Entrepreneurship
Defining Entrepreneurship
The term “entrepreneurship” comes from the French verb “entreprendre” and the German word “unternehmen”, both means to “undertake”.Despite its current prominence, entrepreneurship still remains a vague concept.
Understanding entrepreneurship through various sciences
Economics: - One who brings resources, labor, material and other assets into combinations that make their value greater then before and also one who introduces changes, innovation and new order.
Psychology: - A person who is typically driven by some forces, which create a desire to obtain or attain something.
Understanding entrepreneurship through various sciences
Sociology: - A person whose actions would determine his social status and who contributes to the development of society.
Management: - A person who has a vision and generates an action plan to achieve it.
Entrepreneurship definition
Joseph Schumpeter (1934) he added the concept of innovation to the theory of entrepreneurship. According to him entrepreneur is the bearer of “mechanism for change”, and anybody could be an entrepreneur if he/she “carries out new combinations”.
Entrepreneurship definition
Schumpeter listed five different kinds of innovations or ways to act as entrepreneur:-
The introduction of new good or quality of good. The introduction of new method of production. The opening of a new market. The utilization of some new sources of supply of
raw materials or intermediate goods. The carrying out of some new organizational form
of the industry
Entrepreneurship definition
Stevenson and Sahlman (1987): entrepreneurship is “the relentless pursuit of opportunity without regard to resources currently controlled. Moreover, they believe that there is an underlying process in entrepreneurship that starts with the identification of opportunity and ends with harvesting the fruits of one’s labours”
Entrepreneurship definition
Peter Drucker he defines an entrepreneur as one who always searches for change, responds to it, and exploits it as an opportunity.
Bygrave & Hofer (1991): defined the entrepreneurial process as “all the functions, activities, and actions associated with the perceiving of opportunities and the creation of organizations to pursue them”.
Entrepreneurship definition
An individual, who identifies, recognizes upcoming opportunity and is able to organize resources to establish an enterprise capitalizing on that opportunity is an entrepreneur.
Entrepreneurship – Highlights
Diversity - Entrepreneurship principle is applicable in diverse settings.
Great potential - Mostly entrepreneurial ventures are started as small enterprises but grow rapidly
Creative thinking - Entrepreneurs identify opportunities creatively.
Difference in entrepreneur & manager Entrepreneur
involved with the start-up process
assumes financial, material and psychological risks
driven by perception of opportunity
initiates change is his own boss gets uncertain rewards
Manager
running the business over a long period of time
does not have to bear risks
Driven by resources he currently possesses
follows rules & procedures is a hired employee gets fixed rewards and
benefits
Entrepreneurship characteristics
Entrepreneurship is viewed as a function involving identification and use of opportunities which exist in the market.
Entrepreneurs bear risks in converting the ideas into action and pursuing opportunities.
Characteristics continued
Entrepreneurship involves creative and innovative action
Entrepreneurs undertake managerial activities as part of their work.
An entrepreneur constantly strives for excellence in his/her field of work.
Qualities of successful entrepreneurs
Initiative In the world of business,
opportunities come and go. He should be able to initiate action and take advantage of opportunity. Once you miss the opportunity it will not come again. Therefore, initiative on the part of entrepreneur is a must.
Qualities of successful entrepreneurs
Willingness to assume risk In
any business there is an element of risk. in other words it is not necessary that every business shall earn profit. This deters individuals to take up business. However, an entrepreneur always volunteers to take risks to run a business and be successful.
Qualities of successful entrepreneurs
Ability to learn from experience
An entrepreneur may commit mistakes. However, once an error is committed, it should not be repeated as that will lead to heavy losses. So, one should learn from his mistakes.
Qualities of successful entrepreneurs
Motivation
Motivation is key to success. Once you get motivated to do something you will not rest unless you complete it. For example, sometimes you become so much interested in reading a story or a novel that you do not sleep unless you complete it.
