2.Entrepreneurship ISC class 11 Business Studie Di Syllabun for the year 2023-2024

2.Entrepreneurship

CHAPTER OUTLINE

2.1 Meaning and Definition of Entrepreneur

2.2 Classification of Entrepreneurs 2.3 Types of Entrepreneurs (Clarence Danhof)

2.4 Characteristics of a Successful Entrepreneur 2.5 Meaning and Definition of Entrepreneurship

2.6 Characteristics of Entrepreneurship

2.7 Factors Affecting Entrepreneurship 2.8 Types of Entrepreneurship

2.9 Meaning and Definition of Intrapreneurship

2.10 Characteristics of Intrapreneurship 2.11 Classification of Intrapreneurship

2.12 Factors Affecting Intrapreneurship 2.13 Difference between Entrepreneurship and Intrapreneurship

2.14 Meaning and Definition of Enterprise 2.15 Relation of Entrepreneur, Entrepreneurship and Enterprise

2.16 Steps in Setting up An Enterprise

2.17 Phases of a Business

2.18 Meaning of Start Up Business

• Summary

Exercises

Question Bank

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Entrepreneurship is an interesting and challenging subject. The word 'entrepreneur' first appeared in the French language and was applied to leaders of military expeditions and civil engineering. Richard Cantillon, an Irishman living in France, was the first person to use the term 'entrepreneur to refer to economic activities.

2.1 MEANING AND DEFINITION OF ENTREPRENEUR

An entrepreneur is one who undertakes an enterprise. Undertaking an enterprise involves combining labour, capital and other inputs to produce and/or sell a product or service. An entrepreneur introduces some innovation, assembles resources to execute it and bears calculated risk. An entrepreneur may be an individual or a group of individuals who recognises an opportunity, gathers the resources needed to exploit the opportunity and the risk involved. An entrepreneur initiates, organises and controls the affairs of an enterprise to supply products, services or ideas. Innovating, risk bearing and organising are the main functions of an entrepreneur.

Thus, in simple words an entrepreneur is a business person who not only conceives and organises

ventures but also frequently takes risks of doing so to give practical shape to his idea.

The meaning

Entrepreneur is a person who conceives the idea

Arranges all the resources

Give practical shape to his idea

The concept

Entrepreneur (Person)

Entrepreneurship (Process)

Enterprise (Outcome-start Business)

Definitions of Entrepreneur

An entrepreneur is "the agent who buys means of production at certain prices in order to combine them into a product that he is going to sell at prices that are uncertain at the moment at which he commits himself to his costs. For example, a farmer pays out contractual incomes which are certain to the landlords and labourers, and sells at prices that are uncertain.

Richard Cantillon

"An entrepreneur is the economic agent who unites all means of production- the labour

of the one, the capital or land of the other and who finds in the value of products which

result from their employment, of the entire capital that he utilises and the

value of the wages, the interest and the rent which he pays as well as profits belonging to

himself

-J. B. Say

"An entrepreneur is an innovator who brings economic development through new combination

of factors of production." Joseph Schumpeter "An entrepreneur is one who always searches for change, responds to it, and exploits it as

an opportunity"

Peter F. Drucker

"An entrepreneur is someone who exercises some control over the means of production and

produces more than what he can consume in order to sell it for income."

David C. Mcclelland

On the basis of above definitions an entrepreneur can be defined as a person who tries to create something new, organises production and undertakes risks and handles economic uncertainty

involved in the enterprise. The concept of entrepreneur is associated with the three elements - Risk-bearing, Organising

and Innovating.

Entrepreneur

Risk-bearing

Organising

Innovating

1. Risk-bearing: Entrepreneur is a person who takes risk for establishing a new venture/ enterprise in order to create utility for the welfare of human beings as well as for him/ herself.

2. Organising: Entrepreneur is one who organises the factors of production and also to create product/venture.

3. Innovating: Entrepreneurs are persons who create new business/venture and taking risks in achieving the objectives which they propose to make/eam profits and growth by identifying opportunities.

2.2 CLASSIFICATION OF ENTREPRENEURS The two sub-categories of Entrepreneurs are:

1. Independent Entrepreneurs: Those who foster an idea on their own and start a new

organisation/firm based on that idea are Independent Entrepreneurs.

2. Spin-off Entrepreneurs: Those who foster an idea within an existing work place, related to activities there, and take this idea out of the work place and create a new firm or organisation on their own are Spin-off Entrepreneurs.

2.3 TYPES OF ENTREPRENEURS (CLARENCE DANHOF) Clarence Danhof has classified entrepreneurs into the following categories

1. Innovative Entrepreneurs: An innovative entrepreneur discovers the opportunity for introducing a new product/service or a new technique of production/distribution. For example, Ajit Narayan, an IIT Chennai Alumnus created a communication device that converted Timited muscle movements (head or finger movements) into speech. He launched Invention Labs to produce and sell the device. Similarly, Vijay Sekhar Sharma launched Paytm, a digital payment system.

Innovative entrepreneurs are more common in developed countries. There is dearth of such entrepreneurs in underdeveloped countries. Such entrepreneurs emerge only when the country has achieved a certain level of development and people look forward to change and progress. Several graduates from IITs and IIMs are emerging as innovative

entrepreneurs in India.

2. Imitating or Adoptive Entrepreneurs:

This type of entrepreneurs adopt or imitate

successful innovations created by innovative entrepreneurs. They imitate the technology

and systems of others. For example, Sachin Bansal and Binny Bansal launched Flipkart,

an e-commerce firm on the lines of Amazon of USA. Imitative entrepreneurs are more common in less developed countries. They imitate the technology and business models of firms in advanced countries. There is a need to adjust and adopt new technologies to the special needs and conditions of developing nations. As compared to innovative entrepreneurs, the imitative entrepreneurs face less risk. The former is a creator while the latter is an adopter. Imitative entrepreneurs play an important role in countries having limited resources. They make modifications to innovations of innovative entrepreneurs.

3. Fabian Entrepreneurs: The entrepreneurs of this type are very cautious and skeptical while practising any change. They have neither the will to introduce something new nor the desire to imitate innovations of others. Fabian entrepreneurs are shy and lazy. They are not willing to take risk and follow the footsteps of their predecessors. Customs, traditions, religion and past practices dominate their dealings. Mom and Pop stores are largely fabian entrepreneurs.

