Nature & Development of

Entrepreneurship
 Entrepreneur

Individual who takes risks and starts

something new
 Characteristics of an Entrepreneur
• Initiative taking
• Organizing and reorganizing of social and economic
mechanisms to turn resources and situations to
practical account
• Acceptance of risk and failure
 Entrepreneurship
It is the process of creating something different with
value by devoting the necessary time and effort;
assuming the accompanying financial, psychological,
and social risks; and receiving the resulting rewards of
monetary and personal satisfaction
 Entrepreneurial Decision Making
Change from present lifestyle Factors to Form new enterprise
Work environment disruption Desirability of new venture formation
1. Cultural
2. Sub-cultural
3. Family
4. Teachers
5. Peers

Possibility of new venture formation

1. Government
2. Background
3. Marketing
4. Financing
5. Role models
 Types of Start-ups
• Lifestyle firm
– A small venture that supports the owner and does not grow
• Foundation company
– R & D firm that usually does not go public
• High potential venture
– This has a high growth potential and hence receives great
investor interest
• Gazelles
– Very high growth ventures
Role of Entrepreneurship in Economic
Development
• Product evolution
• Iterative synthesis
– Intersection of knowledge and social need that starts the
product development process
• Ordinary innovations
• Technological innovations
• Breakthrough innovations
 Government as an Innovator &
Entrepreneur
• Government active in commercializing technology
• Technology transfer
 Intrapreneurship
• Entrepreneurship within an existing organization is
Intrapreneurship
 Skills Required for Entrepreneurship
• Technical skills
• Business management skills
• Personal entrepreneurial skills
 Technical skills
• Written & Oral communication
• Monitoring
• Technology & Technical business management
• Interpersonal
• Listening
• Ability to organize
• Network building
• Coaching
• Team player
• Ability to lead
 Business management skills
• Planning and goal setting
• Decision making
• Human relations
• Marketing
• Finance & Accounting
• Controlling
• Negotiating
• Venture launch
• Managing growth
 Personal entrepreneurial skills
• Inner control/ discipline
• Risk taker
• Innovative
• Change oriented
• Persistent
• Visionary leader
• Ability to manage change
Entrepreneurial & Intrapreneurial
Mind
 Entrepreneurial Process
• Identification and evaluation of opportunities
• Development of a business plan
• Determination of the required resources
• Management of the resulting enterprise
 Identification and evaluation of
opportunities
• Creation and length of opportunity
• Real and perceived value of opportunity
• Risk and returns of opportunity
• Opportunity verses personal skills and goals
• Competitive situation
 Window of Opportunity
• The time period available for creating the new
venture – it is limited
 Opportunity Analysis
• What market needs does it fit?
• What social conditions underline these need?
• What market research data is required?
• What competition exists?
• What does the international market look like?
• Where is the finance to make this happen?
 Development of a business plan
• Title page
• Table of contents
• Executive summary
– Description of business
– Description of industry
– Marketing plan
– Financial plan
– Production plan
– Organization plan
– Operational plan
– Summary
• Appendices (Exhibits)
 Determination of the required
resources
• Existing resources of the entrepreneur
• Resource gaps and available resources
• Access to needed resources
Management of the resulting enterprise
• Management style
• Key variables for success
• Identification of problems and potential problems
• Implementation of control systems
 Entrepreneurial Decision Making
• Strategic orientation
– The decision making is totally dependent on their perception
of opportunity unlike managers
• Commitment to opportunity
– Entrepreneur is pressured by the need for action, short
decision windows, willingness to assume risk and has a short
time span
• Commitment to resources
– Is again short term and ensure that they are productive
 Entrepreneurial Decision Making
• Control of resources
– Strives to hire resources for short periods of time, on an
as-needed basis
• Management structure
– Is very flat, as he is trying to hasten the decision making
process
 Traditional Managers
• Primary motive is promotion and moving up the
hierarchy, concerned with status
• Short term focus – quotas, budgets, targets
• Delegation and supervision
• Averse to taking risk
• Tries to avoid making mistake
• Agrees with those in the upper management
• Hierarchy as basis of relationship
 Entrepreneurs
• Primary motive is to create value and profit, not
concerned about status
• Looking for survival and 5-10 years of growth
• Direct involvement
• Moderate risk taker
• Deals with mistakes and failures
• Follows dream
• Transaction and deal making as basis for relationship
 Intrapreneurs
• Independence and ability to advance, driven by
status
• Has self imposed time orientation
• Direct involvement
• Moderate risk taker
• Able to get others to agree to achieve dream
• Transactions within hierarchy
 Intrapreneurial Environment
• Organization operates on frontier of technology
• New ideas encouraged
• Trial and error encouraged
• Failures allowed
• Resources available and accessible
• Multidiscipline teamwork approach
• Long term horizon
• Appropriate reward system
• Support of top management
• Sponsors and champions available
 Intrapreneurial Leadership Characteristics

• Understands the environment

• Visionary and flexible
• Creates management options
• Encourages team work
• Encourages open discussions
• Builds a coalition of supporters
• Persists
Individual Entrepreneur
 Entrepreneurial Feelings/ Attributes
• Locus of control
– Attribute indicating sense of control that one has over life,
drive to achieve
• Feeling of independence
• Need for achievement
• Risk taking
 Entrepreneur Background
• They are very secure individuals
– Strong sense of belonging
– Confident
• They have a strong support system
– Family
– Mentors
• Strong sense of values
Creating & Starting The Venture

Creativity & Business Idea

 Business Strategy development or Review
New Business
development New Business Strategy development
Process
Idea generation
Front end •Screen ideas against new business strategy
Planning
Concept development and evaluation
•Test concept with customers & employees

