2 – Classifications and Models of Entrepreneurship

Introduction

Entrepreneurship is the most effective strategy for making money, particularly for those with a business sense. There are many types of entrepreneurs, each with positive and negative characteristics. To be successful in business, one must understand what type of entrepreneur he is and be self-aware. This is the first step in the process of becoming a better person. In a short period, a person can become an expert entrepreneur.

2.1 Types of Entrepreneurship

All active owner-managers are entrepreneurs, by definition. They can be divided into the following groups:

2.1.1 Classification Based on Ownership

Based on ownership, entrepreneurship can be divided into the following categories:

1. Founders or “Pure Entrepreneurs”: Founders, often known as “Pure Entrepreneurs,” start businesses. As the title implies, they are the business’s founders. They devise a company proposal and work hard to make it a reality. Dhirubhai Ambani of the Reliance Group, for example.

Individuals who have inherited a family-owned business from their dads and forefathers are known as second-generation operators. The Reliance Group, which includes Mukesh and Anil Ambani, sons of Dhirubhai Ambani, has been separated into two companies: Reliance – Reliance Industries Limited and Reliance – Anil Dhirubhai Ambani Group.

2. Franchisees: The term “franchisee” comes from a French word that means “free.” It’s a business model in which the parent company (the franchiser) licenses its trademarks and tried-and-true business practices to a franchisee in exchange for a regular payment. The franchisee has not only spent his money and time in the firm, but he has also conceptualised it. For instance, after a comprehensive review and training, NIIT has given its franchisee operations to local players. These franchisees employ the same curriculum, materials, and pricing strategy and grant the same degree. They split profit margins with the leading firm, NIIT, and receive training, curriculum design, and materials from the parent company.

3. Owner-Managers: An owner-manager is a person who acquires a firm from the founder and then invests his time and resources in it. Sabeer Bhatia is the founder and CEO of Hotmail, while Microsoft’s Bill Gates purchased the company for $400 million and became its owner-manager.

2.1.2 Classification based on Personality Traits and their Style of Running Business

1. The Achiever: These businesspeople have a strong personal desire to succeed. The only thing that motivates them is the desire to accomplish something in life, to make a mark in society, and to demonstrate their superiority. No matter how many obstacles stand in their way, they are unstoppable. They are self-driven and do not require any external stimuli. Their traits could be described as achievement personified. They are, without a doubt, go-getters. They will frequently create their business around their brand due to their personalities. These entrepreneurs have ambitions and are willing to take risks to achieve them. For example, Narayan Murthy, who was stable and employed, resigned and founded Infosys independently.

2. The Induced Entrepreneur: The Induced Entrepreneur is an entrepreneur motivated to start a business for external reasons. Examples of external influences include supporting government policies, unemployment, family support, facilitating institutional support, and so on. These types of business owners are more grounded in their approach. Several entrepreneurs established their businesses as SSIs when the government promised subsidies, tax refunds, and financial support for small-scale industries.

3. The Idea Generator: These entrepreneurs are highly creative individuals constantly seeking fresh company venture ideas. They can detect demand considerably earlier than others.

4. The True Manager: The real managers are methodical in their approach to business. They examine company realities, assess future demands regarding opportunities and dangers, and then take action based on the findings. Rather than abrupt transformations, they prefer gradual changes.

5. The True Achievers: The true achievers are vibrant. They want to see their goals and those of others who work with them, such as employees, suppliers, and distributors, met.

2.1.3 Classification Based on Business Type

1. Industrial Entrepreneur: An industrial entrepreneur is a businessperson involved in producing goods. He determines what people want and need and then creates products to meet those requirements and wants. This definition would essentially include all industrial entrepreneurs.

2. Trading Entrepreneurs: A trading entrepreneur engages in trading operations (purchasing and selling goods and services) rather than product manufacturing. He locates potential markets, drives demand, and piques buyers’ interest in buying a product.

3. Corporate Entrepreneur: A corporate entrepreneur is a person who uses his or her creativity to organise and manage a business venture (which is registered under some statute or act that gives it a separate legal entity).

4. Agricultural Entrepreneur: Agricultural entrepreneurs run businesses related to agriculture. Examples include farm equipment, fertilisers, and other agricultural inputs. They supply supporting items that can help expand agricultural productivity through biotechnologies, mechanisation, and yield improvement.

2.1.4 Classification Based on the Stages of Development

1. First-Generation Entrepreneur: A first-generation entrepreneur is a technologist who establishes an industrial unit using innovative skills. He combines many technologies to create a commercial product or service.

2. Modern Entrepreneur: A modern entrepreneur starts a business to meet the market’s current needs and engages in business endeavours that align with contemporary socio-cultural trends.