4. Drone Entrepreneurs: These entrepreneurs refuse to adopt and use opportunities to carry out changes in production and distribution. Such entrepreneurs may even suffer losses due to their inertia and stubborn nature. They are laggards because they continue to operate in traditional ways and resist changes. They are pushed out of the market when their products/services lose marketability and their operations become uneconomical. Several Indian entrepreneurs wound up their businesses as they failed to face the challenges created by Liberalisation, Privatisation and Globalisation (LPG) which began in 1991. Most of the textile factories in Mumbai closed down because they did not modernise their plant and machinery and did not respond to changing needs and preferences of consumers. DCM Data Products was one of the earliest computer firms in India. But it could not survive due to its failure to keep pace with changes in information technology. Infosys Technologies became a leading information technology company while Patni computers suffered even though Infosys was launched by former employees of Patni computers.

2.4 CHARACTERISTICS OF A SUCCESSFUL ENTREPRENEUR

The characteristics of a successful entrepreneur are: 1. Forward Looking: An entrepreneur is a keen observer and have the ability to spot opportunity. They are able to anticipate trends, opportunities, and future organisational

challenges

2. Hardworking: Entrepreneurs are hardworkers, they put constant efforts and realise a

sense of satisfaction on accomplishing goals. 3. Passionate: Entrepreneurs are passionate about their enterprise. Passion helps them overcome difficulties and win over people. They show true enthusiasm and energy around the work they do. Joseph Cambel said "Passion will move men beyond themselves,

beyond their shortcomings, beyond their failures."

4. Opinionated: An entrepreneur has to act as the pilot of his venture and are always ready and willing to take a stand for how they believe things should be done. 5. Confident: Entrepreneurs like to take timely rather than ideal decisions. They do not

procrastinate as otherwise they lose opportunities. They are confident and believe in themselves. 6. Resourceful: In order to launch and run un enterprise, financial, human and physical resources in adequate quantity, of good quality and at reasonable cost are required. An entrepreneur is able to collect the necessary resources and to make their optimum use.

7. Positive: Entrepreneurs believe in themselves. They have a natural tendency to change

the environment. They do not depend upon luck but on efforts. With the roller coaster

ride that is entrepreneurship, staying positive helps the team get through highs and lows. Table 2.1: Distinction Between Entrepreneur and Manager

Entrepreneur

Manager

Basis of Distinction

1. Risk taking

An entrepreneur assumes the risks of enterprise

Manager does not assume risks of

enterprise

2. Status

An entrepreneur is his own boss-self employed

An entrepreneur invests some

A manager works under a boss-

an employee

3. Capital Investment

A manager does not invest capital capital in the enterprise in the enterprise

4. Return or Reward

Profit which is uncertain, irregular and can be a loss

Salary which is fixed and regular

Anand Mahindra-owner Mahindra & Mahindra

of Pawan Goenka-Managing Director

5. Example

of Mahindra & Mahindra

An entrepreneur can also be the top manager of his enterprise. But a manager entrepreneur of the enterprise in which he is employed.

2.5 MEANING AND DEFINITION OF ENTREPRENEURSHIP

The word 'entrepreneurship' has been derived from French root which means to "undertake". Entrepreneurship is the process of undertaking an economic activity that involves risk. It of running an enterprise. It involves innovating, organising and coordinating.

Activities undertaken by an entrepreneur to bring a business unit into existence are collectively known as entrepreneurship. It is the process of changing ideas into economic opportunities and creating values. In brief, entrepreneurship is the process of creating a business enterprise.

Definitions of Entrepreneurship

• "Entrepreneurship is the function of seeking investment and production opportunity, organising an enterprise to undertake a new production process, raising capital, hiring labour, arranging the supply of raw materials, finding site, introducing a new technique and selecting top managers of the enterprise."

B. Higgins

"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 human, financial and material resources necessary to

bring a project to fruition."

John Kao and Howard Stevenson

• "Entrepreneurship is the purposeful activity of an individual or a group of associated

Individuals, undertaken to initiate, maintain or aggrandise profit by production or distribution -A. H. Cole

of economic goods and services. "Entrepreneurship is the ability to create and build something from practically nothing. It involves initiating and building an enterprise. It is the knack for sensing an opportunity where others see chaos, and confusion. It is the know how to find, marshall and control resources and to make sure the venture does not run out of money when it is needed

most."

-Jeffrey A. Timmons

• "Entrepreneurship is any attempt at new business or new venture creation, such as self-

employment, a new business organisation, or the expansion of an existing business, by an

individual, a team of individuals, or an established business."

The Global Entrepreneurship Monitor "Entrepreneurship is an innovative function. It is a leadership rather than an ownership."

Schumpeter

In all the above definitions entrepreneurship refers to all the activities undertaken by an to bring a business enterprise into existence. It is same as Management

means --

what manager do and Entrepreneurship means - what entrepreneur do.

2.6 CHARACTERISTICS OF ENTREPRENEURSHIP The main characteristics of entrepreneurship are as follows.

1. Economic Activity: Entrepreneurship involves the creation and operation of an Therefore, it is essentially an economic activity. It involves creation of value or wealth. 

2. Creative Activity/Innovation: Entrepreneurship involves innovation or introduction of something new. It is a creative response to the environment. An entrepreneur recognises the need for change and initiates it. He does things in new and better ways. 3. Dynamic Process: Entrepreneurship thrives on the changing environment which brings new opportunities for business. Flexibility is the hallmark of a successful entrepreneur. 4. Purposeful Activity: Entrepreneurship is the purposeful activity of an individual or a group of individuals who seek to earn profits through the production and distribution of economic goods and services.

5. Risk Element: Entrepreneurship make decisions in the face of uncertainty. Therefore,risk is an inherent and inseparable element of entrepreneurship. An enterprise is undertaken for profits but there is every possibility of loss.

6. Organisation Building: An entrepreneur assembles and coordinates other factors of production, i.e., land, labour and capital. Managerial skills and leadership are other very important facets of entrepreneurship.

7. Gap Filling Function: It is the job of an entrepreneur to fill the gaps between needs and goods and services. He has to complete the inputs and provide the knowledge about the production process. Thus, is a multi-dimensional concept. It is both an art as well as a science.

But it is more of an art than a science. There are very few principles or ground rules that apply

to the creation and running of business enterprises. The environment in which entrepreneurs

operate is very heterogeneous and dynamic. Success depends on the ability of the entrepreneur

to visualise the future correctly and to take effective measures to exploit the environmental

changes. circumstances and background of the person, however, influence success

or failure to some extent.

2.7 FACTORS AFFECTING ENTREPRENEURSHIP Entrepreneurship is influenced by various factors. Some of the important factors which affect

the entrepreneurship are:

1. Political: Business has to function within the framework of government policies and laws. Lack of a stable government, political corruption, increasing government intervention in red tape and bureaucracy act as barriers to entrepreneurship. 

2. (legal and taxation): The strength and fairness of the legal system of a nation affect the quality of entrepreneurship to a great extent. This is because entrepreneurs require a wide variety of legal services to function. The government can also influence a high degree of control on the market through provisions of taxation. The Government can also influence a high degree of control on the market through provisions of taxation. An efficient legal and institutional framework with few barriers constraining people to pursue business opportunities can increase the likelihood of starting a business.

