Entrepreneurs All Chapters Note

7/26/2019 Entrepreneurs All Chapters Note

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CHAPTER:ENTREPRENEUR

Concept:

Economists has defined entrepreneur as a person who bring resources and generatewealth. He is a person who introduces changes, innovations and new order .

Psychologist has viewed entrepreneur as a person who is typically driven by certain

forces, like the need to attain or obtain something, to experiment, to accomplish or

to escape the authority of others.

The person or group of person who creates new idea, innovate or invent new thing,

bear risk, manage resources and turn into successful business is called Entrepreneur.

Economists usually treat their service as separate factor of production calledEntrepreneurship. Entrepreneur is the only factor of production whose role is to

combine and organize other factors of production. The entrepreneur sees the value

of a new idea and is able to organize and carry out the job of turning it into cash .

They are the persons who shift economic resources out of an area of lower into an

area of higher productivity and greater yield. The term entrepreneur may be properly

applied to those who incubate (Develop) new ideas, start enterprises based on those

ideas and provide added value to society based on their independent initiative .

Entrepreneur as a Risk-Bearer, entrepreneur as an organizer, and entrepreneur as a

innovator. In conclusion we can say that Entrepreneur is the one who organizes and

manages a business undertaking, assuming the risk for the sake of profit. He is the

risk and uncertainty bearer, innovator, organizer of factors of production and effortful

for creating something new.

Characteristics of an Entrepreneur or Entrepreneurial Traits:

1.

Desire for responsibility: The entrepreneurs feel personal responsibility about

the result of the ventures in which they are associated.

2. Preference for moderate risk: the entrepreneurs are calculating risk taker

instead of being wild risk-takers. They rarely play gamble.

3. Confidence in their ability to succeed: the entrepreneurs have ample confidence

in their ability to succeed. They are optimistic regarding their chance to

succeed.

4. Desire for immediate feedback: the entrepreneurs want to know how they are

doing work. They are continuously interested for reinforcement.


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5. High level of energy: the entrepreneurs have high level of energy than average

men. To be a successful entrepreneur, work long time and labor hard is a

rule rather than exception. Their morale is like this the harder you fall, the

harder you bounce.

6. Future orientation: the entrepreneurs have well-defined sense of searching

opportunities. They always look forward. They are less interested in what was

done yesterday.

7. Skill of organizing: the entrepreneurs are well organizer. They group tasks

necessary to achieve goal and allocate task to various positions. He delegates

authority and responsibility of each position. He must also have established

harmony of efforts.

8.

Desire for high achievement: the main force that motivates the entrepreneurs

is the desire for high achievement. They have strong desire to achieve their

goal.

9. High degree of commitment: the entrepreneurs need full commitment to initiate

any venture successfully. They fully surrender their body, mind and money to

the business.

10.Flexibility: the entrepreneurs must flexible to adapt to the changing demand of

their customers and their businesses.11.Independence: the entrepreneurs do not like to be directed by others. They

like to work independent according to their routine.

12.Foresight: the entrepreneurs have good foresight regarding the future business

environment. They are able to forecast the likely future change in the market,

change in the attitude of the customers, technological progress.

13.Innovative: the entrepreneurs are continuously involved in innovation to make

necessary arrangement to meet the changing taste of the consumer . For this

they establish research and innovative centers.

Function of Entrepreneur:

1. Planning

a. Setting goals

b. Developing business plan

2. Organizing

a.

Grouping of Tasks


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b. Coordination

3. Mobilizing Resources

a. Financial resources

b. Human resources

c. Technology resources

4. Relationship Management

a. Exchange relationship

b. Professional relationship

c. Government relationship

d. Social relationship

5. Control

a.

Financial control

b. Production control

c. Management control

Types of Entreprneurs

1. Innovative Entrepreneurs: innovative entrepreneurs can be the following types:

a) Innovative: The entrepreneurs who make innovation are known as innovative

entrepreneurs. They introduce new products, initiate new production technique,and discover new market, or new energy, or new source of raw materials.

b) Imitative: The entrepreneurs who imitate the innovations made by the

innovative entrepreneurs are known as imitative entrepreneurs. They

themselves do not make dynamic innovations. They simply adopt the

technique and method initiated by others.

c) Fabian: the entrepreneurs who take extreme care while making any type of

experiment in their business and who are of skeptic (pessimistic) are known

as Fabian entrepreneurs.

d) Drone: the entrepreneurs, who reject the opportunity to make improvement in

the technique of production even if the return has decreased in comparison

the product of similar firms, are known as drone entrepreneurs.

e) Forced: they are the victim of circumstances. They forced to become

entrepreneurs to fashion their own economic livelihood.

f) Empire builder: the entrepreneurs who go on creating new ventures one after

another are empire builder.


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2. Behavioral

a) Solo operators: The entrepreneurs who work alone are called solo (alone)

operators.

b) Active partners: the entrepreneurs who operate the business as joint venture

are known as active partners.

c) Inventors: the entrepreneurs who discover new product from their capacity

are called inventors.

d) Challengers: the entrepreneurs who make business due to challenges are

called challengers. After meeting one challenge they search for other

challenges.

e)

Buyers: the entrepreneurs who like to run the business by buying the business

in operation are called buyers.

f) Life timers: the entrepreneurs who take business as inseparable part of their

life is known as life timers.

3. Focus Group

a) Women: the women involved in independent business are known as women

entrepreneurship.b) Minority: minority races are also involved in business which is called minority

entrepreneurship.

c) Immigrant: The people who go from one country to another country and run

business are known as immigrant entrepreneurs.

d) Part-time: the person who do not sacrifice fixed salary but also run their

independent business are called part-time entrepreneur.

e) Home-based: the entrepreneurs who run business from their home are called

home-based business.

f) Family business: the business in which the financial control of the company

lies with the two or more than two members of the family is called business

of family ownership and the persons involved are known family business

owners.

g) Corpreneur: the couples who work together as co-owner in their own business

are known as corpreneurs.

h)

Intrapreneur: the corporate entrepreneur is known as intrapreneur.


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Distinction between an Entrepreneur and a Manager:

Entrepreneur and manager are not the same terms. In reality these two terms denote

different meaning. An entrepreneur may initiate new business and may work also as

the manager of that business. But managers cannot be an entrepreneur. The

entrepreneur is the owner of the business firm whereas the manager is an employee.

The entrepreneur receives dividend or profit for making investment, which is uncertain.

On the other hand, the manager receives salary for the work done which is fixed

and certain. A firms managers are agents who work for the firms owners, who are

the principals. The main points of difference between an entrepreneur and a manager

have been shown in table below:

Points Entrepreneur Manager

1. Motive The main motive of entrepreneur

is to start a venture by setting

up an enterprise. He

understands the venture for his

personal gratification.

But, the main motive of a

manager is to render his

services in an enterprise already

set up by someone else.

2. Status An entrepreneur is the owner of

the enterprise.

A manager is the servant in the

enterprise owned by the

entrepreneur.

