Process-Types of Entrepreneurship- TU Notes-Bikram Adhikari

The  process  of  creating  and  managing  a  new  enterprise  is  called  the  entrepreneurial process. It has four distinct phases starting from identifying and evaluating the opportunity for managing the enterprise. The phases are discussed below in detail. 

Identify and Evaluate the Opportunity 

Opportunity  is  the  favorable  condition  in  the  environment.  In  the  first  step  of  the  entrepreneurial  process,  the  entrepreneur  should  identify  the  likely  opportunity  for  the  new  venture.  Opportunity  may  be  identified  through  inputs from customers, business associates, channel members, and technical people.  It arises from the development of the general environment such as, political,     economic,     sociocultural,     technological,     legal,     and     global     components.

Once  an  opportunity  is  identified  through  varied  sources,  it  should  be  evaluated. There are some considerations for evaluation of the opportunity.  

  • First,  the  opportunity  should  cover  a  significant  market  size,  which  is  profitable with growth potentialities. 
  • The  real  as  well  as  the  perceived  value  of  the  opportunity  should  be  high. 
  • The opportunity should be suitable in terms of risk and return. 
  • It should match the personal skills and goals of the entrepreneur. 

The identified opportunity should make sense with the business idea. 

Develop Business Plan 

A  business  plan  is  the  description  of  the  future  direction  of  the  business.  It  integrates   the   functional   plans   such   as   marketing,   production,   human   resource, and finance. It also provides a detail description of the business as well as industry. Once the opportunity is identified and evaluated, the next step  of  the  entrepreneurial  process  involves  development  of  the  business  plan.  A  business  plan  is  crucial  to  exploit  market  opportunities.  It  is  also  useful to determine the resource requirement, obtaining those resources and managing the venture successfully.

Determine and Obtain the Resource

As mentioned earlier, entrepreneurship is directed towards the exploitation of  opportunity.  For  this,  resources  are  vital.  The  determination  of  resource  requirement  involves  assessment  of  the  current  resources  of  the  enterprise.  After   assessment   of   the   current   resources,   the   resources   required   for   exploitation   of   particular   opportunity   should   be   determined.   The   gap   between  the  existing  resources  and  required  resources  should  clearly  be  identified. After  the  gap  is  identified,  the  next  step  of  the  entrepreneurial  process  is  to  acquire  the  needed  resources.  The  entrepreneur  tries  to  give  up  less  control  as much as possible while acquiring resources. In other words, He/She/she strives to maintain a large ownership as possible. 

Manage the Enterprise 

Once   the   resources   are   obtained,   the   next   and   final   step   of   the   entrepreneurial   process   is   to   manage   the   enterprise.   It   involves   the   implementation  of  the  business  plan.  In  this  stage,  the  management  system  and  organizational  structures  are  clearly  spelled  out.  The  critical  success  factors   are   determined.   A   strong   control   mechanism   is   established   to   manage the enterprise successfully.

Types of Entrepreneurship

Entrepreneurship   involves   creation   of   new   ventures.   It   is   based   on   innovation and the desire of certain outcomes. It may also be viewed as the search  of  new  opportunities.  Entrepreneurship  is  guided  by  insight  and  a  vision  of  the  entrepreneur.  Hence,  an  entrepreneur  starts  up  ventures  in  many   ways.   According   to   the   nature   and   goal   of   the   entrepreneur,   entrepreneurial  venture  can  be  started  in  three  ways.  They  are  Salary-Substitute Firms, Lifestyle Firms and Entrepreneurial Firms.

Salary-Substitute Firms

Salary-Substitute  Firms  are  small  firms.  They  are  called  Salary-Substitute  Firms as they are started to earn a certain level of income similar to earning the  salary  from  the  employer.  In  simple  words,  the  objective  of  this  type  of  firms   is   to   substitute   salary   income   through   entrepreneurial   income.   Examples of such firms include dry cleaners, retail stores, accounting firms, hair  salons,  and  restaurants.  They  offer  standardized  products  and  services  to  the  customers,  which  may  not  be  innovative.  They  are  happy  to  serve  local customers and normally compete on a price basis.

Lifestyle Firms 

Lifestyle  Firms  provide  the  owner  opportunity  to  pursue  certain  lifestyle  while  earning  livelihood.  Examples  include  photographer,  tour  guides,  and  golfers. They are not innovators and they do not wish to grow rapidly. They are largely based on habits or hobbies.

Entrepreneurial Firms

These  are  the  firms  which  bring  new  products  and  services  to  the  market.  They  seek  and  create  market  opportunities  regardless  of  the  resources  they  currently  control.  They  create  products  and  services  that  are  worth  taking.  They  attempt  to  offer  superior  customer  value.  Google,  Facebook,  and  Zynga are well-known, highly successful examples of entrepreneurial firms. They  create  products  and  services  that  have  worth,  and  are  important  to  their customers.

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