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Concepts and Theories of Entrepreneurship

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Published: Tue, 06 Feb 2018

ENTREPRENEURSHIP AND SMALL BUSINESS (OMAN)

1 Entrepreneur & Entrepreneurship

Definition of Entrepreneur:

The term” entrepreneur” is derived from the French verb ‘enterprenedre’. It means “to undertake”. In the early 16th century, the Frenchmen who organized and led military expeditions were referred to as “entrepreneurs.” Around 1700A.D, the term was used for architects and contractors of public works.

An entrepreneur is a person who undertakes and operates anew enterprise or venture and assumes some accountability for the inherent risks. A female entrepreneur is sometimes referred to an “entrepreneuse”.

Entrepreneur is a person who creates and manages change by the recognition of opportunities (needs, wants, problems, and challenges) and develops people and manages resources to take advantage of the opportunity and creates a venture.

The term “entrepreneur” was applied to business initially by the French economist, Cantillon, in the 18th century, to designate a dealer who purchases the means of production form combining them into marketable products.

Concept of Entrepreneurship:

Entrepreneurship is a process undertaken by an entrepreneur to augment his business interest. It is an exercise involving innovation and creativity that will go towards establishing his/her enterprise.

One of the qualities of entrepreneurship is the ability to discover an investment opportunity and to organize an enterprise, thereby contributing to discover an investment growth. It involves taking of risks and making the necessary investments under conditions of uncertainty and innovating, planning, and taking decisions so as to increase production in agriculture, business and industry etc.

Entrepreneurship is the composite skill, the resultant of a mix of many qualities and traits – these include tangible factors as imagination, readiness to take risks. Ability to bring together and put to use other factors of production, capital, labor, land, and also tangible factors such as the ability to mobilize scientific and technological advances.

Intrapreneurs:

Of late a new breed of corporate entrepreneurs has come to the force in large organizations are called as “intrapreneurs”. They are entrepreneurs who catch hold of a new idea for a product, service, or process and work to bring this idea to fruition within the framework of the organization. Intrapreneurs with their innovations and dedicated effort are perceived as a valuable asset by the organization, inspiring others. He serves as a champion to others in the organization. In America, a number of intrapreneurs are leaving their jobs to start their own ventures. It is found that many are exceedingly successful in their new ventures and they are causing threat to the companies they left a few years ago.

Difference between Entrepreneur and Intrapreneur:

Difference

Entrepreneur

Intrapreneur

1. Dependency

An entrepreneur is independent

He is dependent on the entrepreneur. i.e., owner

2. Raising of funds

They can raise fund required for the enterprise

Funds are not raised

3. Risk

He/She bears the risk involved I the business

An intrapreneur does not fully bear the risk

4. Operations

He/She operates from outside

He/She operates from within the organization itself

Distinction between an Entrepreneur and a Manager

Factors

Entrepreneur

Manager

1. Motive

The main motive is to start a venture by setting up an enterprise. He understands the venture for his personal gratification.

The main motive of a manager is to render his services in an enterprise already set up by someone else

2. Status

He is the owner of enterprise

A manger is the servant in the enterprise owned by the entrepreneur

3. Risk bearing

He being the owner of the enterprise assumes all risks and uncertainty involved in running the enterprise

A manager as a servant does not bear any risk involved in the enterprise

4. Rewards

The reward that he gets for bearing risks involved in the enterprise is profit which is highly uncertain

A manager gets salary as reward for the services rendered by him in the enterprise, which is fixed and certain

5. Innovation

He himself thinks over what and how to produce goods to meet then changing demands of the customers. Hence, he acts as an innovator also called a change agent

Manager simply executes the plan prepared by the entrepreneur and translates the entrepreneur’s ideas into practice

6. Qualifications

He needs to possess qualities and qualification like high achievement, motive, originality in thinking, foresight, risk bearing ability and so on.

On the contrary, manager needs to possess distinct qualification in terms of sound knowledge in management theory and practice.