3. Capital Availability: Entrepreneurs require capital to start risky ventures and also require

instant capital to scale up the business quickly if the idea is found to be successful.

Availability of capital facilitates the entrepreneur to bring together the land, machine

and raw material to combine them to produce goods. Capital is therefore, regarded as

lubricant to the process of production. 4. Availability of Raw Material: Raw material consisting of natural resources is also an essential product required for any industry. In the absence of raw materials, neither any enterprise can be established nor can an entrepreneur be emerged. Shortage of raw material can adversely affect entrepreneurial environment. Without adequate supply of raw materials no industry can function properly and emergence of entrepreneurship is adversely

5. Labour: Labour is an important factor of production for almost any kind of product or service. Easy availability of right type of workers also effect entrepreneurship. The quality rather than quantity of labour influences the emergence and growth of entrepreneurship.

2.8 TYPES OF ENTREPRENEURSHIP

It is presumed that entrepreneurship has just one meaning. But there are different types of

entrepreneurship as described below:

1. Small Business Entrepreneurship: A small business entrepreneurial venture is a concept of starting a small business to offer a product or service with the intention of

disrupting an industry or maximizing profit. Such businesses are funded via friends or

family or small business loans and lack the scale to attract venture capital. Examples of

small business entrepreneurship include grocery stores, consultants, etc.

2. Scalable Startups: A "scalable startup" takes an innovative idea and searches for a scalable and repeatable business model that will turn it into a high growth, profitable company. Their funding comes from venture capitalists and they hire the best employees. Scalable startups only make up a small proportion of all businesses due to the risk capital and outsize returns. Examples of scalable startup entrepreneurship include Facebook, Instagram, etc.

Large Company Entrepreneurship: Large companies through sustaining innovation, offers new products that are variants around their core products. New products are developed in order to meet with changing customer needs and advanced technology. Companies do this by partnering with or buying innovative companies. Examples of large company entrepreneurship include Google, Samsung, etc.

4. Social Entrepreneurship: Social entrepreneurship is the process of launching and running an enterprise that serves a social cause. A social entrepreneur seeks to transform something that is beneficial to a large segment of society or to society as a whole. He has a social mission in addition to innovation, discipline and determination of a businessman. Usually social entrepreneurs target the disadvantaged, neglected and underserved segments who lack both the money and political clout to transform their lives.

2.9 MEANING AND DEFINITION OF INTRAPRENEURSHIP Gifford Pinchot II wrote his famous book Intrapreneuring in 1985. He used the term

intrapreneur to refer to the person who is a senior manager in a big company but functions like an entrepreneur. He is the head of a semi-autonomous division. He is empowered to discover and execute innovative business ideas within the corporate framework or a Strategic Business Unit (SBU). He takes personal responsibility for pursuing the idea and executing it.. The Company provides him the necessary freedom, funds and other resources to introduce new products, services, processes, etc.

Several senior executives of big companies left their well paid jobs to start their own enterprises because they were not given the authority and resources to pursue their innovative ideas or dreams. They are driven more by the desire for achievement than by monetary gain. The enterprises launched by them in some cases posed a serious threat to the enterprises they left, Several corporations adopted the practice of intrapreneurship to retain these creative top executives. For example, the International Business Machines (IBM) created Independent Business Units (IBUS). Each IBU is promoted and run by an intrapreneur. Jack Welscft, the former chairman of General Electric (GE) USA said that the key to allure intrapreneurs is to give them a sense of ownership and create an environment that encourages risk taking and tolerates failures.

Intrapreneurship is the process of discovering and exploiting business opportunities within an existing company. It involves launching new business ventures within the framework of a present corporation. Intrapreneurship is also known as corporate entrepreneurship or corporate venturing.

2.10 CHARACTERISTICS OF INTRAPRENEURSHIP

The main characteristics of intrapreneurship are as follows.

1. Corporate Framework: Intrapreneurship occurs within the framework of an existing company. The intrapreneur is given the charge of discovering and exploiting business opportunities in an already functioning large and diversified corporation.

2. Semi-Autonomous: Intrapreneurship involves creating and nurturing a semi-autonomous

business unit which may be a subsidiary, a strategic business unit or a division. 3. Lack of Ownership: The intrapreneur is not the owner of the unit he creates

nurtures. In some cases he may be given some stake in the equity of the company.

and

4. Senior Managerial Position: An intrapreneur occupies a senior managerial position in the company. He may be a divisional head or chief executive officer.

5. Limited Risk Taking: An intrapreneur does not bear the full risk of failure. He may lose his job and his image in the industry may suffer but financial loss is not catastrophic 6. Accountable to Owner: An intrapreneur is not his own boss in legal terms. He enjoys freedom and get the required resources and support. But he is accountable to the owner /promoter of the company.

2.11 CLASSIFICATION OF INTRAPRENEURS

Intrapreneurs

Venture

Project

1. Venture Intrapreneurs: Those who are involved in internal corporate venturing are known as Venture Intrapreneurs.

2. Project Intrapreneurs: Those who are involved in intrapreneuring a new project or a

special idea are known as Project Intrapreneurs.

2.12 FACTORS AFFECTING INTRAPRENEURSHIP

Factors affecting intrapreneurship are:

1. Management Support: Management support is very essential for intrapreneurship. Role of a manager in creating and directing entrepreneurial behaviours is quite vital. Managers can provide facilities and mobilise organisational resource to achieve high level of organisational performance.

A good management support also represent acceptance of employee's valuable options, new ideas, people's acknowledgement to do and taking forward the ideas towards completion, or introducing intrapreneurship in different aspects like procedures, and processes in the firms.

2. Organisational Culture: Organisational culture is one of the factors that influence intrapreneurship. It includes a series of well integrated and valuable opinions, beliefs, values and behaviours that have important roles to the success of an organisation.

3. Resource Availability: There are basically two categories of organisational resources: tangible and intangibles. Tangible assets like physical capital and intangible assets like human and social capitals are foundations for all types of activities within Organisations. Human resource plays important role in the creation of intrapreneurial orientation.

4. Rewards and Appreciation : To motivate intrapreneurship in an organisation it is very important to appreciate and give rewards. Companies provide their employees with these rewards in the form of different bonus and rewards such as- cash, profit from shares, insurance, pension etc. to keep them motivated. Organisation must appreciate the work of their employees and give them feedbacks. Intrapreneurs need a lot of inspiration and mental support to come up with new innovative ideas.

