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ENTREPRENEURSHIPDEVELOPMENT
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ENTREPRENEUR- Chapter Scheme
Introduction
Concept
Definition
Nature/Characteristics Types of risk an entrepreneur may face
Functions
Role
Types & Classification Women Entrepreneurs
Entrepreneurs Vs Managers
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INTRODUCTION
Since an Individual has 3 career options-
to work for someone else
To be self employed
To be an entrepreneur
Important factor in economic development
First & foremost catalyst for change As a tool for income generation &
employment
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REASONS OF POPULARITY
Provides numerous opportunities for self-
expression & self realisation for doing
something new
Offers growth & self development
More monetary rewards
Decision making power Satisfactory rewards
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CONCEPT
The words derivation is from French word
entreprendre which means to undertake.
Previously applied to military expeditions(early 16th century), then in context to
architects,contractors etc (18th century), then
as an intermediate between capital & labour
(19th-20th century), & at last as emerging class
called entrepreneur class (in 21st century).
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Entrepreneurs...
14th century...Tax contractors...bore the risks
of collecting taxes. If they collected more than
the fee...they kept the rest as profit.
Called the change agents of progressive
economies
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Entrepreneurship
Entreprendre...17th century French...the
individual who undertook the risk of a new
enterprise... undertakers.
They were contractors who bore the risks of
profit or loss
Examples: soldiers of fortune, adventurers,
builders, merchants and funeral directors
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Entrepreneurs...
Adam Smith...The Wealth of Nations: spoke of
the enterpriser as an individual who
undertook the formation of an organization
for commercial purposes
A. Smith...mentioned role of
industrialist...,person with unusual foresight
who could recognize potential demand for
goods and services
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Entrepreneurs...
John Stuart Mill...describes an entrepreneur as a
business founder
Recognized entrepreneurship as central to economic
theory
Carl Menger...Principles of Economics: Economic
change does not arise from circumstances but from
an individuals awareness and understanding of
those circumstances
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Entrepreneurs...
In 19th century entrepreneurs were:
risk takers
decision makers aspired to wealth
endured commensurate losses
gathered and managed resources to create new
enterprises
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Entrepreneurship
Joseph Schumpeter...20th century talks about
creative destruction whereby established
ways of doing things are destroyed by the
creation of new and better ways of getting
things done
Described it as a process and entrepreneurs as
innovators who use process to shatter thestatus quo through new methods...
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Entrepreneurs...
Are not equal to inventors...inventor might
only create anew product, whereas an
entrepreneur will gather resources, organize
talent, and provide leadership to make it a
commercial success
Peter Drucker...Resources, to produce results,
must be allocated to opportunities rather thanto problems...
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DEFINITIONS
The entrepreneur can be defined asone who recognizes & manages onlyenterprise especially involving highrisk.
An entrepreneur is one who creates anew business in the face of risk &
uncertainty for the purpose ofachieving profit & growth byidentifying significant opportunities &assembling the necessary resourcesto capitalize on them.
As per different social scientist- likeeconomist, psychologist, sociologists,
management experts As per different authors- like
R.CANTILLON, J.B.SAY,J.A.SCHUMPETER, P.F.DRUCKER..
17551755 CantilllonCantilllon A person bearingA person bearingriskrisk
18161816 SaySay Agent combinigAgent combinigall fopsall fops
19211921 KnightKnight Recipient of pureRecipient of pureprofitsprofits
19341934 SchumpterSchumpter Ability to identifyAbility to identifynew opportunitynew opportunity
19851985 StevensonStevenson Relentless pursuitRelentless pursuitof opportunityof opportunity
19881988 GartnerGartner Actions taken toActions taken tocreate org.create org.
19911991 Bygrave &Bygrave &HoferHofer
Characteristic ofCharacteristic of
entrepreneurentrepreneurprocessprocess
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ENTREPRENEURIAL
NATURE/CHARACTERISTICS/DIMENSIONS
An entrepreneur should be one who bears, innovates orimitates & organizes the business
Desire for responsibility
Preference for moderate risk
Confidence to succeed
Immediate desire for feedback
High level of energy & commitment
Future orientation
Skill at organizing
Value of achievement over money
Tolerance for ambiguity & flexibilty
Locus of control
Other important traits
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TYPES OF RISK
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Family &Family &
Social RiskSocial Risk
PsychologicalPsychological
RiskRisk
Career RiskCareer Risk
FinancialFinancialRiskRisk
RISKS
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FUNCTIONS OF AN ENTREPRENEUR
A successful entrepreneur recognizes the commercialpotential of a product, designs operating policies inmarketing, production, product development & theorganization structure.
