Entrepreneurship & Entrepreneurial Opportunities: Notes | Entrepreneurship Class 12 - Commerce PDF Download

Who are Entrepreneurs?

Entrepreneurs are the people who have the ability to see and evaluate business opportunities. They gather the necessary resources to take advantage of them and initiate appropriate action to ensure success. 

The journey of entrepreneurship starts from identifying business opportunity. In this chapter, we will understand the process of identifying business opportunities. 

What is a Concept of Entrepreneurship?

Entrepreneurship is the ability and readiness to develop, organize and run a business enterprise, along with any of its uncertainties in order to make a profit. The most prominent example of entrepreneurship is the starting of new businesses.

• In economics, entrepreneurship connected with land, labour, natural resources and capital can generate a profit. 
• The entrepreneurial vision is defined by discovery and risk-taking and is an indispensable part of a nation’s capacity to succeed in an ever-changing and more competitive global marketplace

Types of Entrepreneurship

It is classified into the following types:

1. Small Business Entrepreneurship:
   These businesses are a hairdresser, grocery store, travel agent, consultant, carpenter, plumber, electrician, etc. These people run or own their own business and hire family members or local employee. For them, the profit would be able to feed their family and not making 100 million business or taking over an industry. They fund their business by taking small business loans or loans from friends and family.
2. Scalable Startup Entrepreneurship:
   This start-up entrepreneur starts a business knowing that their vision can change the world. They attract investors who think and encourage people who think out of the box. The research focuses on a scalable business and experimental models, so, they hire the best and the brightest employees. They require more venture capital to fuel and back their project or business.
3. Large Company Entrepreneurship:
   These huge companies have defined life-cycle. Most of these companies grow and sustain by offering new and innovative products that revolve around their main products. The change in technology, customer preferences, new competition, etc., build pressure for large companies to create an innovative product and sell it to the new set of customers in the new market. To cope with the rapid technological changes, the existing organisations either buy innovation enterprises or attempt to construct the product internally.
4. Social Entrepreneurship:
   This type of entrepreneurship focuses on producing product and services that resolve social needs and problems. Their only motto and goal is to work for society and not make any profits.

Characteristics of Entrepreneurship

Not all entrepreneurs are successful; there are definite characteristics that make entrepreneurship successful.

A few of them are mentioned below:

1. Ability to take a risk:
   Starting any new venture involves a considerable amount of failure risk. Therefore, an entrepreneur needs to be courageous and able to evaluate and take risks, which is an essential part of being an entrepreneur.
2. Innovation:
   It should be highly innovative to generate new ideas, start a company and earn profits out of it. Change can be the launching of a new product that is new to the market or a process that does the same thing but in a more efficient and economical way.
3. Visionary and Leadership quality:
   To be successful, the entrepreneur should have a clear vision of his new venture. However, to turn the idea into reality, a lot of resources and employees are required. Here, leadership quality is paramount because leaders impart and guide their employees towards the right path of success.
4. Open-Minded:
   In a business, every circumstance can be an opportunity and used for the benefit of a company. For example, Paytm recognised the gravity of demonetization and acknowledged the need for online transactions would be more, so it utilised the situation and expanded massively during this time.
5. Flexible:
   An entrepreneur should be flexible and open to change according to the situation. To be on the top, a businessperson should be equipped to embrace change in a product and service, as and when needed.
6. Know your Product: 
   A company owner should know the product offerings and also be aware of the latest trend in the market. It is essential to know if the available product or service meets the demands of the current market, or whether it is time to tweak it a little. Being able to be accountable and then alter as needed is a vital part of entrepreneurship.

Importance of Entrepreneurship

1. Creation of Employment:
   Entrepreneurship generates employment. It provides an entry-level job, required for gaining experience and training for unskilled workers.
2. Innovation:
   It is the hub of innovation that provides new product ventures, market, technology and quality of goods, etc., and increase the standard of living of people.
3. Impact on Society and Community Development:
   A society becomes greater if the employment base is large and diversified. It brings about changes in society and promotes facilities like higher expenditure on education, better sanitation, fewer slums, a higher level of homeownership. Therefore, entrepreneurship assists the organisation towards a more stable and high quality of community life.
4. Increase Standard of Living: Entrepreneurship helps to improve the standard of living of a person by increasing the income. The standard of living means, increase in the consumption of various goods and services by a household for a particular period.
5. Supports research and development: 
   New products and services need to be researched and tested before launching in the market. Therefore, an entrepreneur also dispenses finance for research and development with research institutions and universities. This promotes research, general construction, and development in the economy.

