MGT601 - SME Management - Lecture Handout 04

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KINDS OF ENTREPRENEURS
THEIR ROLE AND FUNCTIONS IN AN ENTERPRISE

The lecture is about the kinds of entrepreneurs, their role and functions in an enterprise. It also explains the hurdles they encounter. The overall general profile of Pakistani entrepreneurs and their importance in enhancement of progress.

Kinds of Entrepreneurs

Innovating entrepreneurs

He is the one who introduces something new into the economy or employs a new technique of production.

Imitating Entrepreneur

They lap up innovations originated by the innovative entrepreneurs. They are suited to developing countries which are not able to take up expensive research.

Fabian Entrepreneurs

They are very cautious and skeptical in adopting and implementing any change. They are lazy and shy and lack the will to adopt new methods. They follow the old traditions and avoid risk taking.

Drone Entrepreneurs

Inert and traditional, they are hurdles in economic development. They struggle to exist, not to grow.

Role of Entrepreneurship or Entrepreneur

It may be noted that an entrepreneur is a combination of two skills vise, “an idea person” and “a manager”, He is either the originator of the new business venture or a manager who tries to improve organizational effectiveness by initiating productive changes. His role consists of the ability to take up the factors of production and employ them in the production of new goods ad services. He perceives opportunities, which others does not see or do not care about. As rightly pronounced by Jule Buckman, “Basically an entrepreneur sees a need and then brings together the manpower, materials and capital required to meet that need.” Akio Morita [the Founder of Sony], for instance, adopted the company’s production to create Walkman personal-stereo. Gulshan Kumar of T-series skimmed the audiocassette vast Indian market.

Introduction of Change

An entrepreneur’s role lies in introducing the following five broad types of changes:

  1. Initial launching, i.e., original production of goods.
  2. Subsequent expansions i.e. increase in quantity.
  3. Factor innovation, i.e., increase in the supply or the productivity of the factors mentioned below:
    • Financial (procuring capital from a new source or in a new form)
    • Labor (upgrading existing labor)
    • Material (procuring old material from new source or use of new material)
  4. Production innovation i.e., hinges in the production process.
  5. Market innovation comprising changes in the size or composition of the market, e.g., production of new goods, change in the quality or cost of existing goods, discovery of new markets etc.
    Essentially, the entrepreneur always searches for change, responds to it and exploits it as an opportunity.

Increasing Productivity

Entrepreneurship has a role in increasing productivity. The keys to higher productivity are : (a) Research and development, (b) investment in plant and machinery and human resources, (c) resource allocation from areas of average to above average rate of remuneration of capital and labor, and (d) realization of internal and external economies of scale.

Innovation

Entrepreneurship plays an important role in promoting innovative technologies, products and services. Invention of zipper, titanium, operation of spinning jenny from foot to steam engine, invention of power loom etc., owe to the spirit of entrepreneurship.

Functions of Entrepreneurs

  1. Determination of the objectives of the enterprise.
  2. Development of the organization.
  3. Securing adequate financial resources.
  4. Requisition of technological; equipment and its revision consonant with the technical change.
  5. Development of market and devising new products to meet anticipated consumer demand.
  6. Maintenance of good relations with public authorities and society at large.
  7. Management of human relations.
  8. Financial management.
  9. Production management

Barriers in the Path of Entrepreneurship

Vesper has listed 12 common barriers in the path of entrepreneurship. These are:

  1. Lack of viable concept
  2. Lack of market knowledge
  3. Lack of technical skills
  4. Lack of seed capital
  5. Lack of business know-how
  6. Complacency (lack of motivation)
  7. Social stigma attached to certain vocations
  8. Job “ Lockins”, “Golden Handcuffs” or attachment with the job
  9. Time Pressures, Distracter
  10. Legal constraints
  11. Monopoly- Protectionism
  12. Inhibitions Relating to Patents

References:

  1. Aitken, Huge J (exploration in enterprise, Harvard University press page46
  2. The theory of economic development, Harvard University press page 89-105
  3. Mc Cleland, Davis C (The achieving society) Collier Mac Millan New York.
  4. The displaced uncomfortable entrepreneur (Psychology today) 1975
  5. Peter F. Drucher (Innovations and entrepreneurship) Page 27-28
  6. World Bank Sponsored study by Etal.

Book Recommended

Entrepreneurship and Small business Management by Dr C L Bansal

Key terms:

  1. Titanium (an element use to make non corrosion alloys)
  2. Stigma (Disgrace) a sign of.
  3. Monopoly (Exclusive control of trade, business, etc)
  4. Protectionism (A system of controls set up by government to protect country’s` agriculture or industry from foreign competition)
  5. Patent (An official document that gives the holder right to protect his product from others copying it)

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