Difference between Entrepreneur and Entrepreneurship:

Entrepreneur

Entrepreneurship

Refers to a person

Visualiser

Creator

Organizer

Innovator

Technician

Initiator

Decision – maker

Planner

Leader

Motivator

Programmer

Risk – taker

Communicator

Administrator

Refers to a process

Vision

Creation

Organization

Innovation

Technology

Initiative

Decision

Planning

Leadership

Motivation

Action

Risk – taking

Communication

Administration

Skills required for an Entrepreneur:

1. Technical skills:

  • Written and oral communication
  • Monitoring environment
  • Technical Business Management
  • Effective Interpersonal relationship
  • Effective Listening
  • Ability to organize
  • Network Building
  • Management Styles
  • Coaching
  • Being an effective team player

2. Business Management Skills

  • Planning and goal setting
  • Decision making
  • Human Relations
  • Marketing finance
  • Accounting
  • Management
  • Control
  • Negotiation
  • Management growth

3. Personal entrepreneurial skills

  • Self discipline
  • Risk taking attitude
  • Being creative
  • Logical and analytical
  • Persistent
  • Visionary leader
  • Ability to manage change
  • Articulate

Characteristics of an Entrepreneur:

  1. Mental ability consists of intelligence and creative thinking. An entrepreneur must be reasonably intelligent, and should have creative thinking and must be able to engage in the analysis of various problems and situations in order to deal with them.
  2. Clear Objectives: An entrepreneur should have clear objectives as to the exact nature of the goods to be produced and subsidiary activities to be undertaken.
  3. Business secrecy: An entrepreneur must be able to guard business secrets. Leakage of business secrets to trade competitors is a serious matter which should be carefully guarded against by an entrepreneur.
  4. Human relations ability: An entrepreneur must maintain good relations with his customers if he is to establish relations that will encourage them to continue to patronize his business. He must also maintain good relations with his employees if he is to motivate them to perform their jobs at a high level of efficiency.
  5. Communication ability: An entrepreneur who can effectively communicate with the customers, employees, suppliers and creditors will be more likely to succeed than the one who does not.
  6. Technical knowledge: An entrepreneur must have a reasonable level of technical knowledge.

Other main characteristics

  • Self – confident and optimistic
  • Able to take calculated risk
  • Prepared to take risks
  • Respond positively to challenges
  • Flexible and able to adapt
  • Knowledgeable of markets
  • Versatile knowledge
  • Able to get along well with others
  • Independent minded
  • Energetic and diligent
  • Creative, need to achieve
  • Dynamic leader
  • Responsive to suggestions
  • Take initiatives
  • Resourceful and persevering
  • Perceptive with foresight
  • Responsive to criticism
  • Ability to organize and administer efficiently

Significance/importance of entrepreneurship:

  • Economic Development: Entrepreneurship contributes to economic development of every country. It enables continual improvement of societies and their organizations entrepreneurship
  • Developing personal relationships: Small businesses are well placed to build personal relationships with customers, employees and suppliers.
  • Responding flexibility to problems and challenges
  • Inventiveness and innovation: Small businesses are well positioned to introduce and develop new ideas. This is due to their owners not having to report or seek approval from anyone else. For Example, When Anitha Roddick set up The Body Shop; she developed a range of environmentally friendly cosmetics in unsophisticated packaging. Due to the innovation in the packaging style her products are considered to be No: 1 in terms of quality and package.
  • It invigorates markets: The formation of new business leads to job creation and has a multiplying effect on the economy.
  • It empowers citizens, generates innovation and changes mindsets. These changes have the potential to integrate developing countries into the global economy.

Classification and Type of Entrepreneurs:

1. Innovative Entrepreneurs

It is a type of entrepreneur, who launches new products, discovers new markets, establishes new methods of production and restructures the enterprise.

He can work only when definite level of progress has been previously accomplished. They focus on revolutionalisation and development.

It is characterized by aggressive assembling of information and the analysis of results derived from novel combination of factors.

2. Imitative Entrepreneurs:

They adopt victorious innovations launched by the innovative entrepreneurs.

They duplicate the technology and techniques innovated by others and they are suitable for underdeveloped countries.

They are characterized by readiness to adopt successful innovations, by innovating entrepreneurs. They are adoptive and more flexible.