Function of Innovation
Assumption of Risk
Managerial Function of Organization & Managemant
Business Decisions
Thus,the entrepreneur is an institution himself & he perfomes Variousfunctions related with organization development& management control.
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ENTREPRENEUR Vs MANAGER
Very often Entrepreneur & manager are used interchangeableterms, but strictly speaking these terms are different.
Entrepreneurial role is Played by Chief Executive teams & Toplevel executive team Whereas Managerial Role by Middle &
joint Level executives.
Management involves combining or coordinating resources toproduce whereas entrepreneurship involves combining toinitiate changes in production.
As per Joseph Schumpter, manager is one who deals with dayto day affairs of a going concern. But an entrepreneurattempts to change the factor combinations & thus increasesproductivity & profits.
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Difference
ParameterParameter EntrepreneurEntrepreneur ManagerManager
Goal ManagementGoal Management Starts a new venture for personal useStarts a new venture for personal use Renders service in an alreadyRenders service in an alreadyexisting set upexisting set up
StatusStatus OwnerOwner Employee/servantEmployee/servant
RiskRisk Bears all risk and responsibilitiesBears all risk and responsibilities Bears no risk or responsibilityBears no risk or responsibility
RewardsRewards Gets uncertain & irregular profit & mayGets uncertain & irregular profit & mayeven be negativeeven be negative
Receives fixed & regular salary forReceives fixed & regular salary forservice rendered & never negativeservice rendered & never negative
InnovationInnovation Innovator, change agent & meetsInnovator, change agent & meetschanging customer needschanging customer needs
Executes & translates existing plansExecutes & translates existing plans
of othersof others
QualificationQualification To possess high qualities & qualificationsTo possess high qualities & qualifications
(high achievement motive etc)(high achievement motive etc)
To possess distinct qualificationsTo possess distinct qualifications
(knowledge in management theory)(knowledge in management theory)
ContinuityContinuity DiscontinuousDiscontinuous
To Produce ResultTo Produce Result
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TYPES
As per Clarence Danhof(on the basis of economic development)
Innovative/aggressive entrepreneur
Imitative/Adoptive entrepreneur
Fabian entrepreneur
Drone entrepreneur
As per Arthur H. Cole(on the basis of function & characteristics)
Empirical
Rational
Cognitive
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CLASSIFICATION
TYPES OF
BUSINESS
BusinessEntrepreneur
Service RetailIndustrialCorporateTradingAgricultural
Horti
CultureDairy Forestry
Tiny Small Medium Large
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USE OF TECHNOLOGY
Technical High Technology Low Technology ProfessionalNon Technical
MOTIVATION
Pure Motivated SpontaneousInduced
DEVELOPMENT
First Generation Modern Classical
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GROWTH
Growth Super Growth
AREA
Urban Rural
GENDERM/F
Young Old Middle
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WOMEN ENTREPRENEUR
In 1988, for the first time the definition of
Women entrepreneurs enterprise was
evolved.
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ENTREPRENEUR LEADERS
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The Builder of Indian Industry
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Dhirubhai Ambani alias Dhirajlal
Hirachand Ambani was born on
December 28, 1932, at Chorwad,
Gujarat, into a Modh family. His
father was a school teacher.
Dhirubhai Ambani started his
entrepreneurial career by selling
"bhajias" to pilgrims in Mount
Girnar over the weekends.
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After doing his matriculation at the age of 16, Dhirubhai
moved to Aden, Yemen. He worked there as a gas-station
attendant, and as a clerk in an oil company. He returned
to India in 1958 with Rs 50,000 and set up a textile
tradingcompany.