Qualities of successful entrepreneurs
Self-confidence
For achieving success in life, one should have confidence in himself or herself. A person who lacks confidence can neither do any work himself nor can inspire others to work. Self confidence is reflected in courage, enthusiasm and the ability to lead.
Qualities of successful entrepreneurs
Orientation towards hard workThere is no
substitute for hard work in life. While running a business, everyday, one problem or the other may arise. The businessman has to be vigilant about it and solve it as early as possible. This requires hard work on the part of entrepreneur. He cannot afford to say that now office time is over and I will not work.
Qualities of successful entrepreneurs
Decision making ability
In running an enterprise, the entrepreneur has to take a number of decisions. He should therefore be capable of taking suitable and timely decision. In other words he must take right decision at the right time. In the present world things move very fast. If an entrepreneur does not have the ability to take timely decision, he might miss opportunity and incur losses.
Functions of an entrepreneur
Identifying entrepreneurial opportunity –
There are many opportunities in the world of business. An entrepreneur senses the opportunities faster than others do. And therefore, keeps his eyes and ears open and apply imagination, creativity and innovativeness in attaining business success.
Functions of an entrepreneur
Turning ideas into action –
An entrepreneur should be capable of turning his ideas into reality. He collects information regarding the ideas, products, practices to suit the demand in the market. Further steps are taken to achieve the goals in the light of the information collected.
Functions of an entrepreneur
Feasibility study – The entrepreneur conducts
studies to assess the market feasibility of the proposed product or services. He anticipates problems and assesses quantity, quality, cost and sources of inputs required to run the enterprise. Such a blue print of all the activities is termed as a ‘business plan’ or a ‘project report’.
Functions of an entrepreneur
Resourcing –
The entrepreneur needs various resources in terms of money, machine, material, and men to running the enterprise successfully. An essential function of an entrepreneur is to ensure the availability of all these resources.
Functions of an entrepreneur
Setting up of the Enterprise –
For setting up an enterprise the entrepreneur may need to fulfill some legal formalities. He also tries to find out a suitable location, design the premises, install machinery and do many other things.
Functions of an entrepreneur
Managing the enterprise –
One of the important function of an entrepreneur is to run the enterprise. He has to manage men, material, finance and organize production of goods and services. He has to market each product and service, after ensuring appropriate returns (profits) of the investment.
Functions of an entrepreneur
Growth and Development – Once the
enterprise achieves its desired results, the entrepreneur has to explore another higher
goal for its proper growth and development. The entrepreneur is not satisfied only with
achieving a set goal but constantly strives for achieving excellence.
Types of entrepreneurs
Necessity based / Opportunity based Profit oriented / Social entrepreneurs Serial entrepreneurs Intrapreneurs First generation / family business
Intrapreneurship
Pinchot (1985) defines an intrapreneur as a "person who focuses on innovation and creativity and who transforms a dream or an idea into a profitable venture, by operating within the organizational environment."
Intrapreneurship
It is the practice of using entrepreneurial skills without taking on the risks or accountability associated with entrepreneurial activities. It is practiced by employees within an established organization using a systemized business model.
Intrapreneurship
Employees, perhaps engaged in a special project within a larger firm are supposed to behave as entrepreneurs, even though they have the resources and capabilities of the larger firm to draw upon.
Intrapreneurship
Intrapreneurship types
Employee Intrapreneur Self-employed Intrapreneur – franchising,
multi level marketing
How Intrapreneurship could be promoted in organizations:-
Support from ownership and top management Recognition that Intrapreneurship is compatible
to the existing culture Communication channels that are open Allocation of resources to the new innovations Rewards for Intrapreneurship Follow through by the intrapreneurs in order to
see the finished product.