3. Fabian Entrepreneurs:

They are exemplified by great caution and skepticism in experimenting any change in the organization. They imitate only in situations where it becomes necessary to do so. They imitate only in situations where it becomes necessary to do so. They are exhibited by precaution and skepticism in practicing any change they have neither the ‘will’ to introduce new changes not any desire to adopt new methods, innovated by the most enterprising entrepreneurs.

Dealings are determined by customs, religion, tradition and past practices.

They are not much interested in taking risks or changes and they try to follow ‘the beaten tack’ created by the footsteps of their predecessors.

4. Drone Entrepreneurs:

They suffer losses, as they refuse to make any modifications in the existing production methods.

They are exhibited by refusal to adopt and use opportunities to make changes in production.

They are willing to suffer losses but they do not make changes in the production methods adopted by them.

Also called as ‘laggards’ because they continue in their traditional ways and in fields; their product loses its marketability soon.

5. Solo Entrepreneurs:

They basically work alone and if required may recruit few people.

6. Active partners:

They set up an enterprise as a joint venture and they actively take part in the activities of the organization.

7. Simply partners:

They contribute funds, but are not involved in the operations of the enterprise.

8. Inventors:

They are involved in the research and development and innovative activities.

9. Buyers:

These entrepreneurs in order to reduce risk buy an already established and ongoing enterprise.

10. Life timers:

They take business as primary part of their life. Family enterprise falls into this group of entrepreneurs.

Entrepreneurs according to the type of business:

1. Business Entrepreneur: They are the individuals who conceive an idea for a new product or service and then create a business to materialize their idea into reality. They tap both production and marketing resources in their search to develop a new business opportunity.

2. Trading Entrepreneur: They are the one who undertakes trading activities and is not concerned with the manufacturing work. He identifies potential markets, simulates demand for his product line and creates a desire and interest among buyers to go in for his product. He is engaged in both domestic and overseas trade.

3. Industrial Entrepreneur: It is essentially a manufacturer who identifies the potential needs of customers and tailors a product or service to meet the marketing needs. He is a product-oriented man who starts in an industrial unit because of the possibility of making some new product. The entrepreneur has the ability to convert economic resources and technology into a considerably profitable venture. E.g., Electronic industry, textile units, machine tools and the like.

4. Corporate Entrepreneur: It is a person who demonstrates his innovative skill in organizing and managing corporate undertaking. A corporate undertaking is a form of business organization which is registered under some statute or Act which gives it a separate legal entity.

5. Agricultural Entrepreneur: They are those who undertake agricultural activities as raising and marketing of crops, fertilizers and other inputs of agriculture. They are motivated to raise agricultural through mechanization, irrigation and application of technologies for dry and agriculture products.

Entrepreneurs in Technology: (Refer the Book)

  1. Technical Entrepreneur
  2. Non – technical entrepreneur
  3. Professional Entrepreneur

Entrepreneurs and motivation: (Refer the Book)

  1. Pure entrepreneur
  2. Induced entrepreneur
  3. Motivated entrepreneur
  4. Spontaneous entrepreneur

Growth and Entrepreneurs: (Refer the Book)

  1. Growth entrepreneur
  2. Super – growth entrepreneur

Entrepreneur and stages of development: (Refer the Book)

  1. First – generation entrepreneur
  2. Modern Entrepreneur
  3. Classical entrepreneur

Entrepreneurial competencies:

The characteristics possessed by an entrepreneur which result in superior performance are called Entrepreneurial competencies or traits. Knowledge, skill and motive are the components of competencies. These competencies can be developed and sharpened. These can be injected in human beings through education and training. Practice helps develop competencies. Thus it is rightly said that Entrepreneurs are made and not born. Some of the major entrepreneurial competencies are :

a) The individual’s capacity for the pursuit of effective personal entrepreneurial behavior

b) The way that they design the organization to maximize the potential for effective entrepreneurial behaviour by all staff

c) The way that they design the organization to enable it respond to, and indeed shape, the dynamics of the task structure and interdependencies confronting it

d) The way that the entrepreneur shapes the capacity of the business to develop and innovate over time.

