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DEPARTMENT OF MBA
COURSE
Entrepreneurship And Legal Aspects
20MBA26 – 2nd SEMESTER
{MODULE 1}
Study Material for the year 2022-23
PREPARED BY
Dr. Harshitha S
DEPARTMENT OF MBA,
SJB INSTITUTE OF TECHNOLOGY, BANGALORE.
MODULE 1: Introduction to Entrepreneur & Entrepreneurship
Meaning of entrepreneur - Evolution of the concept - Functions of an
Entrepreneur - Types of Entrepreneur - Intrapreneur- an emerging class -
Concept of Entrepreneurship -Entrepreneurial Culture - Stages in
entrepreneurial process. Creativity and Innovation: The role of creativity – The
innovation Process – Sources of New Ideas – Methods of Generating Ideas –
Creative Problem Solving – Entrepreneurial Process
Meaning of Entrepreneur
The word “entrepreneur” originates from a thirteenth-century French verb,
entreprendre, meaning “to do something” or “to undertake.” By the sixteenth
century, the noun form, entrepreneur, was being used to refer to someone who
undertakes a business venture.
An entrepreneur is a person who sets up a business or businesses, taking on
financial risks in the hope of profit of his new venture.
Entrepreneurs plays a key role in any economy, using the skills and initiative
necessary to anticipate needs and bring good new ideas to market.
Entrepreneurs who prove to be successful in taking on the risks of a startup are
rewarded with profits, fame, and continued growth opportunities.
According to Joseph Schumpeter, an entrepreneur is an innovator who
desires to earn profit through innovation. An entrepreneur is neither
technical man nor a capitalist but simply an innovator. He introduces something
new in the economy. He is motivated by establishing his psychological power.
Scaborough and Zimmerer (1988) defines entrepreneur as a person who
creates a new business facing an uncertain situation in order to gain profit and
growth to identify opportunities and provide the resources to achieve it.
Kuratko & Hodgetts (2004), defines entrepreneur as a person who is trying to
organize, manage and take risks in business.
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Evolution of Entrepreneur
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entrepreneur/
There have actually been two earlier waves of important entrepreneurial
activity. The first coincided with the rise of the industrial age, from the 1860s to
the 1880s, which produced a few captains of industry and more than a few
robber barons. The second, fueled by the promise of unlimited capital, occurred
between 1910 and 1929 but was cut short by the Great Depression and then
permanently eclipsed by World War II and the postwar rise of the MBA
managerial class, which effectively drove entrepreneurship into second-class
status for the next fifty years. Interestingly, these earlier periods produced
relatively few entrepreneurs compared to the size of the workforce at the time.
Even more striking, the entrepreneurial activity that did occur was largely
limited to North America and northwestern Europe. While these earlier waves
gave rise to some famous companies and an impressive array of new
technologies and products, nothing in our history has prepared us for the current
entrepreneurial revolution, which is simply unprecedented in size and scope.
I date this third wave of entrepreneurship to around 1985, the year Steve Jobs
and his band of renegades made Apple the youngest company to ever land on
the Fortune 500. From that historic entrepreneurial event, we are now at the
point where we have some 100 million new entrepreneurs coming on the scene
every year, from every corner of the globe.
The first fresh-faced entrepreneurs focus on volumes. Striving to increase the
numbers they sell, they would use any tactic to sell more items. Ironically, huge
companies (often with large inventory shipments) also capture these metrics,
and looking to hit their volume metrics monthly.
The next generation of entrepreneurs are seeking revenues. No longer satisfied
with just volumes, they know that pricing can make a huge difference to the
perceived value of their products and services. They are carefully tweaking their
prices and prodding the elasticity. Sure they are aiming for volumes, but the
true lever is revenue.
An entrepreneur is “one who reorganises and manages only enterprise specially
involving high risk”.
Earliest Period
Middle Ages
17th century
18th century
19th and 20th century
21st century
Functions of an Entrepreneur
I. Promotional Functions
(1) Discovery of Idea
The first and foremost function of entrepreneur is idea generation. A person
may conceive his own ideas or develop the ideas contributed by others. Ideas
can be generated through several ways like own experience and exposure of
entrepreneur, keen observation of environment, education, training, market
survey, environmental scanning and so on. After the ideas were collected,
entrepreneur has to weigh objectively each and every idea and finally select an
idea which is worth pursuing commercially.
(2) Determining the business objectives
Entrepreneur has to develop business objectives in the backdrop of nature of
business and type of business activity i.e. nature of business, manufacturing or
trading, type of business organisation chosen so that he/she can organise the
venture in accordance with the objectives determined by him/her.
(3) Detailed Investigation
Entrepreneur has to analyse in detail the product proposes to produce. In other
words, Entrepreneur should investigate commercial feasibility of the product
proposed to be produced and conduct market study to ascertain the potential
demand for the product. Besides, Entrepreneur has to probe the sources of
supply of various inputs required for manufacturing the proposed product, their
respective prices and other terms and conditions
(4) Choice of form of enterprise
Entrepreneur has to choose the appropriate form of organisation suited to
implement the venture. There are various forms of organisation namely sole
proprietor, partnership, company and co-operatives etc. which are in existence.
