ENTREPRENEURSHIP MANAGEMENT

Prof Bharat Nadkarni

Reference Books• Entrepreneurship by Hisrich & Peters• Entrepreneurship by Rajeev Roy (Oxford Univ. Press)

• Entrepreneurial Management by R K Mittal• Entrepreneurship Development – Programmes & Practices by J S Saini

• Entrepreneurship – strategies and resources by Marc D Dollinger

• Indian Entrepreneurship – its past and present by V Chernovskaya

• Entrepreneurship Management by P N Singh & J C Saboo

Entrepreneurship Management

 

Entrepreneurship : Definition

Entrepreneurship is the process of creating something different

with value by devoting the necessary time and effort, assuming

the accompanying financial, psychic, social risks and receiving

the resulting rewards of monetary and personal satisfaction and

independence.Points to note1. Creating something different with value2. Devoting necessary time & effort3. Assuming accompanying financial, psychic and social risks4. Receiving resulting rewards – Monetary, Personal satisfaction, independence

Entrepreneurship Management

Entrepreneurial TraitsNeed for achievementHigh level of motivationCreative / InnovativeModerate risk takerAgility / quickness in analysing and picking up opportunitiesSelf ConfidenceExcellent Leadership QualitiesGood business acumenIndependence of thought & action Flexible/ Ready to changeResilience

Entrepreneurship Management Who is an Entrepreneur“Entrepreneur”, a french word literally translated means go

between. Oxford Dictionary defines it as a person who organizes a

commercial undertaking involving personal financial risk.

“An Entrepreneur is one who organizes and operates an

enterprise for personal gain. He pays current prices for the

materials consumed in the business, for the use of the land, for

the personal services he employs and for the capital he

requires. He contributes his own initiative, skill and ingenuity

in planning, organizing and administering the enterprise. He

also assumes the chance of loss and gain consequent to

unforeseen and uncontrollable circumstances. The net residue

of the annual receipts of the enterprise after all costs have been

paid, he retains for himself.”

Entrepreneurship Management

Decision Process for a potential entrepreneur

Change from present lifestyle- Work Environment- Disruption

Form new enterpriseDesirable Possible- Cultural - Government- Family - Background- Teachers - Marketing- Peers - Financing

- Role Models

Entrepreneurship Management Origin & DevelopmentMarco Polo as a Trader

Thomas Edison as an Inventor

Narayan Murthy / Shahnaz Huassain as Innovators

J N Tata & Dhirubhai Ambani as Visionaries

Venture Capital conceptThe function of an entrepreneur is to reform or revolutionize the pattern of production by exploiting an invention or more generally an untried technological possibility for producing a new commodity or producing an old one in a new way, opening a new source of supply or a new outlet for products by re-organizing a new industry.

Entrepreneurship Management

Challenges InvolvedPerson who actually starts his/ her own business, the experience is filled with enthusiasm, frustration, anxiety and hard work. There is a high failure rate due to:

External Factors Inflation, recession, lack of

infrastructure, corruption, economic & political uncertainty, Intense competition.

Internal Factors Lack of capital, poor sales, lack of

managerial ability.

WHAT THEN CAUSES A PERSON TO MAKE THIS DIFFICULT DECISION?

 Advantages of Entrepreneurship

To an Individual1. Self Employment2. Employment for near & dear3. Prolonged career for next generations4. Innovation & Creativity5. Unlimited income/ higher retained income6. Freedom to use own ideas7. Independence8. Satisfaction

 Advantages of Entrepreneurship

To the Nation1. Provides larger employment2. Results in wider distribution of wealth3. Mobilises local resources, skills and

savings4. Accelerates the pace of economic development5. Stimulates innovation & efficiency.6. Competition

 Factors favouring Entrepreneurship1. Growth of education – science, technology &

management2. Developed infrastructure facilities3. Financial assistance4. Training facilities5. Protective and promotional policies6. Globalization

Entrepreneurship Theories1. 1600 : French verb – Go between or To undertake2. 1700 : Person bearing Risks of Profit in a fixed price

contract3. 1725 : Richard Cantillon – Person bearing risks is

different from capital supplier (Risk) 4. 1803 : J B Say – Shifts economic resources out of an

area oflower into an area of higher productivity & greater yields (Value Addition)

5. 1934 : Joseph Schumpeter – “ Innovation is the sole cause of profit.

