MEANING OF
ENTREPRENEURSHIP
Entrepreneurship is the process of designing
and running a new business venture for
earning profits. It is a process that brings innovation that is new ideas,
products, and services in the market. Entrepreneurship is the ability to create, manage and operate a
new business and bears all of its risk with a view to earn profits. A person
who develops new business and undertakes all risks and challenges associated
with it is termed as Entrepreneur.
Entrepreneurship is defined as an act of
looking for an investment and
production opportunity, then creating and managing a business venture for
earning profits. It involves arranging for materials, labor, land, capital,
bringing new techniques and product and recognizing new sources for
enterprises. The risk associated with entrepreneurship is high but at the same,
it may also provide high rewards to a person starting a venture.
Entrepreneurship results in creativity,
innovation, employment opportunities
and leads to the overall economic development of the country. Entrepreneurship
is of the following kinds: – Small Business Entrepreneurship, Large Company
Entrepreneurship, Scalable Startup Entrepreneurship, and Social
Entrepreneurship.
NATURE OF
ENTREPRENEURSHIP
Creation Of Enterprise
Entrepreneurship
is a process that refers to the creation and running of a new enterprise. It is
an activity under which a person called an entrepreneur starts a new venture
using a new idea.
Economic Activity
Entrepreneurship
is an economic activity as it involves creating and running a new business
through optimum utilization of all combined resources. It ensures that all
scarce resources are efficiently used for deriving better returns in the form
of profit.
Profit
Profit
earning is the sole objective of an entrepreneur for undertaking risk.
Entrepreneurs start a new venture with a view to earning profits.
Gap Filling
Entrepreneurship
is a process of recognizing and filling the gap between customer needs and
available products or services. It focuses on removing the deficiencies from
the currently available products to fulfill the needs of customers.
Organizing Function
It
is an organizing function that brings together different factors of production
like land, labor, and capital. Entrepreneurship is concerned with coordinating
and managing all resources engaged within the enterprise.
Innovation And Creativity
It is the process of discovering new ideas
and concepts and implementing them in business ventures. Entrepreneurship
involves bringing innovation in the market by introducing new products or
process that delivers better service.
Risk Bearing
It
is an activity which involves huge risk which every entrepreneur needs to
undertake for starting a venture. New ideas developed and implemented by the
entrepreneur are uncertain and may result in losses.
DEVELOPMENT
OF ENTREPRENEURSHIP
Earliest Period
In this
period the money person (forerunner of the capitalist) entered into a contract
with the go-between to sell his goods. While the capitalist was a passive risk
bearer, the merchant bore all the physical and emotional risks.
Middle Ages
In this
age the term entrepreneur was used to describe both an actor
and a person who managed large production projects. In such large production
projects, this person did not take any risks, managing the project with the
resources provided. A typical entrepreneur was the cleric who managed
architectural projects.
17th Century
In the
17th century the entrepreneur was a person who entered into a contract with the
government to perform a service Richard Cantillon, a noted economist of the
1700s, developed theories of the entrepreneur and is regarded as the founder of
the term. He viewed the entrepreneur as a risk taker who "buy[s] at
certain price and sell[s] at an uncertain price, therefore operating at a
risk."
18th Century
In the 18th
century the person with capital was differentiated from the one who needed
capital. In other words, entrepreneur was distinguished from the capital
provider. Many of the inventions developed during this time as was the case
with the inventions of Eli Whitney and Thomas Edison were unable to finance
invention themselves. Both were capital users (entrepreneurs), not capital
providers (venture capitalists.) Whitney used expropriated crown property.
Edison raised capital from private sources.
A venture
capitalist is a professional money manager who makes risk investments
from a pool of equity capital to obtain a high rate of return on investments.
19th and 20th Centuries
In the
late 19th and early 20th centuries, entrepreneurs were viewed mostly from an economic
perspective. The entrepreneur "contributes his own initiative, skill and
ingenuity in planning, organizing and administering the enterprise, assuming
the chance of loss and gain."
Andrew
Carnegie is one of the best examples of this definition, building the American
steel industry on of the wonders of industrial world, primarily through his
competitiveness rather than creativity.
In the
middle of the 20th century, the notion of an entrepreneur as an
innovator was established. Innovation, the act of introducing
something new, is one of the most difficult tasks for the entrepreneur. Edward
Harriman and John Pierpont Morgan are examples of this type of entrepreneur.
Edward reorganized the Ontario and southern railroad through the northern
pacific trust and john developed his large banking house by reorganizing and
financing the nation's industries. This ability to innovate is an instinct that
distinguishes human beings from other creatures and can be observed throughout
history.
THE ENTREPRENEURIAL DECISION PROCESS
(Deciding
to become an entrepreneur by leaving present activity)
Many
individuals have difficulty bringing their ideas to the market and creating new
venture. Yet entrepreneurship and the actual entrepreneurial decisions have
resulted in several million new businesses being started throughout the world.
Although no one knows the exact number in the United States, Indeed, millions
of ventures are formed despite recession, inflation, high interest rates, and
lack of infrastructure, economic uncertainty and the high probability of
failure.
The
entrepreneurial decision process entails a
movement from something to something-- a movement from a
present life style to forming a new enterprise.
To leave
a present live-style to create something new comes from a negative
force--disruption. Many companies are formed by people who have retired, moved,
or been fired. Another cause of disruption is completing an educational degree.
The decision to start a new company occurs when an individual perceives that
forming a new enterprise is both desirable and possible.
Entrepreneurship is a process, a journey, not the destination; a
means, not an end. All the successful entrepreneurs like Bill Gates
(Microsoft), Warren Buffet (Hathaway), Gordon Moore (Intel) Steve Jobs (Apple
Computers), Jack Welch (GE) GD Birla, Jamshedji Tata and others all went
through this process.
To establish and run an enterprise it is divided into three parts –
the entrepreneurial job, the promotion, and the operation. Entrepreneurial job
is restricted to two steps, i.e., generation of an idea and preparation of
feasibility report. In this article, we shall restrict ourselves to only these
two aspects of entrepreneurial process.
The Entrepreneurial Decision Process
1.Idea
Generation:
To generate an idea, the entrepreneurial process has to pass through
three stages:
a. Germination:
This is like seeding process, not like planting
seed. It is more like the natural seeding. Most creative ideas can be linked to
an individual’s interest or curiosity about a specific problem or area of
study.
b. Preparation:
Once the seed of interest curiosity has taken the
shape of a focused idea, creative people start a search for answers to the
problems. Inventors will go on for setting up laboratories; designers will
think of engineering new product ideas and marketers will study consumer buying
habits.
c. Incubation:
This is a stage where the entrepreneurial process
enters the subconscious intellectualization. The sub-conscious mind joins the
unrelated ideas so as to find a resolution.
2.
Feasibility study:
Feasibility study is done to see if the idea can be commercially
viable.
It passes through two steps:
a.
Illumination:
After the generation of idea, this is the stage when the idea is
thought of as a realistic creation. The stage of idea blossoming is critical
because ideas by themselves have no meaning.
b.
Verification:
This is the last thing to verify the idea as realistic and useful
for application. Verification is concerned about practicality to implement an
idea and explore its usefulness to the society and the entrepreneur.
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