oriented products i.e., highly demanded products and make awareness among the customer about the product through wide publicity through advertisement etc. Production alone cannot make a product worth it; real success depends on the marketing skill.
ii) Financial management skills
The profitability of the enterprise depends on the availability of money, efficient utilization and handling of money. Streamlining money while in surplus and stabilising the enterprise during a deficit period is the ideal skill of an entrepreneur. The balancing nature of finance is essential. Pricing of the product to get more returns in the competitive market is the concept in financial management.
iii) Self-motivating skills
An entrepreneur is the initiator and decision maker to initiate new things and decide how to get funding, how to develop products and above all how to attract customers. The self-motivation among the entrepreneurs leads the person to a great position and makes the business a sustained unit.
iv) Time management skills
Time is a limiting factor in both the cases of financial payments and product delivery. Other than production, the timely delivery of products is also important for a business. In fisheries products, the perishable nature of fish produce needs special care and quick disposal. It is very crucial in a home-based business run by a single person.
v) Administrative skills
Business activity includes proper documentation and filing of all the records from time to time. The filing of purchase and delivery details, tax and licensing should be carried out in a proper way to avoid confusion in future. Entrepreneurs should be familiar with the basic job of an administrator such as planning, organizing, staffing, directing, coordinating, reporting and budgeting to make effective business administration.
Starting a business is very easy and everyone can do it. However, successfully running a business is difficult without these entrepreneurial skills. Apart from these skills, there are some other qualities, an entrepreneur should have to make decisions easily even during risky and critical situations. The qualities such as leadership, management skills, team building, acceptability, adjustability, creativity, growth-oriented, dynamic and vibrant can help in running the business without any obstacles. In general, there are no rigid and specific qualities exclusively for an entrepreneur.
Importance of three I’s in entrepreneurial skills
Some people are very extra-ordinary and they can manage the problems very easily. Their self-interest and involvement in decision-making are opportunities to develop skills in the right way. But there are three I’s which are treated as mandatory skills for the entrepreneur. They are initiative, independence and ideas which contribute equally to developing entrepreneurial skills.
i) Initiative
An entrepreneur should have the ability to initiate things at the correct time and in an efficient manner. It is a basic skill for an entrepreneur.
ii) Independent
An entrepreneur should tend to face all problems and strategically solve them. Even though one obtains opinions from others, the entrepreneur should make decisions independently.
iii) Ideas
An efficient enterprise and its success mainly depend on the new ideas of an entrepreneur. To include change and upgradation based on consumer demand and feedback. New ideas should be backed by creative thinking to make your product unique and popular.
Measuring Entrepreneurship
Entrepreneurship is a key driving force for individual, national and global development. It links innovation and economic growth. Hence, it is essential to measure entrepreneurship to analyse the level of entrepreneurship and its contribution to society.
Individual level: Entrepreneurship is a multifaceted and heterogeneous activity; it is difficult to measure by using a single criterion. Hence, there are some traits which are useful to measure entrepreneurship. The traits are the degree of innovativeness, positive attitude, risk-taking ability, team-building ability, problem-solving capacity and level of enthusiasm.
National level: In India, the level of entrepreneurial activity is usually assessed through an adult population survey. The index used for the measure is the ‘Total Entrepreneurial Activity (TEA) index’.
Global level: At the global level, Global Entrepreneurship Monitor (GEM) a non-profit consortium is collecting research data on entrepreneurial activity from various countries.
Nowadays, the level of entrepreneur development is a criterion towards judging national growth. Hence, in India, a separate ministry of micro, small and medium enterprises has been created towards promoting and facilitate entrepreneurial activities.
Barriers to Entrepreneurship
An entrepreneur is an inventor who produces new things and a sales manager who channelizes sales and other activities. Entrepreneurship is a challenging task and has many barriers associated with it from the very beginning which need to be addressed for smooth functioning of the enterprise. An enterprise can be affected by several bottlenecks that can create barriers to the efficient working of an enterprise. But, in this competitive world, entrepreneurs are facing many barriers and they are:
i) Competition
The increasing number of entrepreneurs over time has led to heightened competition. Hence, concentrating on cost-effective, environmentally friendly, consumer-need-based products is the need of the hour. In the globalization era, the survival of small and medium-scale enterprises is difficult when large-scale industries are competing.
ii) Technology
Technology is the prime force for the success of the enterprise. In the patent era, the affordability and availability of cost-effective technology is a difficult task.
iii) Finance
Finance availability at the right proportion at the right time is a major challenge. Without adequate finance, the entrepreneur will be in trouble to proceed with the activities of an enterprise.
iv) Publicity
In this globalization era, sales promotion in the way of publicity through advertisement is essential. Most of them are giving the least preference to advertisement because of the high cost of advertisement.
v) Consumer behaviour
One of the greatest challenges of running a business is consumer satisfaction with the product. Production and marketing of need-based products according to consumer taste and preference is the only way to lead the enterprise in the success path. The demand for fishery value-added and by-products is gaining acceptance and a good market, mostly in urban areas.