e) The degree to which the above are pursued in a socially responsible way thus laying the ground for wider acceptance of entrepreneurial ‘ways of doing things’ in business and society.

f) Initiative: acting out of choice rather than compulsion, taking the lead rather than waiting for others to start.

g) Sees and acts on opportunities. A mindset where one is trained to look for business opportunities from everyday experiences.

h) Persistence A ‘never say die’ attitude, not giving up easily, striving information seeking continuously until success is achieved.

i) Knowing: Knowing who knows, consulting experts, reading relevant material and an overall openness to ideas and information.

j) Concern for High Quality of Work

k) Commitment to work Contract: Taking personal pains to complete a task as scheduled.

l) Efficiency Orientation: concern for conservation of time, money and effort.

m) Systematic Planning

n) Problem solving

o) Self – confidence

p) Assertiveness

q) Persuasion

r) Use of Influence Strategies

s) Monitoring

t) Concern for Employee welfare

Entrepreneurial Development is a key to achieve overall economic development through higher level of industrial activity. Many studies have shown that entrepreneurs are made. Entrepreneurial development is a process in which persons are injected with motivational drives of achievement and in sight to tackle uncertain and risky situations especially in business undertakings. The process of entrepreneurial development focuses on training, education, reorientation and creation of conducive and healthy environment for the growth of enterprises. Entrepreneurial competence makes all the different to the rate of economic growth – this call for the entrepreneur’s potential inputs to boost the economic development of a country

Functions of Entrepreneur

  1. Idea generation and scanning of the best suitable idea
  2. Determination of the business objectives
  3. Product analysis and market research
  4. Determination of form of ownership/organization
  5. Completion of promotional formalities
  6. Raising necessary funds
  7. Procuring machine and material
  8. Recruitment of men
  9. Undertaking the business operations

Arthur H. Cole has given the following functions of Entrepreneur:

  1. Determination of objectives and change of those objectives as conditions required or made advantageous
  2. Development of the organization, including efficient relations with subordinates and all employees
  3. Securing adequate finance resources and maintaining good relations with the existing and potential investors
  4. Requisition of efficient technological equipment
  5. Development of a market for the products
  6. Maintenance of good relations with the public authorities and society at large

Major functions of Entrepreneur

  1. Innovation – Doing new things or the doing of things that are already being done in a new way. It includes new processes of production, introduction of new products, relation of new markets, discovery of a new and better form of industrial organization
  2. Risk – bearing – Making provisions for capital in order to enable the entrepreneur to reduce uncertainty in his plan of investment and expansion of the enterprise
  3. Organization and management of business so as to have leadership and control over it.

MODULE – 2

ENTREPRENEURIAL DEVELOPMENT

____________________________________________________________________

(Entrepreneurial Process, Entrepreneurial Environment, Institutional Support for small business in Oman)

_____________________________________________________________________

Entrepreneurial Process:

The process of entrepreneurship involves both analytical and creative activities. According to Pierce and Dunham, the entrepreneurial process takes place in four sequential steps:

Step 1: Solo Phase

During this step, the typical entrepreneur works alone. The first task for the entrepreneur is to clearly identify the entrepreneurial idea. Then, the idea is developed and subjected to three feasibility tests.

  • Will the idea provide clearly identifiable benefits for customer or clients?
  • Is the idea compatible with the organization’s resources and overall strategy?
  • Are the idea and its potential implementation compatible with the entrepreneur’s personal character and skills?

Step 2: Network Phase

During this step the entrepreneur shares the idea with o0ther organizational members, seeking feedback and suggestions for improvement of the idea.

Step 3: Bootlegging Phase

During this step, the entrepreneur begins to form a project team and some levels of product prototype development outside the normal operational mode of the company.

Step 4: Formal Team Phase

During this step, the idea becomes a formal organizational venture with formal organizational support.

Entrepreneurial Environment:

It refers to the various facets within which big, medium, and small enterprises and others have to operate.

Entrepreneurial environment is broadly classified into six important segments, namely:

1) Political environment

2) Economic environment

3) Social environment

4) Technological environment

5) Legal environment

6) Cultural environment.