Assisted by his two sons, Mukesh and Anil, Dhiru Bhai
Ambani built India's largest private sector company,
Reliance India Limited, from a scratch. Over time his
business has diversified into a core specialisation in
petrochemicals with additional interests intelecommunications, information technology, energy,
power, retail, textiles, infrastructure services, capital
markets, and logistics.
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N.R.Narayana Murthy
An Indian IT chief who's really made itbig without dropping his ethical preceptsby the wayside is Nagawara RamaraoNarayana Murthy, Chairman of Infosys.
Born in 1946, Murthy's father was aschoolteacher in Kolar district, Karnataka,
India. A bright student, Murthy went on toacquire a degree in Electrical Engineeringfrom Mysore University and later studiedComputer Science at the IIT, Kanpur,India.
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The Infosys legend began in1981 when Narayana
Murthy dreamt of forminghis own company, alongwith six friends. There wasa minor hitch, though-hedidn't have any seed money.
Luckly, like many Indianwomen who save secretlywithout their husband'sknowledge, his wife Sudha-then an engineer with Tatas-
had saved Rs 10,000. Thiswas Murthy's first big break.
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Infosys.a
The decade until 1991 was a tough periodwhen the couple lived in a one-room house.The second break came in 1991 when Indian
doors to liberalization were flung openMurthy grabbed the opportunity with bothhands and has never looked back ever since.Today, Infosys is the first Indian company to
be listed on the US NASDAQ.It provides employment to 85,000 people.
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Food king
When 27-year old Sarathbabu
graduated from the Indian
Institute of Management,
Ahmedabad, he created quite astir by refusing a job that
offered him a huge salary. He
preferred to start his own
enterprise -- Foodking CateringService -- in Ahmedabad.
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The Motivating Force ofFood King
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Requirements to be an entrepreneur
Innovation,
Creativity
Risk Taking
Organization
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Creative as a prerequisite to
innovation
Creativity - is the ability to bring
something new into existence
Innovation - is the process of doingnew thing.
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The Creative Process
Idea Germination
Preparation
Incubation Illumination
Verification
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The difference between invention and
innovation is:
Invention - is the creation of new products,
processes, and technologies not previously
known to exist.
Innovation - is the transformation of creative
ideas into useful applications by combining
resources in new or unusual ways to provide
value to society for or improved products,technology, or services.
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Elements in the Innovation Process
Analitical Planning
Organizing Resources
Implementation
Commercial Application
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ENTREPRENEURSHIP
It is an important factor of industrial development of a country.
This concept is a complex phenomenon, broadly it relates tothe entrepreneur, his vision & its implementation.
Therefore, it refers to a process of action an entrepreneur
undertakes to establish his/her enterprise.
BUT,,, the degree & quality of entrepreneurship differ fromentrepreneur to entrepreneur.
Is a dynamic process of creating incremental wealth. This
wealth is created by individuals who assume the major risks interms of equity, time and career commitment of providingvalue for some product or service
The entrepreneur must somehow infuse value to the productor service...
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CONCEPT/APPROACHES
THEORIES
Entrepreneurship is an evolved thing. With the advancement ofscience and technology it has undergone metamorphosischange and emerged as a critical input for socio-economicdevelopment. Various writers have developed various
theories on entrepreneurship and popularized the conceptamong the common people. The theories propounded bythem can be categorized as under-
Sociological theories
Economic theories
Cultural theories
Psychological theories
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Explanation Sociological Theory: It is a process of role performance. Entrepreneurs are
expected to be governed by the wishes of the society, customs, ethics etc.
CONTRIBUTORS- Thomas Chocharan, Peter Marris etc
EconomicsTheory: Process of initiating a new venture, organizing theresources it requires & assuming the risk it entails. Entrepreneurship andeconomic development are interdependent. Economic development takesplace when a country' real rational income increases overall period of timewherein the role of entrepreneurs is an integral part.
CONTRIBUTORS-Adam Smith (1776),JB Say(1803), J.S.Schumpter(1934), P.F.DruckerAccording to Schumpeter an entrepreneur is one who perceives the opportunities to
innovate, i.e. to carry out new combinations or entreprise. In his views, theconcept of new combination leading ti innovation covers the following 5 cases-
1- The introduction of new goods, that is the one with which consumers are notyet familiar, of a new quality.
