Entrepreneurship: Meaning, Process, Functions and Barriers

Overview of Entrepreneurship
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Meaning of entrepreneurship: Entrepreneurship is the combination of a French and a German word – Entrependre and Uternehmen, respectively. The word defines individuals who take the risk of starting a new venture or enterprise. Basically, this is a highly zestful activity that enables any entrepreneur to alter the process of production, bring in several innovative ideas, use new materials, and so on. Entrepreneurship requires the ability to foresee risks and potentials and running the enterprise effectively while coping with uncertainties and making profits persistently.

We can define an entrepreneur as a person who acts as an economic change agent. He has all the skills, knowledge, and the brain to come up with innovative ideas for the accomplishment of business goals. He will be able to identify any hidden opportunity and can seize the moment and turn it into his or her own favor. Entrepreneurship plays the role of an organizer, a risk bearer as well as an innovator.

What does an entrepreneur do?

  • He identifies different types of opportunities.
  • He effectively gathers resources and introduces new methodologies and ideas in the production process.
  • He introduces several new products.
  • He develops new market niches and works on them consistently.

Different types of entrepreneurs:

There are different types of entrepreneurs. These types vary as well. Let us go through different categories of entrepreneurs:

According to Authur H Cole, there are three categories of entrepreneurs. These are –

  • Cognitive entrepreneur: They always take the help of experts so those smooth alterations can be made in business as per the demand of the situation. Thus, the changes are almost always revolutionary, as well as they depict a complete shift from the already existing structure.
  • Empirical entrepreneur: These entrepreneurs do not go after innovations. Rather they prefer to stick to the rule of thumb.
  • Rational entrepreneur: Such entrepreneurs will always keep themselves updated with business conditions, market scenarios, economic situations, etc. Thus, they are capable of coming up with revolutionary ideas.

According to the scale of enterprise:

  • Small scale entrepreneurs: These entrepreneurs do not have access to enough funds and technology. They are therefore unable to initiate any type of large-scale production.
  • Large-scale entrepreneurs: They are naturally prominent in developed countries. They are capable of coming up with revolutionary ideas as well as can make quite high profits. They always use the latest technology as they have complete access to all the financial resources.

According to ownership:

  • Private entrepreneurship: Such entrepreneurship is profit-oriented. They do not prefer entering a market that offers low monetary rewards.
  • Public entrepreneurship: These entrepreneurs enter into a long-term partnership with the government. Together they create successful enterprises which provide great help to the public.

According to Clarence Banhof:

  • Fabian entrepreneur: Such an entrepreneur is timid. He is always highly vigilant and cautious about taking some bold steps. Innovative steps are embraced by him only when he realizes that there is no way out without being innovative to save the business.
  • Drone entrepreneur: Such an entrepreneur refuses to embrace new and innovative ideas. He does not even care about reductions in the returns.
  • Aggressive/innovative entrepreneur: Such an entrepreneur always uses the perfect blend of information, details, factors, etc., to put together and engineer innovative products.
  • Imitative/adoptive entrepreneur: These entrepreneurs always adopt any innovative idea which has been introduced by other entrepreneurs.

Nature of entrepreneurship:

  • Creation of an enterprise: Entrepreneurship involves the creation of an enterprise successfully.
  • Organization of functions: Entrepreneurship involves bringing together different factors related to production as well as economic utility.
  • Risk-bearing ability: Entrepreneurship needs to assume uncertainty of the future carefully.
  • Innovative ideas: Entrepreneurship is all about coming up with an automatic, creative, and spontaneous response to the dynamic business world as well as the entire global scenario on the whole.
  • Managerial as well as leadership functions: Entrepreneurship controls and coordinates the human resource as well as give proper directions to the enterprise.
  • Filling of the gap: An entrepreneurship aims at filling the gap between human requirements as well as available services and products.

Process of Entrepreneurship:

  • Identification of an opportunity: An entrepreneur always understands the potential opportunities as well as visualizes a new market opportunity. Such entrepreneurs are highly creative and always ready to embrace and apply new ideas and combat new challenges. Entrepreneurs keep a check on the requirements, necessities, wants challenges, and problem areas. They always get the first-mover’s advantage and higher credibility in the new market scenario.
  • Establishment of a vision: Generation of ideas, creativity, coupled with past experiences, can satisfy needs and tackle problems. There will be so many ideas. But the most feasible and profitable one will be finalized. An entrepreneur always evaluates as well as assesses the risks and rewards associated as well as the real and perceived value of the service. He also keeps a check on the competitive business environment.
  • Persuading others: An entrepreneur builds a foundation team. This team includes people who consistently work together for the accomplishment of a common goal. They wish to turn the vision into reality. The team may include family members, partners, financiers, etc.
  • Gathering of important resources: Entrepreneurs come up with effective business plans for attracting investors, partners, venture capitalists, promoters, financial institutions, and so on. A successful entrepreneur will be able to research and identify resources that are required for converting an idea into a feasible venture.
  • Adaptability: Monitoring and upgrading the organization according to the ever-changing market scenario is quite important for an entrepreneur. There have to be enough funds ready for making the required changes. The adaptability of human resources is also necessary for surviving the dynamic business environment.
  • Creation of new venture: After an entrepreneur is done with the arrangement of all the required resources, he needs to create and establish a new venture and run the business venture with utmost proficiency. He needs to show a lot of enthusiasm and passion. Also, he needs to be perseverant enough to keep faith in himself and his ideas.