3. Risk-bearing An entrepreneur being the owner

of the enterprise assumes all

risks and uncertainty involved in

running the enterprise.

A manager as a servant does

not bear any risk involved in the

enterprise.

4. Rewards The reward is profit which is

highly certain.

The reward is salary which is

certain and fixed.

5. Innovation Entrepreneur acts as an

innovator also called a change

agent.

Manager simply translates the

entrepreneurs ideas into

practice.


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6. Qualification

s

An entrepreneur needs to

possess qualities and

qualifications like high

achievement motive, originality

in thinking, foresight, and risk

bearing ability and so on.

A manager needs to possess

distinct qualifications in terms of

sound knowledge in

management theory and

practice.

Concept of intrapreneur

The corporate entrepreneurship is known as intrapreneurship and who perform such

task is known as intrapreneur. The managers who make innovation by remaining

within any firm are known intrapreneurs. Intrapreneurs are the creative employee of

the organization who has ability to innovate some things. Intrapreneurs are not the

owner of the business. They do not have any risk, profit or loss.

Difference Between entrepreneur and intrapreneur:

Difference Entrepreneur Intrapreneur

1.Dependency An entrepreneur is independent in

his operation.

But, an intrapreneur is

dependent on the

entrepreneur. i.e., the

owner.

2. Raising of

funds

An entrepreneur himself raises

funds required for the enterprise.

Funds are not raised by

the intrapreneur.

3. Risk Entrepreneur bears the risk

involved in the business.

An intrapreneur does not

fully bear the risk involvedin the enterprise.

4. Operation An entrepreneur operates from

outside

On the contrary, an

intrapreneur operates from

within the organization

itself.


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Concept of Entrepreneurship

Entrepreneurship is related to coordination, innovation and performance of the

entrepreneur. The function performed by the entrepreneurs is known as

entrepreneurship. Entrepreneurship is to be an entrepreneur. Entrepreneurship refers

to the various activities done for the establishment and operation of an enterprise .

Hence entrepreneurship is a system of creating new business . Entrepreneurship is

the process of creating new idea and turning it into successful business . It involves

creativity and innovation. It involves creating new idea, bring together factor of

production, Plans organize, operates and assumes the risk of new venture and

creating to incremental wealth. It can be said that entrepreneurship is a process

which consists in doing things that are not generally done in the ordinary course ofbusiness routine.

The entrepreneurship is regarded as the engine of economic development. It has

resulted in millions of new ventures in the world. It has appeared as the driving force

for economic development. The interest in the concept of entrepreneurship is growing.

In conclusion, entrepreneurship means the process adopted by the entrepreneur for

the operation of the business. Since the function performed by an entrepreneur is

the entrepreneurship. Entrepreneurship is the creative process of exploiting

opportunities by starting new venture through resource pulling, risk taking, innovating

and managing for rewards. It is a change from present lifestyle.

The can be taken as the two faces of the same coin, which will be obvious from the

following table:

Entrepreneur Entrepreneurship

1. Person Process

2. Organizer Organization

3. Innovator Innovation

4. Risk-taker Risk-taking

5. Motivator Motivation

6. Creator Creation


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7. Visualize Vision

8. Leader Leadership

9. Imitator Imitation

10. Decision maker Decision-making

Features of Entrepreneurship/ Characteristics of Entrepreneurship


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1. Dynamic process:

2. Innovation

3. Risk bearing

4. Decision making

5. Accepting challenges

6. Organization

7. Skillful management

8. Making the business success

Factor Affecting Entrepreneurship:

1. Economic Factors

Economic factors (Free market economies/ capitalism, centrally planned

economies/ socialism,mixed economies.)

Capital

Human resources

Raw material

Market

Competition

Franchise

2. Non-economic factors

Political factors

Social factors

Psychological factors

Technological factor


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Entrepreneurship Decision Process:

1. Conduct opportunity Analysis: opportunity is a favorable condition in the

external environment. It enables an entrepreneur to start a new business . Ideas

provide opportunities. Entrepreneurs must have the ability to generate a large numberof ideas. Business opportunity identification consists of there steps:

Identifying sources of new ideas

Determining methods of generating new ideas

Selection of best idea

The entrepreneur can generate new ideas from the following sources:

Situation survey

Present work environment factors

Outside sources

Research and development

2. Develop business plan: A business plan is developed as road map of the

new venture. It sets goals to be achieved. It states the process and technology to

be used. It identifies target market. It determines product, price, and promotion and

distribution aspect. It describes finance and management aspects. Critical risks are

assessed. Milestones are set for implementation.

3. Setup the venture (Start-up): in this stage the new venture is established and

legal aspect of venture is determined. The legal form of venture can be proprietorship,

partnership and company. The scope can be service, manufacturing, construction and

infrastructural activities.

4. Acquire financial resources: Various options available for financing the new

venture are examined. Early stage funding can be from self, family, friends and

government sources. Growth stage finding can be debt from financial institutions or

public offer of shares.

5. Implement business plan: after acquiring financial resources, the proposed

plan is implemented by organizing resources and building management team.


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Role of Entrepreneurship in Economic Development

Economic development implies sustainable increase in quality of life . It encompasses

increase in per capita income, education, health, and environmental protection .

Entrepreneurship is the driving force for economic development. It plays a critical role

in economic development in the following ways:

1. Capital formation: the entrepreneurship promotes capital formation by

mobilizing the idle savings of the people.

2. Employment creation: the entrepreneurship creates employment opportunity

by initiating new business.

3. Increased productivity: entrepreneurship help in the optimum utilization of

natural resources including land, labor and capital available in the country . This

increase production and productivity.

4. Balanced development: the entrepreneurs operate business in the different

parts of the country on the basis of the availability of resources. This helps to achieve

the objective of balanced regional development or removing regional disparity of the

government.

5. Equitable distribution: entrepreneurship help in reducing to concentration of

economic power. They help in equitable redistribution of income, wealth, and political

power in the country. It is because they provide employment to the deprived, exploited

and poor people. The entrepreneurs make these people conscious.

6. Export promotion: entrepreneurs promote foreign trade by initiating new

products. This helps in earning foreign exchange and helps in reducing the

disequilibrium in balance of payment.

7. Industrialization: entrepreneur and entrepreneurship leads the country to

industrialization. There is an increase in the economic activities in the country. It

helps to transfer the people overly dependent on agriculture to the non -agriculture

sector.

Thus it is clear that entrepreneurship serves as a catalyst of economic development .

On the whole, the role of entrepreneurship in economic development of a country

can best be put as an economy is the effect for which entrepreneurship is the

cause.


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Challenges and Drawbacks of Entrepreneurship

1. Uncertainty of income

2. Risk of losing entire invested capital

3. Long hours and hard work

4. Lower quality of life

5. Complete responsibility

6. Centralized decision making system

7. Traditional management

8. Lack of professionalism and training

9. Poor Human resource system

10. Traditional technology

11. Limited market

12. Inadequate infrastructure

13. Government policy and facilities


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CHAPTER:FAMILY BUSINESS SUCCESSION STRATEGY

Concept of Family Business

A family business includes one or more members of a family with financial control .