2- The introduction of new method of production
3- The opening of new market4- the conquest of new source of supply of raw material
5-The carrying out of new organization
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THEORIES conttdd
Cultural Theory: Advocates of cultural theories point out thatentrepreneurship is the product of culture. Entrepreneurial
talents come from cultural values and cultural systemembedded into the cultural environment.
Hoselitz explains that the supply of entrepreneurship is governed by cultural factors,and culturally minority groups are the spark-plugs of entrepreneurial andeconomic development. in many countries, entrepreneurs have emerged from a
particular socio-economic class. He emphasized the role of culturally marginallygroups like Jews and the Greeks in medieval Europe, the Chinese in south Africaand Indian in east Africa in promoting economic development.
Psychological Theory: It center's around the psychologicalcharacteristic so the individual in a society. Psychological
characteristics affect the supply of entrepreneurs in thesociety.Mc Clelland states that it is the need for achievement which drives people
towards entrepreneurial activities. Individuals with High achievementmotive tend to take interest in situations of High risk.
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DEFINITION Higgin B: It is meant for the function of seeking investment & production
opportunity, organizing an enterprise to undertake a new production
process, raising capital, hiring labour, arranging the supply of RM, findingsite, introducing a new technique & commodities, discovering newsources of RM & selecting top managers of day to day operations ofenterprise.
J.A.Schumpter: It is essentially doing things that are not generally done in
the ordinary course of business routine.
P.F.Drucker: It occurs when resources are redirected to progressiveopportunities not used to ensure administrative efficiency.
A.H.Cole; It is the purposeful activity of an individual or group ofassociated individuals undertaken to initiate maintain profit byproduction or distribution of economic G/S.
Thus, It is the propensity of mind to take calculated risk with confidenceto achieve a predetermined business or industrial objective.
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CHARACTERISTICS OF ENTREPRENEURSHIP
Innovation A function of high achievement
Organization building function
A function of group level pattern
A function of managerial skills & leadership A function of status withdrawal
Gap filling function
A function of religious belief
Dynamic process
Decision making, skillful management, acceptingchallenges
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DIMENSIONS
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EnvironmentNew venture
creation
Individual
Characteristics
Constraints
Organization
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BENEFITS Opportunity to create your own destiny
Opportunity to make a difference Opportunity to reach full potential
Opportunity to reap impressive profits
Opportunity to contribute to society & be recognizedfor the efforts
Opportunity to make avocations their vocation
Opportunity for Economic & social benefits
-creating innovation, fuelling economic growth,identifying ownership opportunities ,enhancingwelfare amenities
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BARRIERS
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ENVIRONMENTAL SOCIETALPERSONALFINANCIAL
BARRIERS
CAUSES DRAWBACKS
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ENTREPRENEURSHIP STIMNULANTS
Entrepreneurial education
Entrepreneurs are heroes
Demographic & economic factors
Technological advancements
Increased focus on capital formation
Supportive government programmes
E-commerce & WWW.
International opportunities
Availability of required training & input
Business & research
To make an environment for innovation
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CULTURAL DIVERSITY
Young entrepreneurs
Women entrepreneurs
Minority entrepreneurs
Part-time entrepreneurs Home-based entrepreneurs
Family business
Copreneurs
Corporate castoffs
Corporate dropouts
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HOW TO AVOID PITFALLS
Know your business in depth
Develop a solid business plan
Manage financial resources Understand financial statements
Learn to manage people effectively
To keep in tune with yourself
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CONCEPTUAL MODEL
As per Kao, a conceptual model of entrepreneurship can be a
relativity among various factors. It was generated due to the
limitations of some of the definitions.