3. Classical Entrepreneur: A classical entrepreneur, also known as a stereotypical entrepreneur, is someone whose goal is to maximise economic returns at a level that is consistent with the firm’s existence, with or without development.

2.1.5 Other Classifications

1.  Innovative entrepreneurs are the forerunners of change in the corporate world. They are full of innovative ideas and provide society with innovative products. Many crucial changes in our society occur due to these creative entrepreneurs. They experiment with different concepts and run permutations and combinations to develop new products and services. Thanks to these clever entrepreneurs, our society is now more networked; we began networking by transferring letters through a messenger (tales even mention pigeons as messengers), then formal postage, and finally, telephonic chat, mobile, internet, email, and video conferencing. The advancements in networking have been tremendous and continue to bring the world closer together every day. It is not necessary to invent; instead, incremental values (such as ringtones, cameras, mobile television, and mobile radio in mobile phones) can be added, or the utility of the same product can be changed (like using mobile for net surfing).

2. Imitative Entrepreneurs: Imitative entrepreneurs take a successful idea and adapt it to their needs. They are risk averse and hence do not try new ideas or products; yet, if the market adopts a new concept, they imitate it and enter the competition.

3. Entrepreneurs Fabian: Fabian entrepreneurs are incredibly cautious and sceptical. They are hesitant to make any changes in their organisation, and when they do, it is because they fear losing their market share.

4. Women Entrepreneurs: In 1988, a definition of a Women’s enterprise was developed for the first time. This definition defines a Women’s enterprise as an SSI unit/industry-related service or business enterprise managed by one or more women entrepreneurs in propriety concerns or in which she/they individually or jointly have a share capital of not less than 51% as a company/member of a cooperative society.

5. Copreneurs: Copreneurs are husband-and-wife teams that create and run a business together. Their rise in recent years reflects the growing importance of women in business.

6. Drone Entrepreneurs: Drone entrepreneurs often resist embracing creativity and adapting to change. They resist altering their organizational practices, equipment, and policies in response to evolving circumstances. Instead of embracing innovation, they are more inclined to endure losses rather than implement necessary changes. In today’s highly competitive environment, such entrepreneurs risk being marginalized or ousted from the market due to their inability to adapt to shifting business dynamics.

2.2 Entrepreneurship Models

But, first and foremost, what is corporate entrepreneurship? The process by which teams within an established company conceive, nurture, launch, and manage a new business that is distinct from the parent company but leverages the parent’s assets, market position, capabilities, or other resources is defined as the process by which teams within an established company conceive, foster, launch, and manage a new business that is distinct from the parent company but leverages the parent’s assets, market position, capabilities, or other resources. Corporate venture capital, on the other hand, focuses on financial investments in external enterprises. Even though it frequently involves outside partners and skills (including acquisitions), it typically calls for significant resources from the established organization, and inside teams are normally in charge of managing projects. It’s also distinct from spinouts, generally built as stand-alone businesses that don’t rely on present corporate activity to fulfil their full potential.

2.2.1 The Opportunist Model

All businesses start as opportunists. Because there is no specified organisational ownership or resources, corporate entrepreneurship relies on the efforts and serendipity of brave “project champions” — people who toil against the odds, frequently despite the corporation, to create new firms.

Only trusting corporate cultures open to experimenting and having various social networks underneath the formal hierarchy (in other words, environments where several CEOs can say “yes”) function well for the opportunist model. Good ideas can easily fall through organisational holes without this setting or obtain insufficient support. As a result, many businesses find the opportunist strategy unreliable. When companies are serious about organic growth, they know they need more than a scattershot, haphazard strategy. Due to its earlier success with less invasive surgical treatments, Zimmer has institutionalised its development techniques to bring new enterprises to market. As a result, the business has begun to move away from the opportunist model.

2.2.2 The Enabler Model

The enabler model’s primary idea is that, if provided appropriate assistance, individuals across a company will be willing to generate innovative concepts. Dedicating resources and procedures (but not formal organisational ownership) allows teams to pursue opportunities independently as long as they meet the organization’s strategic framework. Companies provide clear criteria for selecting which opportunities to pursue, application guidelines for funding, decision-making transparency, recruitment and retention of entrepreneurially minded employees, and, perhaps most importantly, active support from senior management in the most evolved versions of the enabler model.

2.2.3 The Advocate Model 

What about situations where money isn’t an issue? In the advocate model, a corporation provides organisational ownership for forming additional enterprises while giving the core group a tiny budget. Advocate organisations serve as evangelists and innovation experts, assisting business units with corporate entrepreneurship.