A family business is a business in which one or more number of one or more families

has significant ownership interest and significant commitment toward the business s

overall well being. It roots are fixed in family values. In USA, almost 90% of business

is family owned and managed. In India and Nepal as well their share is significant

in total business. In some countries, many of the largest publicly listed firms are

family owned. A firm is said to be family-owned, if a person is the controlling

shareholders.

Family participation as manager or owners of family business can strengthen the

company because family members are often loyal and dedicated to the family

enterprise. However, family participation as manager and/ or owners of a business

can present unique problem because the dynamics of the family system and the

dynamics of the business system are often not in balance.

Succession Planning

Business succession refers to the successfully passing the business down to family

members. It is big threat to family business. Only 50% of family business survives to

the second generation. Only 14% make it to the third generation. And 14% make it

to the third generation. And only 3% serving to the fourth generation and beyond.

Succession planning is a planning of transferring the business to the family member

of the next generation. It is concerned with setting up a smooth transition between

you and the future owners of your business. Business succession planning seeks to

manage the following issues:

Who is going to manage the business when you no longer work the

business?

How will ownership be transferred?

Will your business even carry on or will you sell it.


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In family business, succession planning can specially have complicated because of

the relationship and emotion involved and because most people are not the

comfortable discussing topics such as aging, death, and their financial affairs . An

effective strategy needs to be formulated for family business succession. It should

consider the following aspects:

The role of the owner in the transition (Change) stage should be clear. It

can be working full time, part time or retirement. It can be staying as an advisor.

Family dynamics regarding the ability of family members to work together

should be considered. Specific responsibilities should be given to each member

succeeding the business.

Income for working family members and shareholders should be clearly

stated.

Business environment during the transition should be congenial (friendly).

Loyal employee should be retained

Tax implications of succession should be considered

Training of the succession should be considered.

TYPES OF START-UPS

Concept:

Start-ups refer to the establishment of new venture. In this stage legal form of new

venture, legal environment, financial sources and scope of new venture are

determined. Start-ups is concerned with three main entrepreneurial issues. They are:

Legal forms of entrepreneurial organization: The prospective entrepreneurialorganization legal structure that will best suit the demand of the new venture. The

necessity for this comes from changing tax laws, liability situation, the availability of

capital and complexity of business. Legal form of new venture can be sole trading,

partnership and Joint Stock Company. Each form of organization has specific

characteristics. It also has specific advantages and disadvantages. The entrepreneurs

specific situation, concerns, and desires will dictate the choice.


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Legal environment and entrepreneurship: Entrepreneurs cannot be the legal

expertise or background of a lawyer but they should be sufficiently knowledgeable

about certain legal concepts that have implications for the business venture . There

are many legal concepts that can affect entrepreneurial ventures. These concepts can

be divided into 3 groups:

Legal concepts that relate to the inception of the venture.

Legal concepts that relate to the ongoing venture

Legal concepts that relate to the growth and continuity

Financial sources for entrepreneurial ventures: Finance is one of the

important prerequisites to start-ups an enterprise. It facilitates and entrepreneur tobring together land, labor, machinery and raw material to combine them to produce

goods. It is a lubricant and life blood to the process of production. Therefore,

entrepreneurs must make plan to acquire required capital for start-ups. In financial

plan, the entrepreneur should clearly answer the following three questions:

How much money is needed?

Where will money come from? And

When does the money need to be available?

Types of Start-Ups

1. Life-Style Firms (Home Firms): A life-style firm is a private firm which is also

called home firm. It usually achieves only modest growth due to the nature of the

business, the objectives of the entrepreneur and the limited money. In this style of

enterprise limited money is devoted to research and development . These types of

firm may grow after several years. The no.of employees may be limited to 30 to 40

and have annual revenue of about $2 million. A life-style firm exists primarily to

support the owners and usually has little opportunity for significant growth and

expansion.

2. The foundation company (innovation enterprise): the second types of start-

ups are the foundation company which is also called innovation enterprise . It is

created by research and development and lays the foundation for a new industry .

This firm can grow in 5 to 10 years from 40 to 400 employees . Annual revenues


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may be about $10 million to $20 million. Since these types of start-up rarely goes

public.

3. The high-potential venture: the third type of start up is the high potential

venture. This types of start-up requires greatest investment interest and publicity .

Investors are striving to invest money in it. It growth is far more rapid than life style

and the foundation company. After 5 to 10 years the company could employ 500

employees with 20 to 30 million in annual revenue. The company usually shortly

becomes a public limited company.

Sources of Generating New Ideas:

Opportunity is a favorable condition in the external environment which enables an

entrepreneur to start a new business. The first phase of lunching a successful venture

is to search the ideas of good project because ideas provide opportunities to the

entrepreneurs. Generating good business ideas seem to be simple but it is difficult

to implement well. The imagination, sensitivity to environmental change and realistic

evaluation regarding what the firm can do is needed for identifying such ideas . In

order to select the most promising project, the entrepreneur needs to generate a few

ideas about the possible projects he/ she can undertake. The project ideas can be

discovered from various sources. They may include:

1. Situation Survey: this involves survey of current situation in the general

environment. Changes and developments in general environment such as political,

legal, economic, socio-cultural and technological forces may provides ideas for the

establishment of new business. The following forces of general environment are

examined to generate new business ideas:

Technological changes

Political-legal changes

Socio-cultural changes

Economic changes

2. Present work environment factors: Present work environment factors include

internal factors which also provide some business ideas. They can be:

Vision, mission, goals, strategies and priorities


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Sudden identification of opportunities

Efforts to overcome problems

Job experience, hobby and interest of entrepreneurs

Creativity of entrepreneurs

Existing companies can be source of new idea

3. Outside sources (external sources): Potential entrepreneurs can develop

ideas from the external sources which includes:

Needs and requirement of consumers

Outside consultants and experts

Members of distribution channels

Foreign countries companies

Suggestions from friend, family etc.

TV, newspapers and media publication

Visiting to trade fairs and exhibitions

Attending education and training courses

Competitors activities

Government regulations

4. Research and development: Research and development is the main sources

of generating mew ideas. It is concerned with generating creative ideas. It helps to

invent and innovate new things. Research can be conducted in the labs of current

employment. It can also conduct in an informal lab in the basement or garage of

home. A formal research and development department is a better place for the

entrepreneur to come up with new ideas.