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ENTREPRENEUR-
-SHIP
THEPERSON
THE
ORGANIZATION
THE
ENVIRONMENT
THE TASK
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ANALYTICAL FRAMEWORK
THE PERSON: personality, skill, experience, motives,
psychological preferences
THE TASK: perceiving opportunity, marshalling
resources, providing leadership THE ENVIRONMENT: availability of resources,
infrastructure, competitive pressures, social values,
rules, state of technology
THE ORGANIZATION: structure, rules, policies,
culture, HR system, communication system
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ENTREPRENEURIAL DECISION
This decision occurs despite recession, inflation, highinterest rates, lack of infrastructure, economicuncertainties etc. Each of these decisions is a personalhuman process which although is unique, have
common characteristics. The impulsive motives are the forces behind these
decisions.
The decision to start a new company occurs when anindividual perceives that it is both desirable &possible.
The perception is desirable result from an individualsculture, teachers, sub culture, family etc.
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DECISION FOR A POTENTIAL
ENTREPRENEUR
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Change from present
Life styleWork environment
Disruption
Form new enterprise
DESIRABLE
culturalSub cultural
Family
TeachersPeers
POSSIBLE
GovernmentBackground
MarketingFinance
Role models
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ENTREPRENEUR Vs ENTREPRENEURSHIP Vs
ENTERPRISE
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CONCEPT
ENTREPRENEUR
(person)
ENTREPRENEURSHIP
(process of action)ENTERPRISE
(object)
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ENTREPRENEUR Vs ENTREPRENEURSHIP
Refers to a personRefers to a person Refers to a processRefers to a process
Visualizer Visualizer VisionVisionAble Able AbilityAbility
CreatorCreator CreationCreation
OrganizerOrganizer OrganizationOrganization
InnovatorInnovator InnovationInnovationDecision makerDecision maker DecisionDecision
Administration Administration AdministrationAdministration
MotivatorMotivator MotivationMotivation
Analysizer Analysizer AnalysisAnalysis
LeaderLeader LeadershipLeadership
HumanHuman HumanityHumanity
PlannerPlanner PlanningPlanning
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Conttddd.
CharacterCharacter CharacteristicsCharacteristics
BelieverBeliever Belief Belief
MarketierMarketier MarketingMarketing
DirectorDirector DirectionDirection
ProgrammerProgrammer ActionAction
InvestorInvestor InvestmentInvestment
EmpowererEmpowerer EmpowermentEmpowerment
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ENTREPRENEUR & ENTERPRISE
Entrepreneur is one who provides the 4th
FOP, namelyenterprise.
Enterprise may be defined as an undertaking oradventure involving uncertainty & risk & requiringinnovations.
It serves as the framework within which decisionsconcerning what to produce, how much to produce,when to produce & how to produce are taken byentrepreneurs / managers.
The success of an enterprise depends upon severalinternal & external factors to the business world &some of these factors may be under the control of theentrepreneur.
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ENTREPRENEURIAL PROCESS
Identify an opportunity
Establish vision
Persuade others Gather resources
Create new venture
Change/adapt with time
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Scope of entrepreneurship Capitalism: a capitalist economy represents free
enterprise, freedom to save & invest, freecompetition, consumer sovereignty & very littleinterference from the government.
Socialism: private entrepreneurship is absent in it.It is the economic & financial experts who playedan important role in the development. The purposeis to serve for the satisfaction of society & not tomake profits or to make profits
Mixed economy: both private as well as public
sectors coexist side by side.
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Intrapreneur
Intra means inside the organization
In the era of globalisation, large corporationsare developing new products & services &
creating innovative technologies & systems. The term was coined in America in late 70s.
this is called as corporate entrepreneurs orintra corporate entrepreneur. It implies any ofthe dreamers who do. The concept waspromoted by Pinchot III
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Definition
Those who take hands-on responsibility for
creating innovation of any kind within an
organization.
The intrapreneur may be creator or inventor
but is always the dreamer who figures out hoe
to turn an idea into a profitable reality.
Intrapreneur is a person who promotescreativity within a larger enterprise.
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Intrapreneurship can be defined as the development
within large corporation of internal markets &
relatively small autonomous or semi autonomous
business units producing products, services or
technologies that employ the firms resource in
unique way.