2.2.4 The Producer Model 

Several businesses, like IBM, Motorola, and Cargill, encourage corporate entrepreneurship by forming and sponsoring formal groups with considerable allocated money or active influence over business-unit funding. Like the enabler and advocate models, one goal is fostering latent entrepreneurs. On the other hand, the producer model tries to safeguard new projects from turf wars, stimulate cross-unit collaboration, generate potentially disruptive enterprises, and provide opportunities for leaders to pursue careers outside their business units.

2.3 Problems Faced by Entrepreneurs in India

The following issues confront Indian businesspeople:

• To use result-oriented and consumer-oriented marketing tactics.
• To comprehend, confront, and survive the globalisation period.
• We are improving the manufacturing process and producing high-quality goods.
• To take full advantage of commercial opportunities due to India’s economic liberalisation since 1991.
• To replace old technology with newer, more advanced technology.
• To motivate and effectively manage the requirements and expectations of Indian women and young managers.
• Professionally manage the company’s financial activities.
• To strike a balance between profit-making and social welfare operations.

The following are the issues that Indian entrepreneurs face:

2.3.1 Globalization’s Challenge

A few years ago, Indian businesses had to compete against regional and national rivals. However, the situation has evolved and has become far more complex than it was previously. Almost every country has now liberalised its economy, and the entire world (globe) has become one gigantic global market.

Indian entrepreneurs must prepare themselves with new, better, inventive business methods and abilities to thrive in this competitive globalisation era. They must cheerfully accept this worldwide challenge and do their best to pursue business possibilities to establish a leading position in this constantly changing and difficult open market.

In today’s global competitive environment, Indian entrepreneurs must compete against well-established multinational corporations. For example, if entrepreneurs decide to create a beverage company, large international firms such as Coca-Cola and Pepsi will likely be competitors.

Large multinational corporations have enormous financial resources (surplus funds), a global presence (branches around the world), and effective teams of wise managers and experienced employees (skilled human resources). They sell high-quality goods and services at lower prices and employ superior marketing techniques.

The substantial advantages of multinational firms make it extremely difficult for Indian entrepreneurs to compete. As a result, they face a significant obstacle.

Indian entrepreneurs must develop in all aspects of their businesses, including production, marketing, and finance. They must use current technology, fresh processes, and efficient and highly motivated people to compete.

2.3.2 India’s Liberalization, 1991

Liberalization is the process of granting someone the liberty or freedom to do something that was formerly limited, barred, or outlawed.

In the context of this article, liberalisation refers to removing all barriers to entrance and expansion in commerce.

In 1991, the Indian government began the process of liberalisation. When it was established, private entrepreneurs were given the liberty (freedom) to start any firm in any open domain (unreserved sector) of their choice. However, there were a few exceptions to this openness, which included railways, water supply, defence, and other reserved public sectors that could only be operated and managed by the Indian government.

The Ambani family, which runs the Reliance Group of Industries, made the most of India’s liberalisation. Other entrepreneurs must examine their moves and attempt to follow in their footsteps by wisely charting their paths. Again, this is not a simple undertaking; rising fierce competition has made it much more challenging for Indian and foreign firms.

Indian entrepreneurs, on the other hand, can overcome this formidable competition by focusing more on selling high-quality yet distinctive goods and services at the lowest possible costs.

2.3.3 Adapting a Modern Technology

Science and technology are rapidly advancing. Modern technology increases the quality of manufactured goods and services, lowers manufacturing costs, and expedites manufacturing. Any company that produces high-quality goods at a cheaper production price and at a faster rate is highly competitive. As a result, every organisation must keep up with new, developing technologies and adapt them regularly to remain competitive.

As a result, it is always preferable to replace old technology with new technology. Modern machines must be used to replace old machines. An Indian entrepreneur faces a significant hurdle in this area. He should try to balance old and new technology if he has financial difficulties.

2.3.4  Changing Workforce in India

The workforce in India has changed dramatically in the last decade. According to statistics, men’s dominance in the workforce is dwindling by the day. A new breed of highly educated Indian women has entered the workforce. They have established themselves as effective employees and professional supervisors, breaking all traditional and societal barriers. A woman professional working in a corporate office is persistent nowadays. The increased presence of women in the workforce has presented new obstacles to Indian business owners.

To effectively deal with women’s workplace obstacles, Indian entrepreneurs must be aware of and adhere to the unique labour laws that apply to women. They must provide improved working conditions, a safe setting, and other amenities for female employees. It is essential to take extra precautions to ensure they are treated with decency and respect. Their grievances or complaints about physical or mental harassment must be handled quickly, and action must be taken as soon as possible. Working women are more stressed than men in the workplace. It’s true because they have dual responsibilities every day. They must manage their professional occupations while caring for their children, families, and household responsibilities. This rise in their responsibilities puts them under mental and physical strain.

