01 & 02 Entre Mgmt Session 1 to 3

ENTREPRENEURSHIP MANAGEMENT

Prof Bharat Nadkarni

Reference Books• Entrepreneurship by Hisrich & Peters• Entrepreneurship Management by P N Singh & J C Saboo• Entrepreneurial Management by R K Mittal• Entrepreneurship Development – Programmes & Practices

by J S Saini• Entrepreneurship – strategies and resources by Marc D

Dollinger• Indian Entrepreneurship – its past and present by V

Chernovskaya

Entrepreneurship Management


Entrepreneurial TraitsNeed for achievementHigh level of motivationCreative / InnovativeModerate risk takerAgility / quickness in analysing and picking up opportunitiesSelf ConfidenceExcellent Leadership QualitiesGood business acumenIndependence of thought & action Flexible/ Ready to changeResilience

Entrepreneurship Management Who is an Entrepreneur“Entrepreneur”, a french word literally translated means go between. Oxford Dictionary defines it as a person who organizes a commercial undertaking involving personal financial risk.“An Entrepreneur is one who organizes and operates an enterprise for personal gain. He pays current prices for the materials consumed in the business, for the use of the land, for the personal services he employs and for the capital he requires. He contributes his own initiative, skill and ingenuity in planning, organizing and administering the enterprise. He also assumes the chance of loss and gain consequent to unforeseen and uncontrollable circumstances. The net residue of the annual receipts of the enterprise after all costs have been paid, he retains for himself.”

Entrepreneurship : Definition

Entrepreneurship is the process of creating something different with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, social risks and receiving the resulting rewards of monetary and personal satisfaction and independence.Points to note1. Creating something different with value2. Devoting necessary time & effort3. Assuming accompanying financial, psychic and social risks4. Receiving resulting rewards – Monetary, Personal satisfaction, independence


Decision Process for a potential entrepreneur

Change from present lifestyle- Work Environment

- Disruption

Form new enterpriseDesirable Possible

- Cultural - Government

- Family - Background

- Teachers - Marketing

- Peers - Financing

- Role Models

Entrepreneurship Management Origin & DevelopmentMarco Polo as a Trader

Thomas Edison as an Inventor

Narayan Murthy / Shahnaz Huassain as Innovators

J N Tata & Dhirubhai Ambani as Visionaries

Venture Capital conceptThe function of an entrepreneur is to reform or

revolutionize the pattern of production by exploiting an invention or

more generally an untried technological possibility for

producing a new commodity or producing an old one in a new way,

opening a new source of supply or a new outlet for products by

re-organizing a new industry.


Challenges InvolvedPerson who actually starts his/ her own business, the experience is filled with enthusiasm, frustration, anxiety and hard work. There is a high failure rate due to:

External Factors Inflation, recession, lack of infrastructure,

corruption, economic & political uncertainty, Intense competition.

Internal Factors Lack of capital, poor sales, lack of

managerial ability.

WHAT THEN CAUSES A PERSON TO MAKE THIS DIFFICULT DECISION?


Entrepreneurial Behaviour (EB) is a function of an individual’s personality characteristics and

environmentalFactors. This could be represented as

EB = f (P,E)whereP = Personality characteristicsE = Environmental factors, such as• Social/ psychological factors including family, peer

group, formal and informal association etc• Financial• Material availability• Technology availability/ applicabilityThese environmental factors could be either

nurturant orimpediments to entrepreneurial development.

Entrepreneurship ManagementCase StudyWorking for oneself is better than working for somebody else was clearly driven home by one of the American Professors at the seminar held at Taj in 1980s. We were discussing a case on entrepreneurship. He asked Ashish, my teammate, “How much profit your company is making?”“It made about Rs 1,00,00,000 ( One Crore) last year”, Ashish replied.“How many managers are there in your company”. The American Professor asked.“Ten”, Ashish replied.“How much each of the managers are getting”. The Professor asked.“They are all getting different salaries but on an average they are getting around Rs 30,000 a year”, Ashish replied. That incident happened 30 years back.