5. Risk Taking: Risk-taking can be considered as an important element of intrapreneurship. The risk taking dimension represents the aspect of the strategic position of a company that refers to the firm's willingness and ability to devote increased resources to projects whose outcome is difficult to predict. Organisation must be ready to take risks to support the intrapreneurs.

2.13 DIFFERENCES BETWEEN ENTREPRENEURSHIP AND

INTRAPRENEURSHIP

The functions involved in both entrepreneurship and intrapreneurship are by and large similar. However, there are several differences between the two. 1. Independence: Entrepreneurship is a fully independent enterprise. On the other hand,

intrapreneurship is dependent on the promoters/owners of the corporation. 2. Capital Investment: involves investment of own capital and raising capital from other sources. On the contrary, intrapreneurship does not involve investment of own capital by the intrapraneur. He is also not responsible for raising capital from

others. 3. Risk bearing: Entrepreneurship entails bearing full risk of business failures. But intrapreneurship does not entail risk bearing. The intrapreneur is not responsible for the

risk of the ventures he develops and operates. 4. Framework: An entrepreneur operates from outside whereas an intrapreneur is an organisation man operating from within the organisation.

5. Ownership: An entrepreneur is the owner of his business venture. But an intrapreneur is a paid executive of the company.

6. Reward: Profit is the reward of entrepreneurship. On the other hand, the reward of an intrapreneur is salary and stock options.

2.14 MEANING AND DEFINITION OF ENTERPRISE

Enterprise means an undertaking or adventure that requires some innovation and investment and thus involves risk. Just as family is the basic unit of society, enterprise is the basic un of economy. It obtains factors of production, coordinates them, converts them into something useful and provides it to the society. Enterprise always entails decision making, coordination and risk bearing.

2.15 RELATION OF ENTREPRENEUR, ENTREPRENEURSHIP AND ENTERPRISE

The term entrepreneur, entrepreneurship and enterprise are often used interchangeably, but

conceptually these three terms are different as explained below -

Entrepreneur

Entrepreneurship

Enterprise

Person/Individual

Process

Object/Outcome

Entrepreneur is a person who conceives the idea or discovers an opportunity in the environment, arranges resources to give shape an idea or to an opportunity. Entrepreneurship is the process of changing ideas into commercial opportunities and creating values. Actually the process of creation of venture is called entrepreneurship. Enterprise is created by an entrepreneur. He conceives the idea of setting up a business and performs various activities to give shape to business. In short, entrepreneurship is the process

of creating a business enterprise.

The essential features of an enterprise are as follow.

(i) An enterprise consists of people who work together primarily for the purpose of making and/or selling a product or service. Production for self-consumption and non-business organisations, c.g. trade associations providing economically valuable services are not enterprises inspite of being important activities in an economy. An enterprise, whether public or private, large or small exists in order to produce a product or service that others consume and pay for it.

(ii) An enterprise utilises raw materials, machinery, energy, space and other inputs to produce and/or sell. It has to incur costs on the procurement of these inputs. (iii) Every enterprise makes a comparison between its costs (inputs) and gains (outputs). Therefore, its management must have sufficient autonomy to take appropriate actions

to maintain and improve the success of the enterprise. (iv) An enterprise is a continuing entity. It is not an ad hoc effort to produce a single product rather a recurring effort to produce a stream of products. Some firms may go out of business after a single transaction. But this is due to failure of management or unforeseen conditions and not a planned or desired outcome.

To conclude, is an undertaking involving some economic activity, particularly a new though not necessarily an unknown activity. It may or may not involve an innovation. It always involves risk taking, several factors internal and external to the business world. Some of these factors may be under the control of the entrepreneur. But most of the factors are beyond control In the modern business world environment has become the decisive factor not only for entering into business but also survival and growth of business. Entrepreneurs and managers try to monnor and cope with business environment through techniques like business forecasting, SWOT analysis, contingency planning, etc.

2.16 STEPS IN SETTING UP AN ENTERPRISE

An entrepreneur has to take several decisions in order to establish an enterprise. Such decisions are known as entrepreneurial decisions. Entrepreneurial decisions are required to tackle the problems of launching a new enterprise. A promoter or entrepreneur who wants to establish a new business enterprise has to take the following decisions.

1. Selecting the Line of Business: The first procedural decision involved in setting up a new enterprise is to select the nature and type of business. The entrepreneur has to decide the line of business in terms of industrial, trading or service. Then he has to select the types of goods and services he will produce or distribute. He has to consider several factors, eg., nature and source of raw materials, type of technology to be used, source of supply, distribution policy, etc. After deciding the nature of business activity. the promoter has to analyse and forecast the profitability of the proposed business on the basis of probable operating costs and sales revenues. Operating costs imply cost of procuring different inputs while sales revenue depends upon the size of the market, probable market share of the proposed undertaking, expected growth of total market, sales efforts policies, etc. A market survey may be carried out to estimate these factors. Marketing research may be carried out to ascertain the number, location, needs, etc. of consumers. Then a product analysis is made to determine the design, quality and style of the product to be manufactured. Decisions regarding product design, pricing policy, distribution channel and publicity should be made from the viewpoint of prospective customers.

While selecting the line of business, a number of criteria or factors must be kept in view. First, the expected rate of return must be fair keeping in view the risks involved and the amount of investment required in the enterprise. Secondly, the degree of risk involved should be such that the entrepreneur is willing and able to undertake. Thirdly, the line of business chosen must be technically feasible, i.e. the requirements of finance, technology, skills, labour and materials, should be within the reach of the promoter. The promoter may prepare a comprehensive report containing the conclusions of all his analysis. Such a report is called project report or feasibility report.

2. Deciding Size of the Unit: Determination of the size of the firm or scale of operations is an important decision in the establishment of a new enterprise. An attempt should be made to achieve the size at which the average cost per unit is minimum. In other words, entrepreneur should aim at the optimum size keeping in view the extent of market, technique of production, nature of the product, availability of finance, competence of management, etc. Large scale operations offer several economies of scale but require huge capital investment and expert managerial skills. Where the risks involved are high or a idea is to be tried, it is often preferable to start with a small size and to expand the firm gradually. According to Shubin, "The initial size of the establishment must be based on judicious sales estimates. With accurate sales estimate the firm can avoid investing in an establishment that is too large and expensive to be profitable at the outset but can select a size sufficiently large to take care of the initial sales and their expected increase during the immediately ahead." However, the initial size of the enterprise can be large provided the entrepreneur is able and willing to afford the capital required and the involved. A careful analysis and reconciliation of technical, managerial, financial, market and such other factors should be made to determine the size of the firm.