Rules for the intrapreneur to get his or her idea accepted
Do any job needed to make your project work regardless of your job description
Share credit wisely Remember, it is easier to ask for forgiveness
than permission Come to work each day willing to be fired Ask for advice before asking for resources
Rules for the intrapreneur to get his or her idea accepted
Follow your intuition about people; build a team of the best
Build a quiet coalition for your idea: early publicity triggers the corporate immune system
Never bet on a race unless you are running in it Be true to your goals, but realistic about ways to
achieve them Honor your sponsors.
Successful entrepreneurs
Arun Jain, Chairman & CEO of Polaris Software Lab Limited, emphasizes that it is quality consciousness which has made him one of the most highly successful first generation entrepreneurs.
Successful entrepreneurs
Dhirubhai Ambani’s company Reliance is one of the few Indian enterprises truly on the world stage – employing thousands of people and with a turnover of many crores of rupees.
Mr. D.H. Ambani is a perfect example of an ENTREPRENEUR.
Successful entrepreneurs
Madhuri Mathur, made the life of ladies in kitchen easier by bringing out the idea of a kitchen machine that would blend, chop, mince and grind that culminated into sumeet mixer.
Successful entrepreneurs
Shahnaz Husain introduced herbal cosmetics to the world. Her creams and lotions have found their way into salons in different parts of the globe. She has 650 salons at 104 countries.
Successful entrepreneurs
As the inventor of Hotmail, Sabeer Bhatia strengthened India's IT revolution. Hotmail went from strength to strength as the Web email address of choice for an estimated 200 million users worldwide.
Shri Jhunjhunwala is an Entrepreneur
Shri Jhunjhunwala of Varanasi is a businessman engaged in the production of “Jhula Vanaspati”. He started his business career from a humble beginning. He had a small retail shop of oil and ghee. His earning was limited and not sufficient to meet the needs of his family. He started looking for an opportunity to earn more.
Government policies/programs related to entrepreneurship promotion
Government specially focuses on development of :-
1. Rural areas
2. Women
3. Economically Weaker sections
Of the society in form of various policies and programs to promote entrepreneurship.
Government policies/programs related to entrepreneurship promotion
Indian Government has been very actively promoting the cause of entrepreneurship in form of various policy initiatives like:-
IRDP – Integrated Rural Development Program PMEGP – Prime Minister Employment Generation P. NREGA – National Rural Employment Guarantee Act RGUMY - Rajiv Gandhi Udyami Mitra Yojna etc.
Government policies/programs related to entrepreneurship promotion
The Ministry of Micro, Small and Medium Enterprises is the nodal Ministry for formulation of policies, programmes and schemes, their implementation and related co-ordination, for the promotion and development of small scale industries in India.
Government policies/programs related to entrepreneurship promotion
Micro, Small and Medium Enterprises Development Organization (MSME-DO) :- the Office of the Development Commissioner (Micro, Small and Medium Enterprises) . It is the apex body for assisting the Government in formulating, coordinating, implementing and monitoring policies and programmes for micro, small and medium enterprises (MSMEs) in the country.
Government policies/programs related to entrepreneurship promotion
National Small Industries Corporation Ltd (NSIC) :- it helps in promoting, aiding and fostering the growth of micro, small and medium enterprises in the country, with a focus on commercial aspect of their operations. It deals in the areas of raw material procurement, product marketing, credit rating, acquisition of technologies, adoption of improved management practices, etc.
Government policies/programs related to entrepreneurship promotion
Khadi and Village Industries Commission (KVIC)
:- established under the Khadi and Village Industries Commission Act, 1956, as a statutory organization engaged in promotion and development of khadi and village industries for providing employment opportunities in the rural areas.
Government policies/programs related to entrepreneurship promotion
Coir Board :- is a statutory body, for the promotion and development of coir industry in India as well as for uplifting the living conditions of the workers engaged in this industry.
National Commission on Enterprises in the Unorganised Sector (NCEUS)
has been set up for addressing the wide range of issues affecting the productive potential of the unorganized micro and small productive units.