Understanding women’s dual roles, employers can help to reduce stress by providing adequate maternity leave, giving separate toilets and washrooms, implementing favourable work schedules that do not interfere with their domestic lives, providing health insurance or, at the very least, a free routine medical check-up, and providing employee benefits that can improve their lives.

Employers must remember that a happy, truthful, and hardworking woman will always give her all to the company she works for. This provides a strong return on an employer’s kind and humane investment.

Along with dealing with women in the workforce, Indian entrepreneurs face a significant issue in dealing with the younger generation. Most organisations now hire managers who are young, dynamic, and ambitious graduates with high goals to achieve. These executives are eager to work hard but demand solid compensation for their financial, physical, and psychological needs. These restless youngsters must be engaged in demanding activities and fascinating work assignments, and appealing remuneration, incentives, perks, or employee benefits must be provided, among other things. If they don’t, they’ll resign and leave the company, then go to work for competitors. Loyalty is no longer as important as it was a few years ago.

The Indian entrepreneur must meet this challenge by consistently training, developing, and inspiring these young minds.

2.3.5  Marketing is a Big Challenge

Companies have devised many innovative marketing strategies to promote their goods and services. High-pressure sales tactics are employed. Children are frequently targeted in ads. As a result, kids persuade their parents to buy the things they find appealing. Advertising spreads marketing messages using numerous media, such as television, newspapers, magazines, the internet, radio, cell phones, billboards, etc. Modern marketing has been inextricably linked to advertising.

Every Indian entrepreneur faces a significant marketing hurdle. He must assemble a capable and seasoned marketing staff. He needs to coach and grow this group into a results-oriented unit. High compensation, attractive incentives, and large commissions are required to drive his marketing crew.

An Indian entrepreneur must meet customers’ demands and expectations to the best of his ability. He must conduct market research and design his product according to the consumers’ likes and preferences. He needs to sell high-quality items at a lower cost and offer after-sale support. In other words, he has to make his company more customer-focused and service-oriented. He must always provide total value for his consumers’ money. Otherwise, they will lose faith in his brand and turn to competitors.

2.3.6 Business Finance Management

A company’s finances are its lifeblood. It has the power to make or break a company. Under-capitalization and over-capitalization are both detrimental to a company’s success. An Indian entrepreneur faces a significant issue in managing his company’s finances. He must effectively manage both fixed and working capital. He needs to get money from the appropriate people. He must appropriately handle his cash flow. He must wisely invest his surplus earnings. He needs to build up enough reserves and surpluses. He must allow sufficient depreciation for his fixed assets to replace them when they become obsolete. He must budget for machine repairs and maintenance. He must also provide for his family while avoiding bad debts.

2.3.7 Obstacles in the Production Field

In the sphere of production, Indian entrepreneurs encounter numerous hurdles. They’ll have to replace all the old plants and machinery with newer, more modern ones. Their production personnel must be trained regularly. To make high-quality finished goods, they must use high-quality raw materials. They’ll need a sound inventory management system. Overstocking and understocking will be avoided as a result. Overstocking will stifle working capital, while understocking will stifle production. Entrepreneurs in India should set aside a portion of their profits for R&D. (R&D). Quality Control must be given considerable attention (QC). To ensure that their completed goods are of good quality, most organisations now adopt Total Quality Management (TQM).

2.3.8 Balancing Economic and Social Objectives

This is also a significant difficulty for Indian businesspeople. They must strike a balance between high-profit and social-benefit operations. They must use contemporary machines without creating job losses or environmental damage. They must make a profit without compromising the quality of their products or services. They need to make money without charging exorbitant prices for their goods. They must not pollute the environment in any way. They must acknowledge their social responsibilities and donate some of their profits (money) to charitable organisations. They are responsible for paying all of their taxes and charges. They must refrain from using unfair and immoral tactics to combat cutthroat competition.

REVIEW QUESTIONS:

1. On what basis can entrepreneurship be classified?
2. What is meant by the term “pure entrepreneurs”?
3. Who is considered an induced entrepreneur, and what factors influence them?
4. How do real managers differ from real achievers?
5. Compare and contrast a trading entrepreneur and an industrial entrepreneur, providing an example of each.
6. What activities are typically undertaken by agricultural entrepreneurs?
7. How can entrepreneurs be classified based on the stages of development?
8. Provide a brief overview of drone entrepreneurs.
9. Explain the concept of an innovative entrepreneur and give two examples of entrepreneurs known for their innovations.
10. Define the term “copreneurs” and explain its significance in entrepreneurship.
11. What are the different models of entrepreneurship?
12. What impact does liberalization have on entrepreneurship?
13. Why is marketing often a significant challenge for entrepreneurs?
14. How does the changing workforce affect entrepreneurship?