1) Political environment: It affects the entrepreneurial growth and accelerates the process of economic activity. Law and order is of high priority, followed by Government policies in regard to the promotion of entrepreneurship, followed by incentives, encouragement and right institutional structure will go a long way in fostering entrepreneurship.

2) Economic environment: It encompasses a wide spectrum of items, namely, land, availability of raw material, skilled labour, infrastructure, machinery, capital and so on.

Shortage of raw materials, inferior quality, high price resulting in high cost of production are bringing had name to the small industry. Without raw materials, no industry can run and no entrepreneurship would come up. The benefits of an improved and healthy market conditions in the environment of entrepreneurial growth are self-explanatory.

3. Social environment: It strongly affects the entrepreneurial behaviour which contributes to entrepreneurial growth. The social factors can be family background, kith and kin (relatives, friends and teachers), religion, social status, social mobility and social marginality.

4. Technological environment: It represents the application of scientific knowledge for practical purposes. The technological advancement has become a catalytic agent in the promotion of entrepreneurship growth of industrial and allied services and agriculture. Further, it brings cultural changes as well as the quality of life. The Knowledge Revolution has made it possible to routine processes – a shift from the traditional manual control of conventional machinery for using the computer brain to operate the machinery. Computer software is an alternate way to reorganize traditional work processes, through application of overseeing knowledge aided by systematic, logical analysis.

5. Legal environment: Registration, licensing, pollution, location, acquisition, payment of wages and labour related laws, pollution and environmental rules, laws relating to organization, product, patent, resource and taxes. According to a recent study, there are over 150 legal requirements an entrepreneur has to take care off.

6. Cultural environment: Every organization has an invisible quality, certain style, and character, a way of doing things that may be more powerful than the dictates of any one person or a formal system. This invisible quality ‘the corporate culture’ decides how effective the organization is in the marketplace.

Max Weber emphasizes that cultural factors have a crippling effect on entrepreneurial growth. Culture consists of (i) tangible man – made objects like furniture, buildings etc. (ii) intangible concepts like laws, morals, knowledge etc. (iii) values and behavior acceptable within the society.

Institutional support for small businesses in Oman:

Incentives:

One of the incentives is the annual award of the Sultan’s Cup for Industry. In 1999, the five winners were the Oman Cement Company, Raysut Cement Company, Oman Flour Mills Company, in the top category, with Jotun Paints and Oman Filters Industry taking best factories awards in the second category. Certificates of Merit were awarded to Oman Cables Industry Company, Amiantit Oman and National Detergent Company from the first category, and Sadolin Paints and Al-Hassan Switchgear Factory from the second category.

In 1998, the criteria for awarding His Majesty, the Sultan’s Cup were changed to take account of a company’s Omanisation plan. Companies should not fall below the 35% target set for the industrial sector. Companies in the first category are those with over RO3 million invested. The Ministry evaluated 27 factories, taking into account a number of other criteria such as added value, the use of local raw material, percentage of exports, quality etc, as well as considering safety standards and environmental protection.

Public /establishment for Industrial Estate (PEIE):

In 1993 the Public Establishment for Industrial Estates (PEIE) was created by Royal Decree giving a significant boost to industry by developing additional industrial estates and encouraging the private sector to participate in the industrialization of Oman. There are five industrial estates at present – namely Rusayl, Sohar, Raysut, Nizwa and al-Buraimi, Sur. but more are being planned all over the country in towns like Khasab and Qalhat. PEIE has commissioned a consultant to prepare a feasibility study for these three new industrial estates. In April 2000, the Ministry announced that a study had been carried out to privatize the industrial estates, transforming them into public companies, but for the time being, the Government will continue to develop them and has allocated around RO200 million for the purpose.

Rusayl:

Rusayl was the first industrial estate in Oman, established in 1983, and becoming operational in 1985. It is situated about 45 kms from the Capital Area and the port of Mina Sultan Qaboos. It is close to Seeb Airport and easily accessible from the main road network. Amongst the many other services provided, an important feature is the nearby housing complex for over 1000 workers, complete with shops, supermarket, cinema, mosque, leisure centre and football pitch. Separate accommodation was recently constructed within the estate for female workers.
There are 107 industries in operation on the Rusayl Estate and five more under construction, with over 40 projects being evaluated. The factories in operation are producing chemicals, electrical and building materials, paints, textiles and garments, computer stationery, aluminum products, car batteries, steel assemblies and poly products, amongst others.