Entrepreneurship Management“That means that the managers together are getting ten times Rs 30,000 i.e. Rs 300,000 per year. And because of your managerial capability the company is making Rs One Crore. That makes managers take away is only 3 per cent. Are you not being exploited? Why don’t you make Rs Ten lakhs as your share, yourself? That is 10 per cent. Why do you allow your managerial capabilities to be exploited by others? Why don’t you exploit it yourself?” the Professor went on. Ashish had no reply. Neither had we.But this case does give us a fodder to think. 1.Fantasy stage2.Tentative decision making stage3.Stage of exploration and preparation for the decision4.Commitment and Stability stage

Advantages of Entrepreneurship

To an Individual1. Self Employment2. Employment for near & dear3. Prolonged career for next generations4. Innovation & Creativity5. Unlimited income/ higher retained income6. Freedom to use own ideas7. Independence8. Satisfaction

Advantages of Entrepreneurship

To the Nation1. Provides larger employment2. Results in wider distribution of wealth3. Mobilises local resources, skills and savings4. Accelerates the pace of economic development5. Stimulates innovation & efficiency.6. Competition

Factors favouring Entrepreneurship1. Growth of education – science, technology & management2. Developed infrastructure facilities3. Financial assistance4. Training facilities5. Protective and promotional policies6. Globalization

Entrepreneurship Theories1. 1600 : French verb – Go between or To undertake2. 1700 : Person bearing Risks of Profit in a fixed price contract3. 1725 : Richard Cantillon – Person bearing risks is different from

capital supplier (Risk) 4. 1803 : J B Say – Shifts economic resources out of an area of

lower into an area of higher productivity & greater yields (Value Addition)

5. 1934 : Joseph Schumpeter – “ Innovation is the sole cause of profit.6. 1961 : David McClelland – Need for Achievement – N Ach factor -

highly motivated, energetic, moderate risk taker.

Entrepreneurship Theories .... Contd.7. 1964 : Peter Drucker – Searches for change, responds to it and

exploits as opportunity. (Opportunity focused)8. 1980 : Karl Vesper – Behaviour perceptions – Economists,

Psychologists, Businessmen, Politicians, (Environment)9. 1983 : Gifford Pinchot – Intrapreneur10. 1985 : Robert Hisrich – Creating something different with value,

devoting time and effort, assuming risks – financial, psychic and social, results – rewards, satisfaction (Leadership & Vision)


How entrepreneurship helps in economic

development Employment Generation

Distribution of economic power

Optimum utilisation of regional resources

Meeting the demand gap by seizing appropriate opportunity

Export potential

Regional development

Karl Vesper’s Theory



Entrepreneur to an economistOne who brings resources, labor, material and other assets into combinations that make their value greater than before and also one who introduces changes, innovations and a new order.

Entrepreneur to a psychologistOne who is typically driven by certain forces – need to obtain or attain something, to experiment, to accomplish or perhaps to escape authority of others.

Entrepreneur to a businessmanOne who appears as a threat and an aggressive competitor OR an ally, a source of supply, a customer or someone who creates wealth for others as well, who finds better ways to utilize resources, reduce waste and produces jobs for others.

Entrepreneurship & Leadership

MCCLELLAND’S NEED THEORY OF MOTIVATION

MCCLELLAND’S NEED THEORY OF MOTIVATION

• Three basic types of motivating needs • 1] need for power

– People with high need for power have a great concern for exercising influence and control

– They seek positions of leadership

– Good conversationalists

– Can be argumentative

– Forceful, outspoken, hardheaded and demanding

– Enjoy teaching and public speaking

MCCLELLAND’S NEED THEORY OF MOTIVATION • 2] need for affiliation

– Derive pleasure from being loved and tend to avoid the pain of being rejected by a social group

– Concerned with maintaining pleasant social relationships

– Enjoy sense of intimacy and understanding

– Ready to console and help others in trouble

MCCLELLAND’S NEED THEORY OF MOTIVATION • 3] Need for achievement

– Have an intense desire for success and an equally intense fear of failure

– Want to be challenged

– Set moderately difficult goals for themselves

– Take realistic approach to life

– Would analyse and assess problems and take personal responsibility of completing a job

– Like specific and prompt feedback on how they are doing

MCCLELLAND’S NEED THEORY OF MOTIVATION • How it applies to managers • Entrepreneurs : showed very high need for achievement ; fairly

high need for power ; low in their need for affiliation

– In small companies/ Ventures : president/ entrepreneur has a very high achievement motivation

– In large companies :

– CEO/ Entrepreneur tend to be average in achievement but stronger in power and affiliation

– Entrepreneurs: rated higher in achievement motivation


Innovation and Entrepreneurship

Prof Bharat Nadkarni


Breaking of the Circular Flow

Schumpeter’s Model

Profits caused by a particular innovation tends to be competed away as other imitate and adapt that. But if the entrepreneur comes out with another innovation at that time when the favourable effects of the former innovation are dying out, he will make profits again. Therefore, as long as innovation exist, profits continue to arise out of them. According to Schumpeter, Innovation is the sole cause of Profit.


Thank You

Documents

01 & 02 Entre Mgmt Session 1 to 3