What is Entrepreneurship ?
Performing the activities of an entrepreneur is called as entrepreneurship. It is a French word, which means "to undertake". In this, all the available resources like innovative ideas, capital, labour, and business intelligence are utilized in effective manner to produce innovative products and services. It may also involve creation of new enterprises or diversification's in established enterprises due to available opportunities in the market.
Entrepreneurship is an ability of an entrepreneur to 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 enterprise. It starts 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.
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 mobilize human, financial and material resources necessary to bring a project to fruition".
Definition of Entrepreneurship
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.
According to Joseph Schumpeter :
"Entrepreneurship as defined essentially, consists in doing things that are not generally gone in the ordinary course of business routine".
Entrepreneurship is generally regarded as setting up new enterprises, but, in recent times, social as well as political entrepreneurial approaches have also developed. When an entrepreneurial approach is implied within an enterprise, it is called intrapreneurship. This intrapreneurship may be utilized for enabling the enterprise for corporal venturing and developing spin-off organisations.
Features of Entrepreneurship
The main characteristics of entrepreneurship are a follows :
1) Economic 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 earn 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 favor of the enterprise. They utilize the available resources to make the complex situations favorable for the enterprise.
5) Risk Taking :
Entrepreneurs are whole sole responsible for the business loss arising out of unpredicted incidents of the future. Whenever an enterprise is set-up there are always uncertainties of market. The product may or may not be liked by the public, or a new competitive product may also arrive in the market, or labour employed may be lured away by the competing entrepreneurs, or sudden depletion of funds may take place due to unseen circumstances. These few very common risks. Therefore, entrepreneurs are ready to take risks. Risk taking is an inevitable feature of entrepreneurship. In this, entrepreneurs analyse the situation with the help of their unique insight and scientific attitude, and develop innovative products and services to reduce risks and gain profit.
6) Building Organisation :
It is most obvious role of entrepreneurship to build an organisation efficiently. Effective leadership and delegation of authorities are required for building organisation. This feature of entrepreneurship utilizes the Innovations in economic manner and thus regarded as crucial for entrepreneurial spirit.
7) Dynamic Process :
Entrepreneurship is dynamic in nature, as it analyses the changing environment on regular basis and adapts the favorable opportunities. This enables the entrepreneurs to keep pace with the current trends and helps in the growth of the business.
8) Gap Filling Function :
Entrepreneurship acts as gap filler. The basis of entrepreneurship is to cater for the needs of the society. It generates suitable products and services for the use of the consumers and the society at large. It provides information about the availability of desired products and services.
9) Skillful Management :
It is crucial for entrepreneurs to be efficient and creative 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 to 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) Mobilization of Resources :
In order to accomplish the desired goal, entrepreneurs must recognize, collect and allocate resources, dispersed in the environment. The mobilization of resources is a crucial task which must be done properly so that it can be fully utilized. This quality of entrepreneurs differentiates them from others.
Role of Entrepreneurship
All the vital functions which are required from the perspective of expansion of the business enterprise are executed by an entrepreneur. An entrepreneur performs different predominant functions of an enterprise from its inception stage to the success stage. These functions are followed in a logical sequence. Importance of entrepreneurship is enlisted below :
1) Planning :
The foremost establishing step towards business enterprise is planning. Layout or outline of the proposed project is formulated by an entrepreneur in a formal methodical format. This layout is submitted to the concerned authorities in order to acquire the legal permission or consent for the business venture. Following steps are part of the planning process :
- Examining the best acceptable business idea.
- Choosing a product line.
- Deciding the kind of business enterprise, i.e., on an individual basis or partnership or corporate basis.
- Rough calculation of the capital required for establishing the business organisation.
- Picking the right capital resources.
- Finalizing the location or site.
- Inspecting government policies, rules and regulations.
- Fixing the approach to be used to carry out all the official government formalities.
- Analyzing whether suitable labour force is available.
- Studying the proposed market and strategy of market.
2) Organisation :
In order to utilize the resources optimally, different resources such as capital. land and labour are organised, gathered and managed by an entrepreneur during the stage of promotion and performance. Efficiency and productivity levels of the organisational network are put into the service and supervised by an entrepreneur have a huge impact on the efficient expansion and development of the organisation.