Sohar:

Sohar Industrial Estate is situated 220 kms from Muscat and 180 kms from Dubai, linked to both by an international highway. Thanks to its strategic location it is attractive to potential investors.
Apart from the major projects now being implemented there are 28 industries in production, 18 under construction and 44 projects coming up in the near future. Industries on the Sohar estate produce a wide range of products, such as foodstuffs, detergents, leather goods, furniture, toothpaste, ice cream, resins, glass, steel bars and engine oil. Potential products may include jewellery, roof cladding, baby food, sweets, sports shoes and polythene bags.

Raysut:

Inaugurated in 1992, the Raysut industrial estate is situated in Dhofar, 15 kms from Salalah, close to the sea and the new container port. The border with Yemen is only 200 kms away and will be approached by a new tarmac road across from Thumrait to al-Mazyounah, which is under construction. Port Salalah is ideally situated on the sea lanes connecting Europe, East Africa, Yemen and the Far East. A free zone has been established at al-Mazyounah which will make Raysut even more attractive as an entrepot destination.

The industrial estate has been divided into zones so that any chemical pollution is kept well away from cleaner industries. There are five factories in operation, manufacturing school stationery, box files, ice, fish processing, frozen chickens, PVC pipes and steel fabrication.

Nizwa:

Nizwa Industrial Estate was inaugurated in 1994. It is situated 180 kms from Muscat and only 15 kms from Nizwa itself. Being the latest estate to be established, there are five pre-fabricated buildings for ceramic tiles, paper products and foodstuffs manufacture. Nine applications have been made for a plot on the Estate and these are currently being evaluated. The Estate is to be enlarged over the next Five-Year Plan. Future projects may include leather goods, novelties, military badges, pharmaceuticals, surgical gloves, chemicals and disinfectants.

Al-Buraimi:

During the 29th National Celebrations, the al-Buraimi Industrial Estate was officially opened. The Estate is 325 kms from Muscat but conveniently situated for the Gulf markets. There are three factories in operation.

Sur:

In addition to the Oman LNG project, a fertilizer plant is to be built at Qalhat near Sur with a capacity to produce 1.65 million tonnes of urea and 250,000 tonnes of excess ammonia per annum from natural gas for export. The preliminary work on the project arrangements has been completed and the major activity is to secure the finance needed through lenders and export credit agencies to supplement the equity capital of the partners in the project. Around RO375 million will be invested in the project. It is estimated that one trillion cubic feet of gas will be required for the project over a 20 year period. The plant will employ some 450 staff of whom about half will be Omanis during the initial operating period.

Al Mazunah:

Al Mazunah Free Zone commenced operations in November 1999 and is located in Oman’s southern region of Dhofar, close to the Yemen border. The Free Zone is located 260 kilometers from Salalah, 245 kilometers from Al Gaydah and 500 kilometers from Sayun, the two closest Yemeni cities. Given the nature of the Free Zone it lays outside the lit of Oman’s tax boundaries, and as such, businesses are able to enter Al Mazunah without visa or completing border procedures between Oman and Yemen. Indeed, Al Mazunah offers excellent opportunities to those wishing to trade goods through Oman into Yemen, or locate warehouse facilities. The Free Zone occupies 450 hectares which is divided into 100 plots ranging in size from 2,000 to 16,000 square meters. To date, 21 businesses and an exhibition area are in operation on the Free Zone.

Sanad Programme:

With the kind directions of H.M. Sultan Qaboos Bin Said, for the great importance of enhancing the role of Omani manpower in the development of the country and for the purpose of creating business opportunities for Omanis who are able to take interest in work, Sanad programme is established to work under the supervision of the Ministry of Manpower and execute the following duties:

Objectives OF SANAD:

  1. Contributing to the employment of the natio

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