Business analysis
•Test for profitability and feasibility

Product development and testing

•Conduct product prototype test

Market testing
Implementation •Test product & other marketing mix element

Commercialization

Post introduction evaluation

 Sources of New Ideas
• Consumers
• Existing companies
• Distribution channels
• Government
• Research and development
 Methods of Generating Ideas
• Focus group
– Group of individuals providing information in a structured
format
• Brainstorming
• Problem inventory analysis
– Obtaining new ideas by focusing on problems
– Food industry (ITC – Taste of India)
• Weight
• Taste
• Appearance
• cost
Product Planning & Development Process

Idea
Idea Stage
Evaluate

Development
Concept Stage
Evaluate

Pilot Production
Product Development Stage
Evaluate

Commercial Plans
Test Marketing Stage
Evaluate
 Determining Need for New Product Idea

• Type of need
– Continuing/ declining/ emerging/ future
• Timing of need
– Duration/ frequency
• Competing ways to satisfy the need
• Perceived benefits/ risks
• Price versus performance features
• Market size and potential
• Availability of customer funds
 Determining Value for New Product Idea

• Cash outflow
– R&D/ Production/ Marketing/ Capital cost
• Cash inflow
• Profit
• Relative returns
– Return on equity
– Return on investment
– Return on assets
• Relative returns compared to other investments
Legal Issues
 Intellectual Property
Any patents, trademarks, copyrights, or
trade secrets held by an entrepreneur are
intellectual property
 Legal Issues
• Appoint
– Auditor
– Lawyer
• Other issues
– International Patents
– Trademarks
– Copyrights
– Trade secrets – employee contracts
– Licensing
– Insurance
– Customers/ supplier contracts
Business Plan
 Business Plan
Business plan is a written document
describing all relevant internal and external
elements and strategies for starting a new
venture
 Scope and Value
• It determines the viability of the venture in a
designated market
• Provides guidance to the entrepreneur to plan their
activities
• Its an important tool to help obtain finance
 Stake Holders
• Investors
• Bankers
• Venture capitalists
• suppliers
• Employees
• Customers
• Advisors
• Consultants
 Market Information
• Market size
• Market potential for their products
• Target market
 Operations Information
• Location of the enterprise
• Manufacturing operations
– Own manufacturing
– outsourcing
• Raw materials
• Equipments
• Labor skills and availability
• Space – owned or leased
• Overheads and working capital
 Financial Information
• Capital required
• Funding
– Institutions
– Owner capital
• Assets and liabilities
• Expected sales and expenses for the first three years
• Cash flow for the first three years
• Current balance sheet figures and pro forma balance
sheets for the first three years
 Writing A Business Plan
1. Introductory page
a) Name and address of business
b) Name(s) and address(es) of principals
c) Nature of business
d) Statement of financing needed
e) Statement of confidentiality of the report
 Writing A Business Plan
2. Executive summary
• 3 – 4 pages summarizing the complete business plan
 Writing A Business Plan
3. Industry analysis
a) Future outlook and trends
b) Analysis of competitors
c) Market segmentation
d) Industry forecast
 Writing A Business Plan
4. Description of venture
a) Vision of the venture
b) Products (s)
c) Service (s)
d) Size of business
e) Office equipment and personnel
f) Background of entrepreneurs
 Writing A Business Plan
5. Production plan
a) Manufacturing process
b) Subcontracting if any
c) Physical plant
d) Machinery and equipment
e) Names of suppliers of raw materials
 Writing A Business Plan
6. Marketing plan
a) Pricing
b) Distribution
c) Promotion
d) Product forecasts
e) controls
 Writing A Business Plan
7. Organizational plan
a) Form of ownership
b) Identification of partners or principal shareholders
c) Authority of principals
d) Management team background
e) Roles and responsibilities of members of organization
 Writing A Business Plan
8. Assessment of risk
a) Evaluate weakness of business
b) New technologies
c) Contingency plans
 Writing A Business Plan
9. Financial plan
a) Pro forma income statement
b) Cash flow projections
c) Pro forma balance sheet
d) Break even analysis
e) Sources and application of funds
 Writing A Business Plan
10. Appendix (backup material)
a) Letters
b) Market research data
c) Leases or contracts
d) Price list of suppliers
 Implementing Business Plan
• Inventory control
• Production control
• Quality control
• Sales control
• Disbursements
 Why Business Plans Fail?
• Goals set are unreasonable
• Goals are not measurable
• Entrepreneur not completely committed to business
• Entrepreneur has no experience as well as skilled
personnel
• Customer needs for the products were not
established
• Has no idea of potential threats to business
Marketing Plan
 Marketing Plan
Examine present & prospective products/ market situation

Organization goals and restraints

Set marketing objectives that are SMART

Determine marketing strategies with action plan

Reevaluate programs against objective

Objectives attainable Objectives not attainable

Marketing plan with steps to monitor progress

Marketing plan with steps to monitor progress

Match feasibility against resource availability

Feasible Not feasible

Submit marketing plan for approval and execution

 Examine present & prospective
products/ market situation
• Situation analysis
– Background of the venture
– Market opportunities and threats
– Competitor analysis
– Strengths and weaknesses of the venture
• Marketing objectives and goals
 Determining Marketing Strategy
• Determining the marketing mix
– Product mix
– Promotion/ Communication mix
– Pricing mix
– Distribution mix
• Determining the STP
Financial Plans
 Financial Plans
• Pro forma income statements
• Pro forma cash flows
• Pro forma balance sheets
• Break even analysis
• Pro forma sources and uses of funds