Functions of entrepreneurship:

There are three types of functions of entrepreneurship:

  1. Primary functions:
  • Planning
  • Decision making
  • Organizing
  • Innovating
  • Managing
  • Risk bearing
  1. Secondary functions:
  • Expansion of the enterprise
  • Diversification of production
  • Maintaining cordial employer and employee relation
  • Coordinating and communicating with third parties
  • Tackling labor problem
  1. Other important functions:
  • Managing scarce resources
  • Identifying parallel opportunities
  • Dealing with public bureaucracy
  • Building strong customer relations

Barriers in entrepreneurship:

Following are the different types of barriers that come across the path of entrepreneurship:

  • Financial barriers: This is one of the most prominent barriers in the life of an entrepreneur. Such barriers are quite common. Availability of funds is of great significance. If a delay happens in gathering enough funds, then it may further delay the commencement of an enterprise. Also, various business operations need a persistent flow of funds.
  • Personal barriers: Personal barriers are caused because of the emotional and psychological blocks of an entrepreneur. Let us have a look at the various types of personal barriers:
  • Lack of motivation and encouragement: When an idea does not turn out to be fruitful, these entrepreneurs give up quite easily. Even a minor failure is enough to demotivate them.
  • Inability to depend on and trust others: These entrepreneurs often find it difficult to trust others while hiring their expert services. They waste much of their time deciding upon the best service provider and then, too, cannot put their trust completely.
  • Lack of patience: If an entrepreneur loses interest because of any hurdle or obstacle, then he does not have enough patience and perseverance to carry on with the entrepreneurship. Even the initial losses are enough to discourage them and shut their enterprises.
  • Lack of confidence: These entrepreneurs never have enough confidence. They never trust in themselves. They are somehow convinced that they will never be able to come up with a successful business idea. They are always bothered about their inability to attract enough funding. Hence, they almost give up on their dream of being self-employed and thus do not carry on with entrepreneurship.
  • Lack of vision: There should never be any limitation to what you can achieve. Some entrepreneurs, after making short progress, lose their vision and show no more interest in expanding the business.
  • Sense of embarrassment/pride: Such entrepreneurs are way too proud or embarrassed to ask for help from someone.
  • Environmental barriers:
  • Machinery: Machines are extremely significant to carry out multiple operations. However, machinery does come costly. Also, technology keeps changing quite rapidly, and hence, machines tend to get obsolete quite often. Thus an entrepreneur needs to replace them. This process is quite difficult for the entire organization.
  • Raw material: The situation can get quite distressful if there is no raw material available during the peak season of the work. This further increases the price of limited raw materials available because of an increased level of competition.
  • Land and building: For an enterprise, it is necessary that proper acquisition of land is made. Then, the construction of buildings will also have to be done. However, all these can be quite expensive. When the land is rented, the fixed cost becomes a cause of worry for the entrepreneur. He needs to keep paying the rents whether he is making any profit out of business or not.
  • Infrastructure support: There have to be proper roads, adequacy of power, drainage facilities, water, and other such infrastructural supports. But because of red-tapism and increased corruption, things tend to be quite complicated.
  • Labour: For successful entrepreneurship, there has to be the availability of skilled labor, quality and quantity labor, and committed and loyal employees. Lack of any of these can lead to severe disruptions in the working procedure of the enterprise.
  • Political barriers: When there are not enough government concessions, and incentives offered, things start getting difficult for the entrepreneurs. Also, there has to be a proper socio-economic setting to make things happen the way they need to. A politician should also focus on making a society economically developed. Only then will things smoothen up for the entrepreneurs.
  • Societal barriers:
  1. Caste and religious affiliations often act as hurdles in the way of a business.
  2. Financial stability and family backgrounds also have to be kept in mind. These, too, can impact the operations and development of an enterprise.
  3. Socio-cultural norms and values often act as barriers for modern-day budding entrepreneurs. These age-old norms hamper the smooth development and progress of business enterprises.
  4. Degree of disapproval and approval of entrepreneurial behavior.

Entrepreneurship scopes in India:

India is right now witnessing multiple entrepreneurship projects for the last two decades. Entrepreneurship is getting all the more popular because of the following reasons:

  • The higher level of profits
  • Control over one’s future
  • Proper government measures which support entrepreneurship
  • Reduction in employment opportunity

Entrepreneurship is a great source of earning as well as employment for various people. It actively reduces the monopoly of bureaucrats. Thus it helps in successfully creating a balanced regional growth and development in the Indian economy. Indian government successfully conducts development programs so that proper entrepreneurial potential is identified. Also, they offer effective assistance – both financial and non-financial, to the entrepreneurs. Multiple entrepreneurship training academies have also been established to provide apt training to young entrepreneurs.

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