Most of the time, the failure of an enterprise is primarily attributed to inadequate planning. Hence, care should be taken before starting the enterprise by allocating sufficient time for planning before proceeding.
vi) Lack of technical expertise
Many entrepreneurs who intend to start their enterprise lack the technical expertise in the domain in which they wish to establish their enterprise. Without proper technical expertise, it is difficult to set up and run an enterprise just by dedication and commitment.
vii) Financial constraints
Investments and funding form the base of the structure on which an enterprise is to be developed. If the financial standing of the entrepreneur is not strong, it is not possible to create a viable structure on that base.
viii) Lack of training modules and support services
Entrepreneurs who do not get the opportunity to be mentored and supported by other fellow and successful entrepreneurs or those who cannot opt for the training and development programmes face many problems in scaling their enterprises and at times they end up running it on a smaller scale.
ix) Expensive quality control
The quality control systems are usually expensive and if they are not adhered to in letter and spirit, they lower the standards of operation as well as the quality of the output product.
x) Lack of marketing and promotional strategies
Enterprises should be able to market and promote their products well in their domain area. The entrepreneur who lacks such capabilities is liable to end up making losses in the long run.
Entrepreneurship Opportunities
Entrepreneurship development is now gaining popularity among entrepreneurs due to growing competition. For the benefit of the entrepreneurs and persons associated with enterprises, the government started many national institutions.
Entrepreneurial Training
To give proper training to the entrepreneurs and associated personnel, the national level institutions are performing a very significant role in increasing the country’s entrepreneurship index at the international level. The institutions in India are listed below.
i) National Entrepreneurship Development Institutes
- National Institute for Entrepreneurship and Small Business Development (NIESBUD), Noida.
- National Institute of Micro, Small and Medium Enterprises (NIMSME), Hyderabad.
- Indian Institute of Entrepreneurship (IIE), Guwahati.
- National Institute of Small Industry Extension Training (NISIET), Hyderabad.
Entrepreneurship development institutes provide financial assistance under the EDI Scheme which is facilitated by the Ministry of Micro, Small and Medium Enterprises.
ii) Entrepreneurship Education
Nowadays, entrepreneurship skill development activities are initiated at the school level towards encouraging entrepreneurial spirit among students. As Mahatma Gandhi emphasized vocational skill development, it has been reemerging with a new face.
Government Support Towards Entrepreneurship
In recent years, Government involvement in encouraging and promoting entrepreneurship has been wide-ranging and has enormous implications. The financial support in the way of Self Help Groups and microfinance is exclusively for motivating the entrepreneurs. The Special Economic Zones are also established with specific concessions to encourage entrepreneurs. Even then, there are some grey areas which need to be filled towards successful entrepreneurial development.
In India, today’s knowledge-based economy is good for entrepreneurship development to a great extent. India has the limitless potential to create entrepreneurs. Most of the time, the major obstacle is the right environment towards entrepreneurship development. To bridge the gap, Government should focus on:
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- Create the right environment for success;
- Ensure that entrepreneurs have access to the necessary skills;
- Ensure that entrepreneurs have complete access to capital; and
- Enable networking and exchange of information.
Are you interested in starting a business? Keep in mind these basic tips.
Tips to start a business –
1) You should be familiar with the technical aspects of your business.
2) You should be capable of record keeping and financial management.
3) You should know about the legal and regulatory management of the enterprise.
4) You should be aware of the operational requirements to run your enterprise.
5) You should be thorough in the marketing skills of your product.
Conclusion
An entrepreneur is a person who can undertake the enterprise with the fullest effort and responsibility. Entrepreneurship is the quality of the entrepreneur for the effective functioning of the business. Entrepreneurship can be classified based on opportunity and purpose i.e., Need-based entrepreneurship, opportunity-based entrepreneurship, Technological entrepreneurship and geographical-based entrepreneurship. The forms of entrepreneurial organization can be classified into Sole proprietor, Partnership, Co-operative form, Joint Stock Company and State enterprises.
One can start an enterprise mainly to be independent, to be employed, self-earning and attain personal satisfaction. The reason may vary between persons. The successful functioning of an enterprise depends on the interrelationship between the socio-economic factors, environment, individual and support system. An entrepreneur’s job is to convert the available opportunities into probable rewards by efficiently utilizing resources and technology. For efficient functioning of the job, an entrepreneur needs some skills such as sales and marketing skills, financial and management skills, self-motivating skills, time management skills and administrative skills.
The major challenges put before the entrepreneur are competition, publicity and consumer behaviour. In India, there are some national-level institutes which support entrepreneurial training along with government support.