Entrepreneurial Issues for Growth and Development

The entrepreneurial issues for growth and development of business organization in

the present business environment are grouped into 3 parts:

I. Strategic planning and entrepreneurship:


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Most entrepreneurs do some form of planning for their ventures, but it tends to be

informal and unsystematic. The actual needs for systematic planning will vary with

the nature, size and structure of the business . A small firm may successfully use

informal planning because little complexity is involved. But an emerging venture that

is rapidly expanding with constantly increasing personnel size and market operation

will need to formalize it planning because a great deal of complexity exists . In the

present business environment, an entrepreneurs planning will need to shift from an

informal to a formal systematic style. Formal planning is usually divided into two

major types:

a. Strategic Planning:

Strategic planning is the formulation of long range plans for the effective managementof environmental opportunities and threats in light of a business s strength and

weaknesses. It includes:

Defining the ventures mission

Specifying achievable objectives

Developing strategies

Setting policy guidelines.

Dynamic in nature, the strategic management process is the full set of commitments,

decisions and actions required for a firm to achieve strategic competitiveness and

earn above-average returns. The five basic steps must be followed in strategic

planning:

Examine the internal and external environment of the venture (strength,

weaknesses, opportunities, threats)

Formulate the ventures long rang and short-range strategies (mission,

objectives, strategies, policies)

Implement the strategic plan (programs, budgets, procedures)

Evaluate the performance of the strategy

Take follow-up action through continuous feedback


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Value of Strategic Planning

Strategic planning is a key factor that influences a ventures survival. Lake of formal

and systematic strategic planning is a main cause of business failure in the current

business environment. Research showed that the firm that engaged in strategic

planning performed well those that did not use such planning . Proper strategic

planning leads to better decision that in turn lead to increased profitability, increased

time efficiency, company growth and knowledge of market. Survey of 500 US

incorporation showed that majority of the entrepreneurs did not have a business plan

when they started their firms but as the firm grew the planning process become more

prevalent and formalized. This survey helps to conclude that strategic planning is a

tool that helps to manage complexity in the business.

In conclusion, an entrepreneurs planning will need to shift from an informal to a

formal and systematic because it helps firms to establish and exploit competitive

advantages within particular environment context.

b. Operational planning:

Operational planning also referred to as short-range planning or functional planning,

consists of the specific practices established to carry out the objectives set forth in

the strategic plan. The operational plan is thus an outgrowth or extension of the

strategic planning process. In the area of finance, marketing, production, and

management, functional policies need to be established in order to implement the

goal determined in the strategy.

The overall planning process incorporates all of the factors involved in strategic

planning and implementation tools of operational planning. Specifically, the tools

applied in functional areas of the business will be a key to implementation of the

planning process. Some of the tools must widely know and used are budgets, policies

and procedures

Budgets are planning devices used to establish future plans in financial

terms.

Policies are the fundamental guides for the venture as a whole.

Procedures are similar to policies; they are usually policies that have been

standardized as continuing method.


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II. The challenge of Entrepreneurial Growth

The life cycle stages of an enterprise can be divided into deferent stages . These

stages include:

New venture development

Start-up activities

Growth

Stabilization

Innovation or decline

Among these stages, managing growth can be a great challenge to the successfuldevelopment of any venture. In this stage, a venture usually reaches major crossroads

in the decision that affect its future. The growth stage often requires major changes

in entrepreneurial strategy. Competition and other market forces call for the

reformulation of strategies. The growth stage present newer and more substantial

problems than the entrepreneur faced during the start -up stage. These newer

challenges force the entrepreneur into developing a different set of skills while

maintaining an entrepreneurial perspective for the organization. Growth stage is a

transition from entrepreneurial one-person leadership to managerial team-oriented

leadership. This is not easy to do. A number of problems can occur during this

transition. They can be:

A highly centralized decision-making system

An overdependence on one or two key individuals

An inadequate managerial skills and training

A paternalistic atmosphere

These characteristics are effective in the new ventures startup and initial survival but

provide a threat to the firms development during the growth stage. In order to bring

about the necessary transition, the entrepreneur must carefully plan and then gradually

implement the following process:

The entrepreneur must want to make the change and must want it strongly

enough to undertake major modifications in his or her own task behavior.


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The day to day decision making procedures of the organization must be

changed. Participation in this process must be expanded. Greater emphasis also

should be placed on the use of formal decision techniques.

The two or three key operating tasks are primarily responsible for the

organizations success must be institutionalized. This may involve the selection of

new people to supplement or replace indispensable individual who have performed

these task in the past.

Middle level management must be developed. Specialists must learn to

become functional managers, while functional manager must learn to become general

managers.

The firms strategy should be evaluated and modified, if necessary, to

achieve growth.

The organizational structure and its management system and procedures

must be slowly modified to fit the companys new strategy and senior manager

The firm must develop a professional board of directors.

III. The management succession challenge:

Management succession challenge is another issue for entrepreneurs. Lack of

succession planning leads to ventures failure. Research shows that many privately

held firms go out of existence after ten years; only three out of ten survive into a

second generation. More significant, only 16% of all privately held enterprises make

it to a third generation. The survey of 200 successful manufacturing firm showed that

the average life expectancy for a privately held business is 24 years, which is also

the average tenure for the founders of a business. One of the major problems most

privately held businesses have is the lack of preparation for passing managerial

control to the next generation. Most privately held firms never formulate succession

plans.


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CHAPTER:THE ENTREPRENEURIAL AND

INTRAPRENEURIAL MIND

The entrepreneurial Process:

1. Identification and evaluation of opportunity:

Opportunity is a favorable condition in the external environment. It enables an

entrepreneur to start a new venture. Business opportunity identification and selection

consists the following steps:

a. Generation of ideas:

First of all the entrepreneur should create idea about various alternative projects that

he can undertake in order to select the best project. The idea of project or business

opportunities can be found out from various internal and external sources . Some of

the sources of creating identifying good project idea may be explained as follows:

i. Situation survey: situation survey refers to the survey of current situation

in the external environmental factors. Under situation survey, technological changes,

political-legal changes, socio-cultural changes, economic changes are surveyed.

ii. Internal sources/ Present work environment factors: Internal environment

of the organization can be the sources of new idea. Internal sources of idea are:

Vision, mission, goals, strategies and priorities of entrepreneurs provide

ideas for new ventures.

Effort to overcome problem or identify opportunities by entrepreneur

suddenly provide new idea.

Job experience, hobby and interest f entrepreneur provides new ideas.

Entrepreneurial creativity also provides new ideas.

Existing companies can be sources of new ideas.

Suggestion made by research and development department, committees,

task forces, work teams, and quality circles can provide useful ideas for project


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iii. External sources/ Outside Sources: The following outside sources can

be helpful in generating new ideas:

Need and requirement of consumers

Outside consultants and experts

Members of distribution channel

Foreign country

Suggestion from family, friend etc.

Television, newspaper, and media publication

Visit to trade fairs and exhibitions and attending education and trainingcourses.

Competitors activities

Government policies, rules and regulation.

iv. Research and development: It is the largest source of new ideas.

Research can be conducted in the labs of current employment . It can also conduct

in an informal lab in the basement or garage of home . A formal research anddevelopment department is a better place for the entrepreneur to come up with new

ideas.

b. Evaluation of ideas: the new idea is evaluated in terms of :

i. Profit Test: In this criterion, the profitability of the idea is assessed.