3. Choosing the Form of Ownership: The choice of the form of ownership determines the division of profits, authority and liability of owner(s), continuity of business transferability of interest, etc. A business enterprise may be organised in three forms namely, sole proprietorship, partnership and joint stock company. The choice of the form of ownership depends on several factors such as the nature and size of the business degree of risk or liability, continuity of business, capital and managerial requirements tax burden, legal formalities, etc. A good form of ownership should be easy to form simple to operate, durable, flexible, free from heavy taxation and legal requirements, et In some cases, the form of ownership may be prescribed by law. For instance, bankin and insurance business can be carried on only in the form of a joint stock company.

4. Locating the Appropriate Site: The location of a business firm is an important decisio as it influences the costs, profitability and growth of the enterprise. Moreover, once th site is selected, it is very difficult to change it. An unfavourable location may restrict th growth of the firm in addition to higher costs. The objective of location decision is to fin out the optimum location so that the per unit costs of production and distribution are th lowest possible. Location is a three-stage process as it involves not only the selection the region, but choice of locality and selection of the site. Region is selected on the bas of access to raw materials and markets, availability of labour, transportation, and bankin facilities. Choice of locality or community is governed by local attitudes, manageri preferences, public facilities, climate, availability of site, financial inducements, et Selection of the site depends on cost of land, soil and surface, development costs, etc.

5. Financing the Proposition: Proper planning and control of finances is essential to success in business. Adequate funds must be provided at the right time for the start and continuity. Financial planning involves advance decisions in the following areas of business finance. (1) Determination of the total amount of capital required for the business, keeping in view the cost of establishing the business (promotional expenses); costs of fixed

assets like land, building, plant, machinery, furniture and fixtures, etc. capital);

cost of current assets like stock of raw materials, cash, debtors inventory, etc.

(working capital) and other operating costs. While estimating capital requirements,

the present as well as future needs for expansion, modernisation, diversification,

etc. should be considered. A proper amount of capitalisation should be fixed.

(ii) Deciding sources of finance: The form and composition of the securities which are to be issued to raise the estimated capital are decided. The sources of finance have to be settled in terms of ownership securities and creditorship securities. This is the problem of deciding an appropriate capital structure. (ii) Deciding the time, price and method of marketing securities.

(iv) Administration of funds. 6. Provision of Physical Facilities: An important decision in launching a new enterprise

is the selection of machines, equipments, plant, buildings, and other physical facilities. The nature and quantum of physical facilities depend upon the size of the firm (large, medium and small), nature of the business (manufacturing, trading or service), process of production (capital-intensive or labour-intensive), the availability of funds, etc. In the selection of a particular machine or equipment the relative cost and productivity, availability of repairs and maintenance services and spare parts, skills of workers, etc. should be made to improve productivity and to reduce costs rather than in the name of modernity alone. The alternative source of supply of physical facilities should be considered.

7. Plant Layout: After selecting the machinery and equipment, it is necessary to arrange them in an efficient manner. Arrangement of physical facilities in the plant is known as plant layout. A good layout is essential for efficient and economical operations. An efficient layout helps to reduce the costs of material handling, inventory, space, etc. The layout should be such that it results in the optimum utilisation of machines, equipment, work force and space. Machinery and equipment should be placed in a proper sequence so as to permit a smooth flow of materials through the necessary operations and in the most direct way possible. The layout should be flexible enough to adapt itself to changing conditions of business. Backhandling of materials and other bottlenecks and delays in production process must be kept to minimum. The type or pattern of plant layout depends upon the nature of production system, space available, volume of output, types of equipment, etc.

8. Internal Organisation: Another important managerial decision in the establishment of a new business enterprise is the creation and development of an internal structure. Work is divided among departments like production, marketing, finance, personnel, etc, and arrangements are made for coordination among these various departments. An efficient network of authority-responsibility relationships needs to be created for successful operations. Internal organisation is a structural framework consisting of authority- responsibility relationships among the members of the enterprise. It defines the official channels of communication and reporting relationships, ie, who is responsible to whom. In a large enterprise, the authority-responsibility relationships are depicted formally on an organisation chart. A sound internal organisation facilitates efficient operations avoids duplication of work, promotes mutual cooperation and coordination, and facilitates expansion and growth of business. It provides the arteries and nerves through which the organisation members communicate with one another. Creation of a sound internal structure involves problems like departmentation, delegation, decentralisation, span of control, etc.

Acquiring the Required Human Resources: The next step is to estimate the needs of people or employees to perform different jobs in the internal organisation structure. The forecasting of the number and type of employees is known as manpower planning or human resource planning. After this, the procurement, development and motivation of the required managers and workers becomes necessary, Persons with required skills, aptitude and experience must be recruited and selected. Once the personnel are employed and placed on jobs, they must be motivated (through proper compensation and non- financial incentives) to make their best possible contribution towards the accomplishment of organisation objectives. Plans are prepared for all these activities at this stage.

10. Compliance with Statutory Requirements: The new venture must comply with all the prescribed statutory conditions such as registration, licensing, listing on one or more recognised stock exchange, constitution of the Board of Directors, filing the prescribed documents, obtaining No Objection Certificate (NOC) from the Pollution Control Board, etc.

11. Launching the Enterprise: The completion of physical, organisational and financial aspects leads ultimately to the actual launching of the enterprise. Acquisition of required materials, machinery, money, workers and managerial ability, start of production and advertising of products, etc. are functions performed at this stage. According to Shubin, "The firm is launched by assembling and organising the physical facilities, developing operation and production processes, advertising its product and initiating a sales promotion campaign, recruiting labour and accumulating inventories."

2.17 PHASES OF A BUSINESS

There are five distinct phases of a business: Expansion, Peak, Recession, Trough and Recovery. 1. Expansion: Businesses in the expansion stage are faced with the need to gain a bigger market share as well as looking for ways to stream in new revenues and profit. This stage calls for a streamlined plan and research before moving into new markets. There is an increase in employment, incomes, production, and sales. In this phase, debtors are generally in good financial condition to repay their debts, therefore, creditors lend money at higher interest rates. This leads to an increase in the flow of money.

2. Peak: The point at which an expansion ends marks the peak. It is the highest point of an expansion, it causes a rise in prices and profits. When a company reaches this point, the idea that was just a thought is now dominating and has stable profits. This stage relies on a financial source to help overcome the challenges and keep the business up on its booming record. Profits touch a new height, attracted by the rising profits, the businessmen industrialists further increase their capital investments. The increase in the prices of input leads to an increase in the prices of final products, while the income of individuals remains constant. Consequently, there is a gradual decrease in the demand of various products due to

increase in the prices of input.