Intrapreneuring means the entrepreneurial activitiesthat acquire organizational sanctions & commitment
of resource for the sole objective of innovative
results
Intrapreneurship is not limited to germination of newideas but even includes implementation of new ideas
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G Pi h t III t i hi f b k I t i
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G. Pinchot III wrote in his famous book Intrapreneuringin 1985 & as intrapreneurs are the person whoresigned from their well paid executive positions to
launch their own ventures. He suggested that wellestablished company should learn to make use of theentrepreneurial talents within to avoid stagnation &decline. Therefore, needed was a system & anorganization culture within a large organization thatwould allow the executives to operate likeentrepreneur. These persons are not driven bymonetary gain but by a deep desire of personalachievement.
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Examples
Don Estridge, an employee at IBM posted atFlorida, far away from his bosses at IBM HQspearheaded the creation of PCs.
Paul Scagnetti, an engineer at Intel came upwith the concept of a handheld computeraimed at helping people do just one thing-record & plan their fitness & nutrition. The
gizmo Vivovic fitness planner hit the marketsuccessfully.
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Features
An entrepreneurship which takes place within anexisting business.
It is the development within a corporation ofinternal markets
Internal managers & employees are responsiblefor it through their innovative work.
It is promoted in the form of autonomous or semiautonomous business units that produceproducts, services or technologies in a uniqueway.
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Stages in Intrapreneurial Behaviour
Solo stage
Networking
Boot legging
Creating formal team
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Factors governing intrapreneurial
success
Appropriate rewards & punishment
Recruitment of interested & enthusiastic
personnel
New ventures & established business with a
difference
Internal product competition & corporate
bureaucracy
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Process
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Process
Problem definition
Coalition
building
Resource mobilisation
Project execution
Venture completion
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Types
Innovative Intrapreneur
Technical Intrapreneur
Marketing Intrapreneur
Manufacturing Intrapreneur
Financial Intrapreneur
Service Intrapreneur
Other intrapreneur in various managementactivities
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Difference
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Entrepreneur Intrapreneur
Owner ofhis enterprise Not the owner, but a key worker
Independent Partially independent
Raises finance from varioussources Doesnot own responsibility to raise capital
Maynot be educated & skilled Educated & skilled person
organizer Strategist
Strives to earn maximum profit Strives to excel in all fields
Bears full risk of business Doesnot bear full risk
Promoter Operates & develops the business
Visualizer Pragmatic visionary, innovator & creative
Direct participation in all activities Direct but restricted participation
Objective is money, freedom to take decision,
chance to innovate
Objective is freedom to take decisions,
corpaorate rewards, promotion rewardsSSIPMT/SAPNA SHARMA/2012 75
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Entrepreneurial culture
Implies a set of values, norms & traits that are
conducive to the growth of entrepreneurship. It is
the corporate culture that focuses on the
emergence of new opportunities, the means ofcapitalising on them & the creation of the
structure appropriate for pursuing them.
It should be differentiated from administrative
culture which focuses on existing opportunities,
organization structure & control procedures.
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An ideal administrator would askquestions as-
What resources do I control?
What structure determines
our organizations
relationship to its market?
How can I minimise theimpact of others on my
ability to perform?
What opportunity is
appropriate?
An ideal entrepreneur would askquestions as-
Where is the opportunity?
How do I capitalize on it?
What resources do I need?
How do I gain control over
them?
What structure is best?
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Exception: though as per Stevenson & Gumpert companies
must often contain both entrepreneurial & administrative
culture because they consist of both entrepreneurial &
established units.
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focus Entrepreneurial culture Administrative culture
Strategic orientation Driven by perception of
opportunities due to
changing technology
By controlled resources
due to social constraints
Commitment to seize
opportunity
Revolutionary, withshort
duration, due to narrow
decision, action
orientation
Evolutionary, with long
duration, due to
negotiation, risk reduction
Commitment of resources Many stages with minimal
exposure at eachstage
Asingle stage with
complete commitment out
of decision
Control of resources Episodic use/ rent of
requirement resources due
to increased specialization
Ownership or employment
of required resources to
power ,status
Management structure Flat, with multiple
informal networks
Hierarchy
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Various subculture
Culture of a business
Business ethics
TQ culture Productivity culture
Corporate culture
Organization culture