RSM UnitI Entrepreneurs and Small Biz Mngmnt

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Prof. R.S.Mathur

Syllabus MBA EP SemIIIUnit 1 Concept of entrepreneurship- nature and historical evolution; entrepreneurship and economic development, effect of culture on entrepreneurship. Unit 2 Role and importance of small business; defining small business; forms of organisation for small business; Setting up a SSI; formalities of launching a new venture; product selection; problems of SSI Unit 3 Challenges of marketing for small businesses; sources of funds for small businesses; Human resource management issues in small businesses; managing small business operations.

Entrepreneurship a Mission with burning desire

Concept of Entrepreneurship

Entrepreneurship is the practice of starting new organizations or revitalizing mature organizations, particularly new businesses generally in response to identified opportunities. Entrepreneurship is often a difficult undertaking, as a vast majority of new businesses fail.

What is entrepreneurship?Process of: creating something different, with value, by devoting necessary time and effort, by assuming the accompanying financial, psychological, and social risks, and receiving the resulting rewards of monetary and personal satisfaction (Bowen and Hisrich, 1986).

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What is Entrepreneurship?Capacity to take risks Ability to own and organize Desire and capability to innovate and diversify (Stepanek, 1962)

Process of EntrepreneurshipEntrepreneurship Innovative Creation



Process of Action


Types of EntrepreneurshipArbitrage Discovering the price gaps that exist and acting on that margin to close the gap Buy low Sell high Innovative Discovering new trading opportunities (Smith) Discovering lower cost or new technologies (Schumpeter)

What makes an entrepreneurThe factors can be classified asPersonality factorsMotivation and emotion gives the drive and purpose and self confidence (Whybrow 1999) High need for achievement( Roberts 1991) Competitiveness main motivator Need for independence

Behavioural characteristics( Kuratko and Hodgetts 1998) perseverance, determination, take calculated risks,creativity, honesty and integrity, initiative, taking responsibility

What makes an entrepreneur Contd.,Environmental factors( Roberts 1991)Family background fathers career, inheritance Education not important, start at early age Work experience important Action factors what entrepreneurs do Are creative and innovative Spot and exploit opportunities Find resources to exploit opportunities Manage risk, create capital are good net workers, determined

Why does one become an entrepreneur?There are many reasons to become an entrepreneur. Some common reasons are: A good business idea Continuing the family entrepreneurial tradition Special skills acquired through a hobby Knowledge or skills in a specific area Possibility to make a living Chance, coincidence or special offer Example set by another entrepreneur

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Definitions (Carland, 1984)Entrepreneur Small Business ownerEstablishes and manages a Establishes and manages a business for principal business for principal purpose of profit and growth purpose of furthering personal goals Characterized by innovative Business primary source of income and consumes behaviour majority of ones time and resources Will employ strategic management practices in the Business perceived as extension of personality, business family needs, desires

Definitions (Carland, 1984) Contd.,Entrepreneurial venture Engages in behavior that is aimed at profitability and growth. Business characterized by innovative strategic practices

Small business ventureIndependently owned and operated Not dominant in its field. Doesnt engage in any new marketing or innovative practices.

Characteristics of entrepreneurship

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The entrepreneur has an enthusiastic vision, the driving force of an enterprise. The entrepreneur's vision is usually supported by an interlocked collection of specific ideas not available to the marketplace. The overall blueprint to realize the vision is clear, however details may be incomplete, flexible, and evolving. The entrepreneur promotes the vision with enthusiastic passion. Cont

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With persistence and determination, the entrepreneur develops strategies to change the vision into reality. The entrepreneur takes the initial responsibility to cause a vision to become a success. Entrepreneurs take calculated risks. They assess costs, market/customer needs and persuade others to join and help. An entrepreneur is usually a positive thinker and a decision maker.

Types of EntrepreneurshipArbitrageDiscovering the price gaps that exist and acting on that margin to close the gapBuy low Sell high

InnovativeDiscovering new trading opportunities (Smith) Discovering lower cost or new technologies (Schumpeter)

Misconceptions about EntrepreneursEntrepreneurs are born They are profit-hungry They are dishonest They are favoured by luck. Only rich people can become entrepreneurs It is a monopoly of certain communities

Peter F. Drucker observed..Most of what you hear about entrepreneurship is all wrong. Its not magic; its not mysterious; and it has nothing to do with genes. Its a discipline and, like any discipline, it can be learned. and

The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.

Role of the EntrepreneurAn innovator who combines technical innovations and financial finesses. Important role in producing competitive products, processes, and services. Generation of new employment Local and regional economic development Improved allocation of resources and transfer of technologies

Entrepreneur as an Economic PioneerIntroduction of new goods and products Introduction of new processes and methods of production Opening up of new markets Opening up of new sources of supply Industrial re-organization

Strategic Importance of the Small-Scale SectorSignificant contributions to national income, employment, and export earnings Value of output over Rs. 5,70,000 crores Employment of over 17.5 million (> twice the private sector; almost as much as all public sector employment) Exports of over Rs. 54,000 crores (> 35 per cent of all exports) (2000-01 figures)

Entrepreneurship and Small BusinessesEntrepreneurship is especially critical in small businesses because: Important source of competition for large firms; challenge their economic power Offer a wide range of choice to consumers Sources of innovation and creativity Good career opportunities to work in an unstructured environment of a small company

Contributions of Entrepreneurs

1.Create employment.The biggest employer is the private business sector. Millions of jobs are provided by the factories, service industries, agricultural enterprises, and the numerous small-scale businesses. Such massive employment has multiplier and accelerator effects in the whole economy. More jobs mean more incomes. This increases demand for goods and services. This stimulates production. Again, more production requires more employment.

2.Develop new marketsUnder the modern concept of marketing, markets are people who are willing and able to satisfy their needs. In Economics, this is called effective demand. Entrepreneurs are resourceful and creative. They can create customers or buyers. This makes entrepreneurs different from ordinary businessmen who only perform traditional functions of management like planning, organization, and coordination.

3.Discover new sources of materials. Entrepreneurs are never satisfied with traditional or existing sources of materials. Due to their innovative nature, they persist on discovering new sources of materials to improve their enterprises. In business, those who can develop new sources of materials enjoy a comparative advantage in terms of supply, cost and quality.

4.Mobilize capital resources. Entrepreneurs are the organizers and coordinators of the major factors of production, such as land labor and capital. They properly mix these factors of production to create goods and service. Capital resources, from a layman's view, refer to money. However, in economics, capital resources represent machines, buildings, and other physical productive resources. Entrepreneurs have initiative and self-confidence in accumulating and mobilizing capital resources for new business or business expansion.

5.Introduce new technologies, new industries and new productsAside from being innovators and reasonable risktakers, entrepreneurs take advantage of business opportunities, and transform these into profits. So, they introduce something new or something different. Such entrepreneurial spirit has greatly contributed to the modernization of economies. Every year, there are new technologies and new products. All of these are intended to satisfy human needs in more convenient and pleasant way.

Advantages of Entrepreneurship

Every successful entrepreneur brings about benefits not only for himself/ herself but for the society, the municipality, region or country as a whole. The benefits that can be derived from entrepreneurial activities are as follows: See subsequent slides-

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Enormous personal financial gain Self-employment, offering more job satisfaction and flexibility of the work force Employment for others, often in better jobs Development of more industries, especially in rural areas or regions disadvantaged by economic changes, for example due to globalisation effects c