3. Recession: The recession is the stage that follows the peak phase. The demand for goods and services starts declining rapidly and steadily in this phase. Producers do not notice the decrease in demand instantly and go on producing, which creates a situation of excess supply in the market. Prices tend to fall. Consequently, producers avoid any type of further investment in factor of production, such as labor, machinery, and furniture. This leads to the reduction in the prices of factor, which results in the decline of demand of inputs as well as output. This is the period when the feeling of over optimism of the carlier period is replaced now by pessimism on the part of the businessmen. The failure of some businesses creates panic among businessmen. The banks also begin to withdraw loans from business enterprises. More business enterprises fail. Prices collapse

and confidence is rudely shaken.

4. Trough: During this phase, there is further decline until the prices of factors, as well as the demand and supply of goods and services, reach their lowest point. The economy eventually reaches the trough. In this phase, the growth rate of an business becomes negative. Adding up to this, there is a rapid decline in national income and expenditure. It becomes difficult for debtors to pay off their debts. Resulting in, decrease in the rate of interest; therefore, banks do not prefer to lend money. In this phase, many weak organisations leave industries or rather dissolve. At this point, an economy reaches to the lowest level of shrinking.

5. Recovery: In trough phase, business reaches to the lowest level of shrinking. Recovery implies increase in business activity after the lowest point has been reached. During this phase, there is a little improvement in economic activity to start with. Demand starts to pick up due to the lowest prices and, consequently, supply also starts reacting. The entrepreneurs begin to feel that the economic situation was not so bad as it was in the earlier stage. This leads to further improvement in business activity. The business also start rising slowly. The recovery continues until business activity reaches about the same level that it had achieved before the decline set in. The recovery could be initiated by new innovations, changes in production techniques, investment in new regions, etc.

2.18 START UP BUSINESS

A new venture goes through three specific phases-pre-start up, start up and post start up. The pre-start up phase begins with a business idea and ends when the doors are opened for busines The start up phase starts when sales activity is initiated and ends when the business is finally established and is beyond short run threats to survival. The post start up phase lasts until the venture is terminated or sold away.

The main focus during the pre-start up and start up phases are on:

(i) the relative uniqueness of the new

(ii) the investment size at start up:

venture:

(i) the expected growth of sales and profits as the venture moves through its start up phase,

(iv) the availability of products/services during the start up phase; and

(v) the availability of customers. Start up business means an enterprise which has a formal business plan, searches for capital, develops a managerial team and begins selling its initial product or service. In a start up business the founder(s) is normally involved in every aspect of the day-to-day life of the business. There are no or very few written rules or procedures. The main goal is to get off to a good start and to gain momentum in the market place. The main challenge before a start up is to ensure the initial product/service is right and to lay the groundwork for growth. It is important not to rush

things or become impatient. Figure 2.5 describes the stages common to the life cycles of entrepreneurial companies. It shows

the relatively predictable progression of the small business. The firm begins with the birth stage where the entrepreneur struggles to get the new venture established and survive long enough to test the viability of the underlying business model in the marketplace. The firm then passes into the breakthrough stage where the business model begins to work well, growth is experienced, and the complexity of managing the business operation expands significantly. Next comes the maturity stage-where the entrepreneur experiences the advantages of market success and financial stability, while also facing continuing management challenges of remaining competitive in a changing environment. Entrepreneurs often face control and management dilemmas when their firms experience growth,

including possible diversification or global

Birth Stage

Establishing the firm Getting customers

⚫ Finding the money

Working on finances

Becoming profitable

Growing

Maturity Stage

Refining the strategy

• Continuing growth

Managing for success

Fighting for existence

Coping with growth and takeoff

Investing wisely and staying flexible

and survival

Breakthrough Stage

Fig. 2.5: Stages in the life cycle of an entrepreneurial firm

SUMMARY

Entrepreneur : A person or group of persons who undertakes an enterprise. Types of Entrepreneurs: Innovative, Imitative, Fabian and Drone.

Entrepreneurship: The process of launching an enterprise.

Characteristics of Entrepreneurship: Economic activity, creative, purposeful, organisation building and gap filling function.

Intrapreneurship: Entrepreneurial activity within an existing company.

Characteristics of intrapreneurship: Coorporate framework, semi-autonomous, lack position, low risk taking, not own boss.

of ownership, senior

Entrepreneurship vs. Intrapreneurship: Independence, capital investment, risk bearing, framework, ownership, and reward.

Enterprise: An undertaking that carries on some economic activity, requires investment and involves risk. May or may not be a legal entity or incorporated/registered.

Relation of Entrepreneur, Entrepreneurship and Enterprise: These three terms are often used interchangeably

but conceptually these are different terms.

Steps in Setting up An Enterprise: Selecting the line of business, choosing the form of ownership, locating the unit, financing the venture, physical facilities and layout, acquiring human resources, complying with the statutory requirements, launching the enterprise.

Phases of Business: Expansion, Peak, Recession, Trough and Recovery.

Start-up Business: A new enterprise which has just started its business operations

EXERCISES

1. Multiple Choice Questions (Select the best alternative)

1. Entrepreneurship fails to lead:

(a) Partnership Firm

(b) New Corporate Division (c) New subsidiary venture (d) None of these

2. An entrepreneur is: (a) Born

(b) Made

(c) Born and Made both

(d) All of these

3. The future of entrepreneurship in India is:

(a) In dark

(b) Bright

(c) In difficulty

(d) None of these

(d) Moderate and Calculated Risks

4. Entrepreneurs undertake : (a) Calculated Risks

(c) Low Risk

(b) High Risks

5. Entrepreneurship is ensured by :

(a) Subsidiaries

(b) Larger Firm

(c) Medium Firm

(d) Small Firm

6. Entrepreneurial traits deal with:

(b) Profit seeking behaviour

(d) None of these

(a) Job-providing behaviour (c) Risk-taking behaviour

7. According to sociological approach, entrepreneurship is:

(a) A process of sensitivity (c) A process of economic change

(b) Process of role performance (d) All of these

8. In economics, which of the following is not a function of the entrepreneur?

(a) Risk-taking

(c) Innovation

(b) Provision of capital and organisation of pro (d) Day-to-day conduct of business

9. Which of the following statements does not clearly distinguish between entrepreneurship and manage (a) Entrepreneurs find the business, managers operate it

(b) Entrepreneurs are the owners of their business, managers are employees

(c) Entrepreneurs earn profits, managers earn salaries (d) Entrepreneurship is once for all activity, management is a continuous activity

10. In which of the following stage, many weak organisations leave industries or rather dissolve? (d) Recovery

(a) Expansion

(b) Recession

(c) Trough associated

11. Which of the following attitudes is not generally

with successful entrepreneurship? (b) Live your business day by day

(a) Investing in R and D

(c) Innovate and improvise continually (d) Produce as per customers' requirements

12. Generally, entrepreneurs fall under

(b) Second category: those who watch things happe

(a) First category: those who make things happen

(e) Third category: those who are left to ask what did happen

(d) All of above categories

13. Innovation involves

(a) Application of new method of production

(b) Using new sources of raw materials

(c) Exploiting new market

(d) All of these

14. Which of following is a function of the Entrepreneur?

(a) Innovation

(b) Risk bearing (d) All of these

(c) Organising and managing functions

15. Ajit Narayan, an IIT Chennai Alumnus created a communication device. This is an example of (a) Immitative employee (b) Fablan employee (c) Drone employee (d) Innovative employe

16. "They are highly ambitious and normally not satisfied by slow progress in their jobs". This applies for which

entrepreneurs?