Government policies/programs related to entrepreneurship promotion
For the development of training modules, undertaking research and providing consultancy services for entrepreneurship development in the small scale sector:-
1. National Institute for Micro, small and Medium Enterprises (NIMSME) at Hyderabad
2. National Institute of Entrepreneurship and Small Business Development (NIESBUD) at Noida
3. Indian Institute of Entrepreneurship (IIE) at Guwahati
An entrepreneur has to obtain several clearances or permissions depending upon the nature of his unit and products manufactured.
Regulatory or Taxation Clearances Environment & Pollution Related Clearances Product Specific Clearances
Regulatory or Taxation Clearances
Registration under Sales Tax Act Commercial Tax officer of area concerned Registration under Central Excise Act Collector of Central Excise or his nominee for
area Payment of Income Tax.- ITO of the area
concerned Registration of Partnership deed - Inspector
General of area concerned
Regulatory or Taxation Clearances
Calibration of weights & measures - Weights and Measures Inspector of State
Power Connection - Designated Officer of State Electricity Board
Employee strength exceeding 10 with power connection or 20 without power - Chief Inspector of Factories
Environment & Pollution Related Clearances
The method of granting consent under water and air pollution to SSI units has been simplified. Except for 17 critically polluting sectors, in all other cases SSI units will merely have to file an application and obtain an acknowledgement which will serve the purpose of consent.
Product Specific Clearances
Establishing a Printing Press - District Magistrate
License for Cold Storage Construction - Designated Official in State
Pesticides - Central/State Agricultural Department - Ministry of Agriculture
Drugs and Pharmaceuticals - Drug license from State Drug Controller
Product Specific Clearances
Safety Matches/ Fireworks - License under Explosives Act from Directorate of Explosives, Nagpur
Household Electrical Appliances - License from Bureau of Indian Standards
Wood Working Industry within 8 km from forest - District Forest Officer
Milk Processing & Milk products manufacturing units - Approval under Milk and Milk Products Order from State Agricultural/ Food Processing Industries Department above a designated capacity.
Filing of Entrepreneurs Memorandum with District Industry Centre of it’s area
Any person who intends to establish a micro or small enterprise, at his discretion shall file the Memorandum of Micro, Small Enterprise with District Industries Centre of its area.
Business Plan Basics
Students at any level of education can use the concept of preparing a business plan as a method of exploring all kinds of ideas for starting a business. It is merely a series of questions that lead you to think about the requirements and the possibilities of any kind of business. Until you start to ask these questions, you aren't able to visualize the details necessary to be successful in a business.
Preparing a Business Plan
The design of the business plan depends on the kind of venture envisaged and what plan should accomplish
Clarity Objectivity Interest Simple Consistent style Realistic
Elements of a business plan
1. Executive summary2. Product or service3. Management team4. Market and competition5. Marketing and sales6. Business system and organization7. Operations and implementation schedule8. Opportunities and risk9. Financial planning
Elements of B-plan – Executive summary
• Value to the customer• Innovativeness• Uniqueness• Management expertise• Financial profitability• Readiness to launch the project• Risk analysis
Elements of B-plan – product/service
The product / service conceptWhat customer need is proposed to be
fulfilledHow your product is different from othersAbility to sustain the innovationStage of developmentQuality specifications
Elements of B-plan – management team
Capability of the team to run a promising business• The core entrepreneurs• Professional experience• Genesis of the project idea• The management team
Elements of B-plan – management team
The company description• Legal ownership• Mission and objectives• Geographical information
Elements of B-plan – target market
• Targeted market segment• Demographic profile• Buying sensitivity• Purchasing patterns• Potential revenues• Special strategies required
Elements of B-plan – Market analysis
• Size and growth trends• Maturity of the industry• Vulnerability to economic factors• Seasonality factors• Technological factors• Regulatory issues• Supply and distribution requirements• Other Influencing factors
Elements of B-plan – Competition
• Competing services• Competitive position• Strengths and weaknesses of
competitors• Barriers to entry• Possible future competition• Positioning vis-a-vis the competition
Common pitfalls – Market
Everybody is waiting for my product Lack of clarity on dimensions of