6. 1961 : David McClelland – Need for Achievement – N Ach factor - highly motivated, energetic, moderate risk taker. – Need for Power – Need for Affiliation.

Entrepreneurship Theories .... Contd.

7. 1964 : Peter Drucker – Searches for change, responds to it and exploits as opportunity. (Opportunity focused)

8. 1980 : Karl Vesper – Behaviour perceptions – Economists, Psychologists, Businessmen, Politicians, (Environment)

9. 1983 : Gifford Pinchot – Intrapreneur10. 1985 : Robert Hisrich – Creating

something different with value, devoting time and effort, assuming risks – financial, psychic and social, results – rewards, satisfaction (Leadership & Vision)

Entrepreneurship Management

How entrepreneurship helps in economic

development Employment Generation

Distribution of economic power

Optimum utilisation of regional resources

Meeting the demand gap by seizing appropriate opportunity

Export potential

Regional development

Karl Vesper’s Theory

Entrepreneurship Management

Entrepreneurship Management

Entrepreneur to an economistOne who brings resources, labor, material and other assets into combinations that make their value greater than before and also one who introduces changes, innovations and a new order.

Entrepreneur to a psychologistOne who is typically driven by certain forces – need to obtain or attain something, to experiment, to accomplish or perhaps to escape authority of others.

Entrepreneur to a businessmanOne who appears as a threat and an aggressive competitor OR an ally, a source of supply, a customer or someone who creates wealth for others as well, who finds better ways to utilize resources, reduce waste and produces jobs for others.

Entrepreneurship & Leadership

MCCLELLAND’S NEED THEORY OF MOTIVATION

MCCLELLAND’S NEED THEORY OF MOTIVATIONThree basic types of motivating needs• 1] Need for achievement 

– Have an intense desire for success and an equally intense fear of failure

– Want to be challenged

– Set moderately difficult goals for themselves

– Take realistic approach to life

– Would analyse and assess problems and take personal responsibility of completing a job

– Like specific and prompt feedback on how they are doing

MCCLELLAND’S NEED THEORY OF MOTIVATION

• 2] need for power 

– People with high need for power have a great concern for exercising influence and control

– They seek positions of leadership

– Good conversationalists

– Can be argumentative

– Forceful, outspoken, hardheaded and demanding

– Enjoy mentoring

MCCLELLAND’S NEED THEORY OF MOTIVATION • 3] need for affiliation 

– Derive pleasure from being loved and tend to avoid the pain of being rejected by a social group

– Concerned with maintaining pleasant social relationships

– Enjoy sense of intimacy and understanding

– Ready to console and help others in trouble

 

MCCLELLAND’S NEED THEORY OF MOTIVATION • How it applies to managers • Entrepreneurs : showed very high need for

achievement ; fairly high need for power ; low in their need for affiliation

 – In small companies/ Ventures : president/

entrepreneur has a very high achievement motivation

– In large companies :

– CEO/ Entrepreneur tend to be average in achievement but stronger in power and affiliation

– Entrepreneurs: rated higher in achievement motivation

Entrepreneurship Management

Innovation and Entrepreneurship

Prof Bharat Nadkarni

Entrepreneurship Management

Breaking of the Circular Flow

Schumpeter’s Model

Profits caused by a particular innovation tends to be competed away as other imitate and adapt that. But if the entrepreneur comes out with another innovation at that time when the favourable effects of the former innovation are dying out, he will make profits again. Therefore, as long as innovation exist, profits continue to arise out of them. According to Schumpeter, Innovation is the sole cause of Profit.

Entrepreneurship Management

Thank You