Marketing, production and financial aspect are analyzed.

ii. Constraints Test: the idea should fit the financial, manpower, time, and

other constraints faced by the entrepreneur.

iii. Risk Test: A risk is any event that could prevent the realization of

objective. The evaluation of idea also involves risk analysis. Risk can be:

Idea risk

Process risk

Risk analysis consists of assessment of risk and possible action.


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c. Selection of Best idea: After identifying business ideas, the entrepreneur

should select the appropriate project from among various alternative ideas . The

evaluated ideas are classified into three group:

Promising ideas: they are possible alternatives for new opportunities.

Marginal ideas: they are stored for future uses.

Reject ideas: they are dropped

A choice is made from among promising ideas.

2. Develop Business Plan:

After identification of best idea, business plan is developed to convert the idea into

successful venture. The business plan is a roadmap of proposed new venture of the

entrepreneur. It is written document that details the proposed venture. It is required

to mobilize financial resources for the new venture. It also serves as a working

document once the venture is established. It covers business description of the

venture, marketing aspects, financial aspects, operations aspects and management

aspects. It analyses critical risks and presents a timetable for implementation of new

venture. A detailed business plan consists of ten sections:

Executive Summary

Business description element

Marketing element

Production element

Finance element

Management element

Critical risk element

Harvest strategy element

Milestone schedule

Appendix.


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3. Determine the resources required:

The resources needed for the new venture should be determined. No business can

thrive (succeed) without resource capabilities. The following factors should be

considered:

Determine resources needed

Determine existing resources

Identify resource gaps and available suppliers

Develop access to needed resources

4. Manage the enterprise:

The management aspects of running the new venture are considered. They are:

Organization structure of the venture.

Development management style

Understand key variables for success

Identify problems and potential problems

Human resource management aspects of the venture.

Implement control system

Develop growth strategy

Managerial Versus Entrepreneurial Decision Making

The difference between the entrepreneurial and the managerial styles can be viewed

from five key business dimensionsstrategic orientation, commitment to opportunity,commitment of resources, control of resources, and management structure. Managerial

styles are called the administrative domain.

1. Strategic Orientation

The entrepreneurs strategic orientation depends on his or her perception of the

opportunity. This orientation is most important when other opportunity have diminishing

returns accompanied by rapid changes in technology, consumer economies, social

values or political rules.


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The administrative (managerial) domain is operant in nature. Managerial strategic

orientation is driven by controlled resources. Managerial domain is concerned with

the use of planning system as well as measuring performance to control current

resources.

2. Commitment to Opportunity

Entrepreneurs are revolutionary and have a short time span in terms of opportunity

commitment. The entrepreneurial domain is pressured by the need for action, narrow

decision windows, acceptance of reasonable risk and few decision constituencies.

In terms of commitments to opportunities, managers are evolutionary with long

duration. The managerial domain is not only slow to act on an opportunity but once

action is taken, the commitment is usually for a long time span. They are pressured

by acknowledgement of multiple constituencies, negotiation about strategic, course of

risk reduction and coordination with existing resources base.

3. Commitment of Resources

An entrepreneur is used to having resources committed at periodic intervals that are

often based on certain tasks or objectives being reached. This multistage commitment

allows the resource providers (such as venture capitalists or private investors) to havean exposure at each stage of business development. The following factors pressures

entrepreneurs for the periodic commitment of resources

Lack of predictable resource need

Lack of control over the environment

Social demand for appropriate use of resource

Foreign competition

Demands for more efficient use

In administrative domain, commitment of the resources is for the total amount needed.

He desires a single stag with complete commitment of resources . This resources

commitment come form need to reduce risk, incentive, compensation, turnover in

mangers, formal planning system.


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4. Control of Resources

Entrepreneur tries to use rented resources where possible. If the has difficulty in

obtaining resource, he tends to have multi uses for the same resources. He focusses

on rented and multi use of same resources due to the pressure of long resource life

compared with need, risk of obsolescence, risk involved in the identified opportunity,

inflexibility permanent commitment resources etc.

The administrator is rewarded by effective resource administration. He wants to own

or accumulate as many resources as possible. The pressures of power, status,

financial status, coordination of activity etc cause the administrator to avoid rental or

other periodic use of the resources. Thus, manager tends to accumulate resources

as it is a source of power for him.

5. Management Structure

Entrepreneurs tend to have a flat organization as it allows him greater degree of

control. He focuses on multiple informal networks. He wants such flat with multiple

inform network due to pressure of coordination of key non controlled resources,

challenge to hierarchy, employees desire for independence etc.

Manager tends to follow a formal hierarchical structure as they know this consolidatedtheir power. Manager wants clearly defined lines of authority and responsibility.

Corporate Entrepreneurship or Intrapreneurship:

The corporate entrepreneurship is known as intrapreneurship and who perform such

task is known as intrapreneur. Intrapreneurship is a process of innovation that occurs

inside established companies through efforts of creative employees. Corporate

management is promoting entrepreneurs within the corporate structure . This

development of entrepreneurial within the corporate structure is called intrapreneurship.

In the globalized context, corporations are promoting individuals with entrepreneurial

skill within the organization and capitalizing on their skills and capabilities.

Intrapreneurship is developed within big business houses. This means, intraprenership

is the outcome of the creative activities of employees in big business. The

intrapreneurship emerges through long years of experience in big corporation.

Intrapreneurship requires large amount of capital and team of people with

multidisciplinary expertise.


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Difference between entrepreneurship and intrapreneurship

Entrepreneurships the process of establishing an independent business

venture whereas intrapreneurship developed within big business houses.

Entrepreneurship is the outcome of the creative activities of entrepreneur

whereas intrapreneurship is the outcome of the creative activities of employees in big

business.

The entrepreneurship depends on the nature and attitude of the entrepreneur

whereas intrapreneurship depends on the climate of corporation.

The entrepreneurship generally begins with development of small business

with limited capital and other resources whereas intrapreneurship requires large

amount of capital and a team of people with multidisciplinary expertise.

Causes for interest in Intrapreneurship (The need for corporate

entrepreneuring)

Many companies today are realizing the need for corporate entrepreneuring . Both

business firms and consultants are recognizing the need for in-house entrepreneurship.

This need has arisen in response to a number of pressing problems. They can be:

1. Interest in intrapreneurship has resulted from events occurring on social,

cultural, and business levels. There is an increasing interest in doing your own thing.

Individuals frequently desire to create something of their own. They want responsibility

and want more freedom in their work environment. Frustration can develop and result

in the employee becoming less productive or leaving the organization. This has

recently caused more discontent in structured organizations . When meaning is not

provided within the organization, individuals often search for an institution, such as

intrapreneurship, that will provide it.

Intrapreneurship is one method for stimulating and capitalizing on those who think

that something can be done differently and better.

2. It is important to instill the entrepreneurial spirit in an organization in order

to innovate and grow. In a large organization problems occur that thwart creativity


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and innovation. This growth and diversity that can result are critical, since large

corporations are more efficient in a competitive market than are smaller firms.