What are Sensing Entrepreneurial Opportunities?

The base of sensing entrepreneurial opportunities is to generate ideas for new business. There are many sources for new business opportunities for individuals. 

These opportunities may be derived out of the following thought process: 

• When there is inefficiency in the market, there is an idea of how to correct that inefficiency, and you have the resources and capability—or at least the ability to bring together the resources and capability needed to correct that inefficiency—that could be a very interesting business idea. 
• In addition, if you see a product or service that is being consumed in one market, that product is not available in your market, you could perhaps import that product or service, and start that business in the local market. 
• You can tap numerous sources for new ideas for businesses. The most promising source of ideas for new business comes from customers—listening to customers. That is something we ought to do continuously, in order to understand what customers want, where they want it, how they want a product or service supplied, when they want it supplied, and at what price.
• Many sources of ideas come from existing businesses, such as franchises. In the case franchises, you could license the right to provide a business idea, you could work on a concept with an employer who, for some reason, has no interest in developing that business. He could have an arrangement with that employer to leave the company and start that business.

The ideas are generated out of the unmet needs in the market. In the age of internet, we can see the examples where the entrepreneurs started business on the basis of perceived need of the customer. The companies like Flipkart.com, ebay.com etc., where they saw the opportunity to provide customers a virtual online market for buying products. They provided platform to buyers and sellers to directly connect to the market. 

What is Environment Scanning?

Environmental scanning is the process of gathering information about events and their relationships within an organization's internal and external environments. The basic purpose of environmental scanning is to help management determine the future direction of the organization.

Once an idea is generated for starting a business, the next step is to conduct environmental scanning to further analyze the idea. The following steps are involved in the environmental scanning: 

• Customer Survey: The very first step in environment scanning is to conduct a customer survey. This survey should answer some of the basic questions like who is my customer. What does the customer want to buy? When does the customer want to buy? What price is the customer willing to pay? In nutshell, it should be analyzed whether a real market exists for the proposed product or services or not. 
• Competitor Analysis: It should be figured out who else is in the market, and what are they doing for the customers. Are they supplying a similar substitute product or service as you have in mind? That is the second thing you have to establish, and by doing that, you can understand better what need is not met at the moment. That will also give you the opportunity to zero in on the price points and feature points of where you can differentiate yourself from existing players in the market. 
• Industry Analysis: You also need to conduct a broader industry analysis to understand the attractiveness of the industry you're going to enter. Is the industry growing or shrinking? What power do the suppliers have in this industry? How many buyers are there? Are there substitute products? Are there any barriers to entry? If so, what are they? That is very important for you to understand, because it will help you realize whether the industry you're thinking of entering is attractive. 
• Regulatory Framework: In addition, you may want to look at regulations that affect that industry. Are there any regulations that you would be subject to? This especially applies in the life sciences sector, where there are strict regulations that control the supply of products into the market. In India, the FPO, the Food Processing Organization, is a significant regulator.

The environment analysis establishes the fact as to what kind of product or services or combination of product or services is worth launching in the market. It provides a fair amount of visibility to the risk and opportunities available in the market and how an entrepreneur can manage them as he starts his new business. 

Problem Identification

• Entrepreneur's Objective: The biggest sources of risk are the entrepreneurs themselves. Do they have the will not just to start the company, but also grow the company? Experience has shown that the prevalence of individuals such as Bill Gates or Michael Dell, Narayan Murthy, Azim Premji, Dhirubhai Ambani, Steve Jobs, that cannot only start companies, but also manage its growth—the prevalence of such entrepreneurs is relatively limited. 
• Technology Risk: A second source of risk is technology risk. To the extent that your company employs technology, there are obviously issues of, how long will this technology be the leading edge? 
• Product Risk: There exists the product risk. If you haven't developed a product yet, can you manufacture it? Will it work? 
• Market Risk: Another source of company risk is the market for the product. You need to be aware of two big uncertainties. First, what is the customer's willingness to buy? And second, what is the pace, if you're successful, at which competitors will be able to imitate you? One of the things you have to think about when you enter that market is how you can create barriers to imitation, so that if you're successful, the competition won't be able to imitate you very quickly. 
• Industry Risk: There are risks associated with the industry. Are there any factors in that industry that relate to availability of supply? In some cases, you need to have certain raw materials that are in limited supply, and that some suppliers might be able to take advantage of that. Barriers to entry might change. Regulations might change and adversely or positively affect your business.