(a) Fabian entrepreneurs (b) Imitative entrepreneurs (c) Innovative entrepreneurs (d) Drone

entreprene

17. Entrepreneurship is a creative response to?

(a) Environment

(b) Business

(c) Products

(d) Opportunities

18. Risk is an inherent and inseparable element of?

(a) Entrepreneurship (b) Innovation

(c) Creativity

(d) Profession

19. In the absence of what,

neither any enterprise can be established nor can an entrepreneur be emerged?

(a) Labour

(b) Raw material

(c) Technology 20. Those who are involved in internal corporate venturing are known as

(d) Capital

(a) Venture Intrapreneurs (b) Project Intrapreneurs

(c) Both a & b

(d) None of these

Ans.

1. (a)

2. (c) 12. (a)

3.

(b)

4. (d) 5. (b)

6. (c)

7. (b)

8. (d)

9. (d)

10. (c)

11. (b)

13. (d)

14. (d)

15. (d)

16, (c)

17. (c)

18. (a)

19. (b)

20. (a)

IL. Fill in the blanks,

1. A person who is a senior manager in a big company but functions like an entrepreneur is known as

2. is the forecasting of the number and types of employees required. 3. The process of changing ideas into commercial opportunities and creative values is known as,

4. Project intrapreneurs are involved in intrapreneuring a 5. is the highest point of an expansion, it causes a rise in prices and profits.

6. Entrepreneur is his own boss whereas a manager works is a/an

7.entrepreneurs are stubborn in nature because of which they suffer huge losses. start-up takes an innovative idea and searches for a repeatable business model that will turn into a high growth, profitable company.

Ans. 1. intrapreneur 

5. Peak

2.Manpower planning

3. entrepreneurship

4. new project/special idea

6. employee

7. Drone

8. Scalable

Short Answer Type Questions

1. Define the term Entrepreneur.

2. Define Entrepreneurship.

3. Define Intrapreneurship.

4. Define the term "Enterprise". 5. What is a Start up Business?

6. What is meant by Fabian Entrepreneur? 7. Name the four types of entrepreneurs given by Danhof.

5. Give two differences between an entrepreneur and manager. 9. Give two differences between entrepreneurship and Intrapreneurship.

10. State any two characteristics of Entrepreneurship. 11. Describe the following in brief:

(a) Drone Entrepreneurs

(b) Adoptive Entrepreneurs

12. Who are independent entrepreneurs? 13. Who are venture intrapreneurs?

IV. Long Answer Type Questions

1. Explain the types of entrepreneurs as suggested by Clarence Danhof.

2. Discuss the characteristics of entrepreneurship. 3. Explain the characteristics of intrapreneurship.

4. Differentiate between Entrepreneurship and Intrapreneurship.

5. Explain the steps involved in setting up an enterprise. 6. Distinguish between:

(a) Entrepreneur and Manager (b) Entrepreneurship and Management (c) Entrepreneur and Intrapreneur

7. "The up a new business enterprise is in many ways, like the birth of a child." Explain in this context the steps involved in starting a new business enterprise. 8. Starting a venture is not an easy task. A series of activities needs to be planned and undertaken to create an

enterprise. Discuss the stages of Start up business briefly. 9. How does entrepreneur from entrepreneurship?

10. Discuss the factors affecting entrepreneurship.

in brief the factors effecting intrapreneurship?

12. Discuss the five phases of a business.

QUESTION BANK

1. Very Short Answer Questions

1. State one crucial feature of Fabian entrepreneurs.

Fabian entrepreneurs are very cautious and do not like to take risk.

2. "They are highly ambitious and normally not satisfied by slow progress in their jobs." This applies for which

entrepreneurs? Ans. Innovative entrepreneurs.

3. What are business ethics and values? Do they provide guidance to employees in their working? Ans. Business ethics and values are the values which help in building a business setup based upon sound business principles which helps in unification of management and workers with determination to successfully achieve the objective of business.

4. How is an entrepreneur different from others?

Ans. The entrepreneur perceive opportunities, synthesize the available information and analyse emerging patterns that escape the attention of other people. They are the people with vision and capable of persuading others.

5. Why creativity is important to entrepreneurs? Ans. Creativity is important to entrepreneurs because it is the first stage in the process of innovation, providing the

stimulus for opportunity discovery and new venture creation.

entrepreneurship theoretically arouse some doubts." Who said this?

6. "The meaning of Ans. Sir William Bomal.

7. State one point of difference between entrepreneurship and managers.

Ans. Entrepreneurs are the risk takers while managers are known as employees. 8. Entrepreneurs are born and not made. Is it true?

Ans. No, it is not true. 9

Is entrepreneurship a development and creative process? Ans. Yes, In this regard Schumpeter has righly said, "Entrepreneurship in reality is a creative process."

10. Is entrepreneurship a science? If not, then what is it?

Ans. No, in the words of Peter F. Drucker, "Entrepreneurship is neither a science nor an art, this is a dealing having knowledge as its base."

11. What is the role of an entrepreneur in the mobilisation of resources?

Ans. The success of an entrepreneur depends on the facts how efficiently one can make proper use of required resources. The entrepreneur also has to see that the mobilisation of resources is in favourable direction.

12. State at least one point of difference between Entrepreneur and Intrapreneur.

Ans. Entrepreneur is the owner of the enterprise while Intrapreneur is dependent on entrepreneur who performs

the task of innovation.

13. State two characteristics of entrepreneurship.

Ans. () Entrepreneurship is a group behaviour,

(H) Entrepreneurship is a knowledge based activity. 14. What is the need for entrepreneurship?

Ans. Entrepreneurship contributes significantly towards the economic growth of a country.

15. "Entrepreneurship and economic growth are interrelated to each other." Do you agree?

Ans. Yes, the entrepreneurship and economic growth interrelated as entrepreneurship leads to economic

development of the country.

16. Why every country needs entrepreneurship?

Ans. Every country needs entrepreneurship as it brings increases in GDP and boosts up the process of

development.

17. Write a brief note on relationship between entrepreneurship and management.

economic

Ans. Entrepreneurs are the owners of business unit who take strategic decisions while management helps in carrying on day-to-day activity and implementation of plans framed by entrepreneurs.