3) Decision-Making :
According to H. Cole, a famous author, an entrepreneur is a decision maker. They have to take several decisions concerning the following matters as a decision maker :
- Deciding upon the various business goals of the enterprise.
- Selection concerning the order of new equipment and efficient technology.
- Decision concerning the attainment of men, material, market, machine, and money.
- Decision for developing a market for the enterprise's product.
- Keeping cordial relationship with the general public and public authorities.
4) Management :
In context of an entrepreneur, management refers to ensuring the smooth functioning of the business venture along with handling daily activities and issues. It also involves long-term policies and future expansion plans. Management constitutes regulation of material, men, machine, money, arranging of labour, land and capital sources for the business.
5) Innovation :
The concept of "performing new things or performing things that are being done before in a new manner" is referred to as innovation. According to Schumpeter, an American economist, economic development is a chosen dynamic change caused by an entrepreneur. This economic development is attained by actuating new combinations of productions. As stated by Schumpeter, there are five forms by which innovation can happen :
- Developing new market,
- Introducing new product in the existing market,
- Finding new and improved source of raw material,
- Rearranging the organisation,
- Instituting of new and upgraded technology in the production process.
6) Risk-Bearing :
All the responsibility and accountability for any loss that can occur because of unexpected emergencies in future is shouldered by an entrepreneur. Entrepreneur. assures rent to the landlord, wages to labourers, interest to creditors and the risks to be covered.
7) Uncertainty-Bearing :
Any risk which cannot be insured and is indeterminable is termed as uncertainty. Entrepreneurs take the responsibility of uncertainty or variability, i.e., the unknown. market trends, job credits, etc., which basically cannot be salaried neither insured nor capitalized.
8) Other Roles :
There are several other activities which are to be performed by an entrepreneur beyond the above roles mentioned :
- Enterprise expansion,
- Change in the production process,
- Maintaining harmonious relations with external agencies.
- Handling labour issues
- Establish amiable employee-employer relationships.
Barriers to Entrepreneurship
Some of the barriers to entrepreneurship are as follows :
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, etc. All these unethical practices hamper the growth and smooth functioning of the business.
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, it is 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, motivation and willingness to commence a new business enterprise. Often, a business opportunity remains un-utilized 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.
Entrepreneurship and Economic Development
This section discusses about the connection between the entrepreneurship and the economic development of the country, how the entrepreneurship is beneficial for the nation and which role does it play in the development of the country. All this is explained through following points :
1) Creates Large-Scale Employment Opportunities :
The most crucial problem of any underdeveloped economy is unemployment. Entrepreneurs play an important role is providing job opportunities to large portion of the population. As more and more entrepreneurial enterprises are developed, both small and large scale job offerings are provided. The units of employed persons keep on increasing with the growth of the business. With the passage of time and success of the business, entrepreneurs set-up more industries which offers more employment opportunities to the economy. In this way, entrepreneurs contribute efficiently towards the economic development of the country.
2) Balanced Regional Development :
The social benefits like transport facilities, education. health, entertainment, etc., take place with the growth and expansion of the business. But these economic developments are limited to the specific areas where the industries are situated. With the changing time and increasing competition, large industries are enforced to start-up their industries in less developed as well as rural areas. This leads to the development of such areas.
3) Increase in National Income :
The total output of all goods and services produced annually including all imports of the country is known as national income. The country produces goods and services according to the demands of domestic customers and number f exports. The country's demand increases with the growing population and their personal income. Whereas, level of export also increases due to the urgent. requirement of imports 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 can be consumed by the customers in house and the excess products can be exported to foreign countries. Hence, entrepreneurs are indirectly liable for their contribution in the national income.
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 exploitation's. 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.
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 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, etc. 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.
Also Read :
Differences Between Entrepreneur and 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 fundamental differences between entrepreneur and entrepreneurship are as follows :
Entrepreneur versus Entrepreneurship
Thus, it makes clear that Entrepreneur and Entrepreneurship together run an industry and are inseparable. |