The following are the components of financial risk: 

• Raising the Money: Will you be able to raise the money early on? At what valuation will you be able to do it? Will you be able to raise follow-up money? The business proposal should be attractive enough so that bankers and financial institutions can fund the requirement. 
• Meeting the Investor's Expectation: The investor's expectation of fair amount of return should be taken care of so that the additional sources of funding for future expansion are available.

What is Spotting Trends?

Another important step for sensing entrepreneurial opportunity is to spot the trend of the product or service in the market. 

The process of spotting trend is largely related to market demography like the age profile of the consumers and how quickly they change their preferences for a product or service. 

The entrepreneur has to ensure that the consumer needs and trend of following a product should be constantly monitored and it should be adequately met to stay in the business.
This can be seen in auto industry where gear lock for cars was manufactured to provide safety to auto users against theft. Similarly, central locking system, theft alarm etc., are provided as a safety feature in the cars. 

What is Creativity and Innovation?

The process of sensing entrepreneurship opportunity does not end with product and risk identification. Creativity and innovation are two important components in this process.
Generally, the terms "creativity" and "innovation" are used interchangeably and the two words are thought to be the same in meaning and context. 

• However, there is a difference in these two terms. Even before we try to understand these two terms we need to keep in mind that an idea is the starting point of creativity and innovation. Without ideas there cannot be any creativity or innovation.
• The word "creativity" is derived from the word "create". This means that creativity is to create something new out of its existing form or make something new altogether. It is not to create something out of nothing which only god can do. When an entrepreneur combines, changes or replies an existing idea to create a new idea having a value proposition which is called creativity. The quality of ideas may vary from brilliant and astonishing ideas to simple good and practical ideas. Nevertheless, having a mindset to evolve various ideas the cornerstone of entrepreneurship.
• Innovation is the next step of creativity. Once an idea is created and has worked reasonably well then an entrepreneur adds something new to the existing product or process so that it works better or fulfills different need. An example of innovation would laptop which was created out of the original idea of a desktop computer.
• The hallmark of a successful entrepreneur lies in the way he or she applies thought process to continuously evolve the product or service through new and innovative ideas. Some of the greatest ideas have not come on their own but there was some brain behind the thought. We can think of Bill Gates who came up with Microsoft Windows Operating System, Garaham Bell who came up with Telephone, Wright Brothers who came up with aeroplane etc. An entrepreneur should undertake the path of creating value by puling together a unique package of resources to exploit an opportunity. 

Selecting the Right Opportunity 

• The last step in the process of sensing entrepreneurship opportunity is to select the right opportunity. In the previous steps, entrepreneur has done a analysis of each and every idea available in terms of risk factors, market and customer response, environment scanning etc. 
• Now, he should decide which idea in terms of product or service is best suited to him. He should be able to evaluate these on the basis cost benefit analysis where he will get maximum return at a given cost. 
• There are other factors also which play an important role in selecting the right opportunity like future prospects, availability of resources etc.

FAQs - Frequently Asked Questions

Q.1: Who is the father of entrepreneurship?

Joseph Alois Schumpeter is regarded as the father of entrepreneurship. He introduced the concept of entrepreneurship.

Q.2: What are the two main types of entrepreneurship?

There are many types of entrepreneurship, two examples of such are:

• Small business entrepreneurship
• Large company entrepreneurship

Q.3: What are the key concepts of entrepreneurship?

The 4 key concepts of entrepreneurship are as follows:

• Innovation
• Risk taking
• Vision
• Organisation

Q.4: What are entrepreneur traits?

Some of the most important entrepreneurial traits are:

• Passion
• Risk taking ability
• Persisting nature
• Innovative
• Leading from the front
• Ethical in nature