18. Do you agree that environment conditions have great influence over entrepreneurship development? Ans. Yes, agree that environment conditions have great influence over entrepreneurship development. Lower rate of interest, inflation, good infrastructure have good impact on entrepreneurship development.

11. Short Answer Questions

1. "Entrepreneurs venture to take risks but some entrepreneurs are very shy and lazy by nature". Mention the

name of such entrepreneurs and explain.

Ans. Fabian Entrepreneurs. Fabian entrepreneurs are characterized by very great caution and skepticism in experimenting any change in their enterprise. They imitate only when it becomes perfectly clear that failure to

do so would result in a loss of the relative position in the enterprise. They are lazy and shy and lack the will to adopt new methods of production. 2. "Intrapreneurs perform the functions of entrepreneurs within the corporate framework without taking risks."

Comment.

Ans. Intrapreneurship is the process of discovering and exploiting business opportunities within an existing company. It involves launching new business ventures within the framework of a present corporation. Intrapreneurship is also known as corporate entrepreneurship or corporate venturing Venturing is a high risk activity and the executives who pioneer new corporate ventures learn about starting new ventures. Some companies develop hobby size business activities to provide this learning by doing.

3. Who is an Intrapreneur?

Ans. An Intrapreneur is an entrepreneur within a large firm. He uses his entrepreneurial skills to service or process without making his investment and without taking risk.

launch a new product.

4. "An entrepreneur is an independent owner whereas an intrapreneur is dependent on the owner." Explain. Ans. An entrepreneur either starts a new enterprise or inherits/buys an existing enterprise. Therefore, he is the owner and independent to carry on business. On the other hand, an intrapreneur is a senior manager in an

existing company. He is given the authority and resources to spot and exploit new business opportunities. Fes

dependent on the founder/owner of the company.

5. "Entrepreneurship and intrapreneurship are not mutually exclusive but dependent on each other for the economic development of a country." Explain. Ans. Entrepreneurship is essential for intrapreneurship to thrive. Only a well-established and large company can provide the environment required for the emergence of intrapreneurs. Similarly, intrapreneurship makes entrepreneurship

more successful. Several businesses created by intrapreneurs have contributed significantly to the success and

growth of the parent business.

6. "A series of activities are required to launch an enterprise". Discuss them in brief Ans. The completion of physical, organisational and financial aspects leads ultimately to the actual launching of the enterprise. Acquisition of required materials, machinery, money, workers and managerial ability, start of production and advertising of products, etc. are functions performed at this stage. According to Shubin, "The firm is launched by assembling and organising the physical facilities, developing operation and production processes, advertising its product and initiating a sales promotion campaign, recruiting labour and accumulating inventories."

7. Differentiate between entrepreneur and entrepreneurship. Ans. (1) An entrepreneur is the individual who launches an enterprise. On the other hand, entrepreneurship is the

process of launching an enterprise.

(ii) An entrepreneur is a tangible person whereas entrepreneurship is not tangible.

III. Long Answer Questions 1. "Developing countries need initiative rather than innovative entrepreneurs." Do you agree? Give reasons in

support of your answer.

Ans. Developing countries are usually short of advanced technology, capital resources and sound industrial infrastructure. Moreover, most of the people have low risk bearing capacity. Failures are often not tolerated and a stigma is attached to those who fail in their ventures. Therefore, most of the entrepreneurs imitate the business ideas of developed countries. Such initiative entrepreneurs make minor modifications in existing products, processes, etc. to suit local demand.

This does not mean developing countries do not need innovative entrepreneurs. Innovations lead to breakthroughs and speed up economic progress. Developing countries require fast progress and can gain a lot through innovative entrepreneurs. Such entrepreneurs build business empires, wealth and acquire international reputation. New age entrepreneurs such as Sunil Mittal (Airtel), Gautam Adani (Adani Ports), Rana Kapoor (Yes Bank), Vijay Sekhar Sharma (Paytm), Sachin Bansal (Flipkart), Kunal Bahl (Snapdeal), Deep Kalra (Makemytrip com) and several others have been pioneers. They have created immense wealth for themselves as well as for their country.

Thus, developing countries need both imitative and innovative entrepreneurs.

 2. "Innovation is the hallmark of entrepreneurship". Why is "Innovation" referred to as the basic function of an Entrepreneur?

Ans. It is true that "innovation is the hallmark of entrepreneurship". Innovation means introduction of something

new. It may occur in the following forms: (i) Introduction of a totally new product or service e.g. mobile phone.

() Improvement of an existing product or service eg smartphone.

(i) Finding new use of a product or service e.g. use of nylon in tyres. (iv) Discovery of a new market for a product or service eg. export.

(v) Use of new method of production eg use of whey in power plant.

(vi) A new form of organization eg. Limited Liability Partnership and one person company.

Innovation is referred to as the basic function of an entrepreneur due to the following reasons: Innovation enables an entrepreneur to solve the society's problems.

Innovation helps in better use of natural, physical and other resources. Innovation enables an entrepreneur to gain a competitive advantage in the market,

Nobody can be a successful entrepreneur without innovation.

3. "Entrepreneur is the person, entrepreneurship is the process and enterprise is the outcome of this process"

Explain.

Ans.

Entrepreneurship is different from entrepreneur and enterprise. An entrepreneur is the person who starts an enterprise. The process of creating an enterprise is called entrepreneurship. The outcome of this process is an enterprise. An enterprise means the business organization formed to provide goods/services to consumers, jobs employees and to add to the country's national income. Thus, entrepreneur precedes entrepreneurship.

The interrelationship between entrepreneur, entrepreneurship and enterprise is given in the following figure

Entrepreneur

Entrepreneurship

Enterprise

The Person

The Process

The Outcome

Inter-relationship between Entrepreneur, Entrepreneurship and Enterprise

4. "We can appoint an employee but not an entrepreneur". Describe difference between an employee and an entrepreneur in the light of this statement.

Ans. An entrepreneur is different from an employee in the following ways:

(1) Status: An entrepreneur is self employed. He is his own boss. On the other hand, an employee someone else (employer).

works for

(i) Reward: Profit is the reward of an entrepreneur. But profit is uncertain and irregular. On the contrary,

salary which is fixed and regular is the reward of an employee.

(iii) Investment: An entrepreneur has to make capital investment his own wealth and by borrowing from others. An employee is not required to make such investment. (iv) Risk: An entrepreneur takes risk. Instead of profits he may suffer losses. In case the venture fails his entire investment may be lost. An employee does not face such risk. 

(v) Innovation: An entrepreneur often launches an enterprise with an innovative product/service. employee usually does not carry out innovations and manages day-to-day operations of the enterprise.

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