The selection of appropriate form of organisation is made after considering the
factors like nature of product to be produced, size of investment, nature of
activities, size of organisation, nature of liability of owners, retention of control,
degree of risk involved, scale of operations, stability and so on.
(5) Fulfilment of the formalities
Having chosen the appropriate type of organisation, entrepreneur has to take
necessary steps to establish the form of organisation chosen. As regards sole
trader, the formalities are barest minimum. In the case of partnership firm,
entrepreneur has to arrange for partnership deed and he has to get the deed
registered. There are lot of formalities to be fulfilled in the case of registration
of company and co-operative form of organisation. Promoter has to take all
necessary steps for establishing the form of organisation.
(6) Preparation of Business Plan
Entrepreneur has to prepare a business plan or project report of the venture that
he is proposing to take up. This plan helps entrepreneur to achieve various
objectives formulated within a specified period of time.
(7) Mobilisation of funds
Entrepreneur has to take steps to mobilise capital needed to implement the
venture. Entrepreneur has to estimate the fixed capital and working capital
required for running the project. Then the entrepreneur has to initiate steps to
build funds from various channels like own funds, borrowing from close circles,
banks, financial institutions, venture capitalists, issue of shares and debentures,
term loans and so on to finance his fixed capital requirement.
(8) Procurement of Machines and Materials
Entrepreneur has to locate the various sources of supply of machineries and
equipments and materials. Entrepreneur has to collect details from the various
sources of supply and screen them for selecting the best source of supply.
II. Managerial Functions
(i) Planning
Under planning, entrepreneur has to lay down the objectives, goals, vision,
mission, policies, procedures, programmes, budget, schedules etc., for enabling
the venture to proceed towards established destinations.
(ii) Organising
Entrepreneur puts in place suitable organisational structure to perform various
managerial functions namely choosing the type of organisation, creating
department, fitting the human resources to appropriate organisation slots,
defining and delegating authority, distributing responsibility and creating
accountability for efficient performance of activities.
(iii) Directing
In the realm of directing, entrepreneur has to motivate, lead, guide and
communicate with subordinates on an ongoing basis in order to accomplish pre-
set goals. The process of directing involves issuing orders and instructions,
guiding, counselling and mentoring of employees, supervising employees,
maintaining discipline, motivating employees and providing leadership.
(iv) Controlling
Entrepreneur has to put in mechanism to evaluate the performance of employees
across the organisation. The various steps involved in control function includes
fixing performance standards, measuring the actual performance, comparing
actual performance with standards, finding out causes for deviation if any,
undertaking corrective measures to bring actual performance to standards set.
He/she may use various control techniques like account, auditing, management
information system, network analysis, cost control, financial tools etc.
(v) Coordination
Entrepreneur has to evolve mechanism to pull together the diverse functions
performed by various departments or teams and direct them towards the
established goals of the organisation for accomplishment.
III. Commercial Functions
(i) Production or Manufacturing
Under production function, entrepreneur has to take decision relating to
selection of factory site, design and layout, type of products to be manufactured,
research and development, product design etc., The efficient and effective
performance of production function depends on the proper production planning
and control to a major extent.
(ii) Marketing
Entrepreneur has to carry out following functions pertaining to marketing aspect
namely consumer research, product planning and development, standardisation,
packaging, pricing, warehousing, distribution, promotion etc., The very success
of marketing function is very much linked with selection of appropriate
marketing mix. The term marketing mix denotes the combination of four
components namely product, price, promotion and physical distribution in the
case of physical products and three more components are included in the case of
service products namely people, process and physical evidence.
(iii) Accounting
Entrepreneur has to arrange to prepare trading and profit and loss account in
order to know the profit or loss incurred out of operation of the business and
prepare balance sheet to know the financial status of business at a particular
day. Besides, cash flow and fund flow statements are prepared to ensure the
adequacy of funds and cash for meeting various working capital needs of the
business.
(iv) Finance
In the sphere of financial function, an entrepreneur has to take decisions like
choosing the right type of financing, framing the best dividend policy, acquiring
of funds, efficiently managing fixed and current assets, maximising
shareholders wealth and investing of funds efficiently and effectively.
(v) Human Resource Management
Entrepreneur has to estimate the manpower needs of the enterprise and
accordingly decide the size of manpower required for various slots of
organisational structure. After determining the required man power the
entrepreneur has to organise the performance of following functions pertaining
to human resources namely arranging for recruitment, selecting manpower,
induction and training, determining compensation structure and incentives,
designing motivation programmes, structuring well being measures for
employees, putting in place safety mechanism at work place, performance
evaluation and career advancement and structuring social security programmes.