3. The resistance against flexibility, growth, and diversification can be overcome

by developing a spirit of entrepreneurship, called intrapreneurship, within the existing

organization.

4. There are social, cultural, and business pressures for intrapreneurship. Hyper

competition has forced companies to focus on new product development, increased

productivity, and decreasing costs.

Establishing Intrapreneurship in an organization:

Intrapreneurship is reflected in the entrepreneurial activities of the colorations and top

level managements shift in paradigm. The entrepreneurial efforts consist of four

elements. They are:

a. New business venturing: New business venturing refers to the creation of

new business within an existing organization.

b. Organizational innovativeness: Organizational innovativeness refers to product

and service innovation with an emphasis on development and innovation in technology.

c. Self Renewal: Self-renewal reflects the transformation of organizations

through the renewal of the key ideas on which they are built.

d. Proactiveness: Proactiveness includes initiative and risk taking, as well as

competitive aggressiveness and boldness.

Climate for Intrapreneurship:

a. Management commitment: The first step is to secure a commitment tointrapreneurship in the organization by top, upper, and middle management . Without

top management commitment, the organization will never be able to make the

necessary changes. Once top management has committed to intrapreneurship for a

sufficient length of time, the concept is introduced throughout the organization.

b. Technology: The organization operates on the frontiers of technology .

Research and development are key sources for new product ideas . The firm must

operate on the cutting edge of technology and encourage and support new ideasinstead of discouraging them.


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c. Failure allowed: Experimentation, or trial and error, is encouraged. Successful

new products usually do not appear fully developed; instead they evolve. A company

has to establish an environment that allows mistakes and failures . Without the

opportunity to fail, few corporate intrapreneurial ventures will be developed.

d. Resources available and accessible: The resources of the firm need to be

available and easily accessible. Often, insufficient funds are allocated to creating

something new. Available resources are committed instead to problems that have an

immediate effect on the bottom line. Some companies, such as Xerox, 3M, and AT&T

have established separate venture capital areas for funding new internal and external

ventures. When available, the reporting requirements can become obstacles to

obtaining resources.

e. Multidiscipline teamwork approach: A multidisciplinary team approach needs

to be encouraged. One key to intrapreneurial success is the existence of skunkworks

involving key people. Another complication is the fact that a team members promotion

within the corporation is based on performance in the current position, not in the new

venture. The corporate environment must establish a long time horizon for evaluating

the success of the overall program.

f. Voluntary involvement: The spirit of intrapreneurship cannot be forced onindividuals; it must be voluntary. Most managers in a corporation are not capable of

being successful intrapreneurs. Those that emerge must be allowed to carry a project

through to completion. An intrapreneur falls in love with the new venture and will do

almost anything to ensure its success.

g. Reward system: The seventh characteristic is a reward system. The

intrapreneur needs to be appropriately rewarded for the energy and effort expended

on the new venture. An equity position in the new venture is one of the bestmotivational rewards.

h. Sponsors and champions available: A corporate environment favorable for

intrapreneurship has sponsors and champions throughout the organization who support

the creative activity and resulting failures.

i. Strong support system: The intrapreneurial activity must be whole-heartedly

supported


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j. Training: The organization can use a group of managers to train and share

their experiences with other members. These sessions should be conducted one day

per month for a specified period of time. Information about intrapreneurship and about

the companys specific activities should be well publicized.

k. Customer oriented: The organization needs to develop ways to get closer to

its customers by tapping the data base, hiring from smaller rivals, and helping the

retailer.

Intrapreneurial Leadership Characteristics:

There are certain individual characteristics needed for a person to be a successful

intrapreneur. They includes:

1. Understanding the environment:

An intrapreneur needs to understand all aspects of the environment. Creativity tends

to decrease with age and education. The individual must be creative and have a

broad understanding of the internal and external environments of the corporation.

2. Being visionary and flexible:

The intrapreneur must be a visionary leader. Leadership is the ability to dream

great things and communicate them in a way that people say yes to being part of

the dream. To establish a successful new venture, the intrapreneurial leader must

have a dream and overcome all obstacles to achieve it.

3. Flexible and creating management options:

The intrapreneur must be flexible and create management options. An intrapreneur

is open to and encourages change. By challenging the beliefs and assumptions of

the corporation, an intrapreneur can create something new in the organization

structure.

4. Encouraging teamwork:

He or she needs the ability to encourage teamwork and use a multidiscipline

approach. Every new company formation requires a broad range of business skills .

Recruiting those in the organization requires crossing established departmental

structure. The intrapreneur must be a good diplomat to minimize disruption

5. Encouraging open discussion:


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Open discussion must be encouraged to develop a good team for creating something

new. Many corporate managers have forgotten that frank, open discussion is part of

the learning process. A successful venture can be formed only when the team feels

the freedom to disagree and to review an idea. The degree of openness among the

team depends on the degree of openness of the intrapreneur.

6. Building a coalition of supporters:

Openness leads to a strong coalition of supporters and encouragers. The

intrapreneur mustencourage each team member, particularly during hard times. A

good intrapreneur makes everyone a hero.

7. Persisting: an intrapreneur must be persistent to create a new venture and move

forwardtowards successful commercialization.

CHAPTER:THE ENVIRONMENT FOR ENTREPRENEURSHIP

Entrepreneurs Environment:Environment for entrepreneurship consists of forces that directly or indirectly influence

the activities of creating and developing new business in the society. It is the

composite of all forces surrounding and influencing the entrepreneur s activities. They

consist of political-legal, economic, socio-cultural and technological forces in external

environment. They cannot be controlled. Environmental forces and factors influence

entrepreneurial activities by providing opportunities and threats. They are complex,

dynamic and uncertain. The entrepreneurs most monitor and respond to changes toexploit the opportunities and face challenges resulting from changing business

environment. The effect of environmental factors differs from organization to

organization, industry to industry and markets to markets

Government Policies and Actions:

The policies and actions may directly and indirectly affect the entrepreneurial activities.

It may promote or limit entrepreneurial activities . Government policies and actions


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influence entrepreneurial policies and practices. It defines what entrepreneurs can and

cannot do. Entrepreneurs must follow the legal provision of the country.

The entrepreneurship friendly industrial policy, industrial act, commercial policy etc .

can promote entrepreneurship. The government must create conductive environment

for entrepreneurship by making available basic facilities and services live transport,

communication, power etc. and incentive, subsidy, concession sound legal system

etc. such facilities reduce the risk and uncertainties of the entrepreneurs. Hence, the

supportive actions of the government are very conductive for entrepreneurial

development. Entrepreneurship has flourished and developed in the countries where

the government has provided such facilities. On the other hand, entrepreneurship and

economic growth is slow in the countries where the government has adopted

indifference policy regarding entrepreneurship. One of the main reasons rapid

economic growths in the countries is regarded to be the positive or market friendly

role played by the government towards the business.