dissatisfaction Insensitive to potential competition No clear appreciation of the entry barriers What stage of product life cycle you are
entering Planning and action based on analysis of
industry competitiveness
How to get market knowledge
Gut feel is not good enough Volume determination – quantitative analysis Behavior determination – qualitative analysis Data collection – primary and secondary
sources Questionnaire design Careful extrapolation
Elements of B-plan – operations
• Location• Sources and complexity of technology• Plant, equipment, facilities,
infrastructure• Recruitment, training and retaining
personnel• Input materials – sources, cost• Production, capacity utilization
Common pitfalls - Technology
In-house
Challenges of prototype and commercializing
Technology expertise with only one person Collaboration
Proven technology, Untested technology
Exclusivity, technical feasibility Absorption
Acquisition, Assimilation, Fine tuning
Elements of B-plan – Implementation schedule
Prepare a realistic 3 to 5 yr. plan to inspire credibility
• Identify major milestones• Plan for aggregating resources• Ramp up plan• Human resource planning• Investment scheduling• Strategic partnerships
Common pitfalls - Roll out plan
Location – poor home work on availability, suitability, cost and further development cost
Availability of quality inputs – workforce, power, water, transport, parking space
Equipment – installation and after sales support
Personnel – attracting, training and retaining
Elements of B-plan – Opportunities & risks
Identify major trends in external environment Identify major competitive forces operating
on the firm Possible impact of the forces on the firm’s
competitiveness in future Which are the most likely scenarios and what
are their implications to us
Elements of B-plan – Financial plan
Is the business concept profitable an worth investing in
Plan for investment, source of funds, cash flow, liquidity and steps for improving profitability
Elements of B-plan – Financial plan
Prepare• Project cost• Projected income• Break-even analysis• Projected cash flow statements• Pro forma balance sheets
Common pitfalls - Finance
Optimistic assessment of project cost and funding
Lack of budgeting of trial production Not taking fully into account the cost
implications Improper assessment of working capital The gap between sanction and disbursement Lack of efforts in confidence building with
investors
Business Plan Basics
Basic components of a business plan can be organized as follows:
providing a description of the business, choosing the best marketing strategy, identifying the management plan, and analyzing the finances needed to start the
business and make it successful.
Business Plan Basic- questions
How can you describe the business...in only one paragraph please?
What is your product, or service? Who will buy it? Where should you locate the business? How can you attract customers? What is your competition? How much should you charge for the products
or service?
Business Plan Basic- questions
What advice do you need and who can provide it?
How will you organize the managers and/or workers of the business?
How will you split the profits? Who is responsible for the losses?
What should you consider to be able to produce the product and get it to the customer?
Business Plan Basic- questions
How much money is needed to get the business started?
How many customers will you have per month and how much will they buy per month?
How much does it cost to make the product or provide the service?
What are your operating costs? (Include your own salary)
Business Plan Basic- questions
How much money will your business earn each month by selling your product or service?
How much investment will you need to keep the business going until you make a profit?
What is your potential profit per year for Year I, Year II, and Year III?
How much money do you need to borrow to start this business?
How will you make the business grow in the future?
QUESTIONS FOR CREATIVE THINKING
What kind of business would you start if your family would lend you $5000 to get it started?
What kind of business would you start if you and two classmates had access to a loan for $100,000?
What kind of business could you start if you want to do business with another country?
What type of business could you start while still going to school?
QUESTIONS FOR CREATIVE THINKING
What type of business could you start using the skills you have now?
What type of business could you run while also working in a part time job (to provide the security of a salary while the business grows)?
How could you start a business and then later make it into your own franchising business for purposes of expansion?
Questions- Financing the venture
How much will be needed for development of the product or service?
How much will be needed for setting up operations?
How much will be needed for working capital? Where will the money come from? What if more
is needed?