In order to increase more positive business environment, the role of the government

should not be interfering and regulating in the daily activities of the enterprises. But,

should be supporting, faciliting and removing and constraints of initiative, innovation

and risk-taking.

The government in order to help and create positive business environment should

make following changes in its policy formulation and involvement (Kohli and Sood,

1987):

Simplification of labor policy

Reforms in the tax policy

Streamling legal frame work fro enterprise creation, operation and liquidation

Make effort to create competitive market (remove entry barriers)

Simplification of the regulation and controls (investment, production,

marketing, prices, foreign direct investment and technology transfer)

Address practical implementation of the policy.

Transparency of policy and their implementation.

Government polices that affect entrepreneurship


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Industrial policy

Monetary policy

Fiscal policy

Privatization policy

Trade policy

Employment and trade policy

Tourism policy

Foreign investment policy

The industrial policy, 2010 spells out its policies, strategies, promises and

commitments:

Commits state-support for the development of infrastructure up to factory

sites for priority industries.

Provides special tax holidays for industries in rural and under-industrialized

parts of the country.

Recognizes and allow sub-contracting of production for the first time in the

countrys history.

Promises to help foster backward linkages, mainly facilitating small scale

industries, in incorporate in the large manufacturing process

Provision of differential tariff rates for raw material imports and the import

of finished goods. The aim of this provision is to promote domestic manufacturing

over direct trade.

Promises protection, duty and tax discount incentives for industries using

local raw material and higher value addition.

Entrusts the government to lay down industrial infrastructures such as roads,

electricity, and telecommunication in different districts that have been identified as

possessing manufacturing and processing potentials

Pledges additional promotional incentive packages for export industries,

particularly the small and medium enterprises.


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Recognizes Research and development and market promotion as an integral

part of the industrial activities and allows 5% income tax deduction for each purpose.

Infrastructure:

Infrastructure is basic physical andorganizationalstructures needed for the operation

of a society or enterprise.They are the services and facilities necessary for an

economyto function. It can be defined as the set of interconnected structural elements

that provide framework supporting an entire structure of development. It includes both

physical infrastructure such as transport, communication, water supply, energy etc

and non physical infrastructure such as financial system, education system, health

care system, the system of government, law enforcement as well as emergency

services. Infrastructure facilitates the production of goods and services and also the

distribution of finished products to markets. In least developed and developing

countries entrepreneurs are not motivated to establish enterprise due to the lake of

adequate infrastructure. Inadequacy of infrastructure limits the entrepreneur s activities.

Therefore, government is responsible to develop basic infrastructure in the country to

promote entrepreneurship.

Types of Infrastructure:

Hard Infrastructure: hard infrastructure refers to the large physical networks

necessary for the functioning of a modern industrial nation . It includes the capital

assets that serve the function of entrepreneurs. It includes:

Transportation infrastructure

Energy infrastructure

Water management infrastructure

Communications infrastructure

Solid waste management

Soft Infrastructure: soft infrastructure refers to all the institutionswhich are

required to maintain the economic, health, and cultural and social standards of a

country, such as thefinancial system,the education system,thehealth care system,

the system of government, andlaw enforcement,as well asemergency services.The
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essence of soft infrastructure is the delivery of specialized services to entrepreneurs.

It includes

1. Governance infrastructure

The system of governmentand law enforcement,including the political, legislative,

law enforcement, justice and penal systems, as well as specialized facilities

(government offices, courthouses, prisons, etc.), and specialized systems for collecting,

storing and disseminating data, laws and regulation

Emergency services, such as police, fire protection, and ambulances, including

specialized vehicles, buildings, communications and dispatching systems

Military infrastructure, including military bases, arms depots, training facilities,command centers, communication facilities, major weapons systems, fortifications,

specialized arms manufacturing,strategic reserves

2. Economic infrastructure

Thefinancial system,including thebanking system,financial institutions,the

payment system, exchanges, the money supply, financial regulations, as well as

accountingstandards and regulations

Major businesslogisticsfacilities and systems, including warehousesas well

as warehousing and shipping management systems

Manufacturinginfrastructure, including industrial parksandspecial economic

zones,mines and processing plants for basic materials used as inputs in industry,

specialized energy, transportation and water infrastructure used by industry, plus the

public safety, zoning and environmental laws and regulations that govern and limit

industrial activity, and standards organizations

Agricultural, forestryand fisheries infrastructure, including specialized food

and livestock transportation and storage facilities, major feedlots,agricultural price

support systems (including agricultural insurance), agricultural health standards, food

inspection, experimental farms and agricultural research centers and schools, the

system of licensing and quota management, enforcement systems against poaching,

forest wardens, and fire fighting

3. Social infrastructure
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viceshttp://en.wikipedia.org/wiki/Law_enforcement_agencyhttp://en.wikipedia.org/wiki/Government


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The health caresystem, including hospitals,the financing of health care,

including health insurance,the systems for regulation and testing of medications and

medical procedures, the system for training, inspection and professional discipline of

doctors and other medical professionals, public health monitoring and regulations, as

well as coordination of measures taken during public healthemergencies such as

epidemics

The educational and research system, includingelementaryand secondary

schools, universities, specialized colleges, research institutions, the systems for

financing and accrediting educational institutions

Social welfare systems, including both government support and private

charity for the poor, for people in distress or victims of abuse

4. Cultural, sports and recreational infrastructure

Sports and recreational infrastructure, such as parks,sports facilities, the

system of sports leagues and associations

Cultural infrastructure, such as concert halls, museums,libraries,theatres,

studios, and specialized training facilities

Business travel and tourism infrastructure, including both man-made and

natural attractions, convention centers, hotels, restaurants and other services that

cater mainly to tourists and business travelers, as well as the systems for informing

and attracting tourists, and travel insurance

Assistance for Entrepreneurship (institutional support to

entrepreneurship development)

Concept:

The support provided to the entrepreneurs by various institution like government, non-

government, cooperatives and private organization in the form of facilities, incentives

and policies that aims to promote, support and facilitate entrepreneurship in a country

is known as institutional support or assistance. Entrepreneurship required promotional,

supportive and facilitative assistance from various institution to solve and diminish

various problem faced by entrepreneurs. Availability of support makes the business

environment conducive and enabling for entrepreneur. These may come up in various
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forms such as loan, access to capital market, market facility and locations, research

and development, information flow, training and skill entrancement programs,

competency development oriented classes etc.

Need for institutional assistance or support:

Establishing a business is not a small task. In the contest of Nepal, it has to be

coordinated a lot of channel. Different types of resources and facilities are required

in order to establish any business or industry. For example, the adequate of finance,

availability of raw material, adequate supply of skillful manpower. Without it, it is only

a day dream of person to establish an industry. Small entrepreneurs are unable to

make available such facilities by themselves. The main problems that confront

entrepreneurs are:

Shortage of capital: Poor access to capital and credit

Scarcity of raw materials: Unreliable supply sources for inputs

Marketing problems: Poor access to market and tough competition. Lack of

market information.

Lack of opportunities for competency development

Lack of access to appropriate infrastructure

Poor access to information, research and extension services

Lack of supportive policies and incentives

Institutional assistance to entrepreneurs is mainly needed in the following areas:

a. Capital resources: entrepreneurs have lack of adequate capital resources.

New venture also does not easy assess to capital market instruments . Loans fromformal financial institutions such as commercial and development bank and other

financial institutions are needed to finance new venture. Besides this international

NGOs also provide loans to target entrepreneur.

b. Limited market: the domestic market for Nepalese products is very limited

due to small size of the country and its population . Besides, this purchasing power

of the people is very low. Due to the low development of transportation and

communication the products can not be marketed easily through in low cost.


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c. Infrastructure availability: entrepreneurs need infrastructure facilities in terms

of industrial sheds, transport, communication, power, water, waste disposal etc .

institutions are needed to build infrastructure. Generally, government institution,

supported by foreign aid, undertakes the task of infrastructure development.

d. Raw material supply: easy availability of raw material facilities supports

entrepreneurial growth. The scarcity of raw materials in the country is also a cause

of low industrial investment. New ventures, especially those based on new technology,

require raw material from foreign sources. Nepals major industries such as woolen

carpet, ready-made garments and handicrafts are dependent on imported raw material

and intermediated products. The problem of raw material is one of the main reasons

for low capacity utilization. Institutions are needed to take care of raw material supply

to meet the need of a variety of entrepreneur.

e. Defective government policies and incentives: entrepreneur needs a sound

policy for creating sound industrial environment. But the government policy of Nepal

is neither sound nor consistent, nor are they effectively implemented. Government

institutions are the prime sources of formulation policies . The industrial policy of

Nepalese has reserved cottage and small industries for Nepalese citizens. The legal

frame work enacted by the government generally carries a number of incentives for

entrepreneurial activities.

f. Long procedures of bureaucratic: Entrepreneurs have faces a long

bureaucratic process. They have complete different processes like, visit different

ministries and departments for registering industries for exports of the product. For

getting foreign exchange for getting financial support etc. the bureaucracy being

inefficient is corrupted as well. Entrepreneurs are needed a sound bureaucratic system.

g. Access to information, research and development: this is the age of informationtechnology. Information is power. Research and development is the sources of

innovation and inventions. Institutions are needed to supply relevant information to

entrepreneurs. They are also needed to conduct research and provide extension

services relevant to entrepreneurs. Government institutions are important fulfill such

needs.


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Institutional Assistance to Entrepreneurs in Nepal

Entrepreneurship has remained the backbone of Nepalese economy. But the pace of

its growth has remained slow. Majority of entrepreneurial ventures currently remain

sick or closed. Institutional support to industries in Nepal is through government

agencies, specialized agencies, consultancy services, institutional finance and

marketing services.

1. Government Agencies

Ministry of industry

Department of industry

Department of cottage and small industries

Office of the registrar of companies

Nepal bureau of standards and metrology

Nepal tourism board

2. Special agencies of government

Industrial promotion board

One-window committee

Nepal industrial development finance

Industrial district management limited

National productivity and economic development centre

Microenterprise, cottage and small industries promotion board

Industrial enterprise development institute

Private sector associations

3. Institutional Finance

Commercial banks

Development banks

Micro finance banks


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Finance companies

Rural cooperatives (approved by NRB)

Unregulated cooperatives

Insurance companies

Employee provident fund

Citizens investment trust

Postal saving bank branches

NGO microfinance co.

Deposit insurance and credit guarantee corporation

4. Consultancy services:

Institute of chartered accountants of Nepal (ICAN)

Centre for economic development and administration (CEDA)

Nepal engineering consultancy service (NEPECON)

5. Marketing services

Trade and export promotion centre

Carpet and wool development board

Ready-made garment export promotion committee

6. Industrial estates:

Balaju, Hetauda, Patan, Nepalgunj, Dharan, Pokhara, Butwal, Bhaktapur,

Birendranagar, Dhankuta, Fajbiraj.

Franchising:

Franchising can simply be defined as a form of contractual arrangement in which a

retailer (franchisee) enters into an agreement with a producer (franchisor) to sell the

producers goods or services for a specified fee or commission. It is a form of

business ownership created by contract whereby a company grants a buyer the rights

to engage in selling or distributing its products or services under a prescribed business


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format in exchange for royalties or share of profits. The buyer is called the franchisee

and the company that sells rights to its business concept is called the franchisor .

Thus, franchising is any arrangement in which the owner of a trademark, trade name

or copyright has licensed others to use it in selling goods or services. The franchisee

is generally legally independent but economically dependent on the integrated

business system of franchisor.

Advantage of Franchising:

1. Training and guidance: The greatest advantage of buying a franchise is that

the franchisor will usually provide both training and guidance to the franchisee. As a

result, the like hood of success is much greater for franchisees who have received

this assistance than for small business owners in general.

2. Brand-name appeal: the franchisers brand name appeals the customer. The

national advertising by the franchisor creates such brand name appeal . The layout,

facilities and decorations are standardized.

3. Financial Assistance: another reason a franchise can be a good investment

is that the franchisor may be able to help the new owner to secure the financial

assistance needed to run the operation. In fact, some franchisors have personallyhelped the franchisee get started by lending money and not requiring any repayment

until the operation is running smoothly. In short, buying a franchise is often an ideal

way to ensure assistance from the financial community.

4. A proven track record: Franchising makes the task of getting started easier

because the franchisee gets a business format already market tested and found to

work. Hence, buying a franchise is so far safer than trying to start a business.

5. Increase purchasing power: Franchising may increase the franchisees

purchasing power also. Because, being part of a large and that too recognized

organization means paying less for a variety of things such as supplies equipment,

inventory, services, insurance and so on. It also can mean getting better service from

suppliers because of the importance of the organization (franchisor) of you is part

(franchisee).


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Disadvantage of Franchising:

1. The controlled exercised by the franchisor: Unlike entrepreneurs who start

their own business, the franchisees find no room or scope for enjoying their creativity.

They have to work as per the given format. A number of restrictions are also imposed

upon the franchisees. Restriction may relate to remain confined to product line or a

particular geographical location only.

2. Franchise Fees: the franchisee must pay different fees to the franchisor. Such

fees are franchisee fee, royalty payment, promotion costs, inventory and supplies

cost, and building and equipment cost. the larger and more successful the franchisor,

the greater the franchise fee.

3. Unfulfilled promises: In some cases, especially among less-known franchisors,

the franchisees have not received all they were promised . Many franchisees have

found that the promised assistance from the franchisor has not been forthcoming . If

franchisees complain, they risk having their agreement with the franchisor terminated

or not renewed.

4. No right to sell the business: Franchisees usually do not have the right to

sell their business to the highest bidder or to leave it to member of their family

without approval from the franchisor.

5. No goodwill: Though the franchisee can build up goodwill for his or her

busines

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