UNIT 3

Managing an Enterprise

Interface with Functional Areas:

Generally, there are six functional areas of business management involving strategy,
marketing, finance, human resources, technology and equipment, and operations. Therefore,
all business planners and entrepreneurs should concentrate on researching and thoroughly
understanding these areas as they relate to the individual business.

Although the traditional business planning format does not strictly adhere to this
approach, it can easily be adapted. Researching and designing a business involves a thorough
analysis of the business in these areas.

Strategy

This important area is, in a sense, the "brain" of business operation. All potential
business operators should create vision and mission statements so they understand what they
want to do, why they want to do it and how they will do it.

Also, strategists should analyze the competitive landscape and markets to determine
where the opportunity for the business lies, and how they will access that opportunity. When
forming a strategy, determine exactly in what market the enterprise will be operating, and
then perform a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis on main
competitors and the enterprise. This will provide a good picture of where the firm fits in the
competitive landscape. This will also help in determining market access strategy, which
involves positioning, differentiating from competitors and branding.

Marketing

Since marketing and sales will generate revenue, planners should also thoroughly
understand their potential customers and determine how they will reach them. Most new
business operators mistakenly use an "inside-out" approach to marketing in that they plan
their product or service first and then look for some way to sell it to a vaguely defined group
that is "out there."

However this "build it and they will come" approach usually results in much wasted
effort, fierce competition from others who have the same idea and, often, failure. Before
designing a product or service, business operators should study the market and assess the
needs of customers. Find underserved areas. Then shape the marketing of the product or
service, and sometimes the product or service itself, to answer those needs.

Finance

Most business plans concentrate on this area because they need loans or investment,
as well as for forecasting and budgeting purposes. Since money is the blood that keeps a
business alive, a business operator should always know how healthy he or she is financially.
This requires a realistic prediction of cash flow, even though it can be difficult to forecast the
future. To do so, a planner should form an expenditure budget and then a picture of potential
revenue. Much of this information can be found by studying similar businesses and adapting
their information to the new business.

Human resources

A common mistake planners make is to stop at the financial aspect of hiring staff. Of
equal concern should be the ability to hire, and whether those hired fit the roles for which
they are chosen. For example, some industries are facing acute labor shortages. Therefore the
planner may have to understand what attracts workers, and offer them what they want.
Today, managers must treat employees like customers, with the same understanding of what
motivates their behavior.

Technology and equipment

This involves not only equipment needed to operate the business, but such concerns as
communications technology for marketing and sales purposes, or transportation requirements.
Understand the needs and balance them with budget demands. Also, the planner may have to
be creative when managing technology and equipment. For example, some equipment may be
expensive and sit idle most of the time. The planner should then consider renting it as needed,
or subcontracting that aspect of production to another company that has that equipment.

Operations

In most businesses, this not only involves equipment, but processes. Essentially,
business operations are those that create and deliver the products or services to customers. In
most start-up situations the business owner performs many roles, including operations. In
fact, a familiarity with operations is often why most people start businesses.

In most new businesses, the owner is also the person who performs the operation. But
there is a danger in this: The operator must always remember that he or she is managing a
business, not working in a job. So management of all aspects of the business should carry
equal weight with actual performance of the service or manufacturing of the product. It can
be argued that this is also a very common reason for business failure: The operator is more
comfortable "doing" and so ignores other important aspects of management.

Strategies to set and achieve goals:

As a business owner, it’s important to take the time to set goals and review business
as a whole. Having clear, well-defined goals can: help business grow, achieve objectives,
improve teamwork and collaboration and help everyone understand the direction in which the
business is heading. Strategies that can help to assess an enterprise are:

SWOT analysis – identify business's strengths, weaknesses, opportunities and threats.

Benchmarking – research of similar businesses in the industry or location and comparison of

industry averages on income, and expenses. This can help to assess how business is
performing. Market research – Research of the market and industry of business to identify
customer needs, trends and changes in the market or technology.

Setting goals

Here are a few things to consider when setting the goals:

 The goals have to be SMART i.e., Specific: be clear about what an enterprise wants to
achieve, Measurable: make sure the goal can be measured, achievable: check that the goal is
something that has the time, money and resources to meet, Relevant: ensure the goal is
relevant to the direction of the business, for example, increasing profit, employing more staff,
increasing brand awareness and Timely: set a realistic deadline for completing the goal.

Strategies in achieving enterprise goals:

Once the enterprise goals are listed, it needs to figure out how to achieve them. Here’s
a list of strategies to achieve the enterprise goals:

Time frame – how long does a task will take to complete (include both a start and
finish date)

Actions – describe the actions that enterprise are going to take in detail

Responsibilities – write down the person or people responsible for achieving each step

Resources – detail your budget, staffing requirements and any supplies that will be
needed

The desired outcome – describe what to expect from the actions and how to know
when the goal has been achieved.

Formal and Non Formal Aids

Government interventions are aimed at improving the competitiveness and financial

health of MSMEs. Among the programs that are seen to have impacted access to finance are
those for skill development, market linkage, technology adoption, cluster development and
finance availability.

Skill Development
To support the growth of technology-based enterprises, the government plans to set
up 100 incubators under the auspices of engineering and technology institutions. There is also
a proposal to expand the services of MSME Development Institutes and technology
incubators to provide hand-holding and advisory support to enterprises. This would provide
confidence to financial institutions about the viability of an enterprise.

Market Linkages
Inadequate market linkages are considered one of the key constraints for MSME
enterprises, eventually leading to enterprise sickness. There are several government policies
to enhance market linkages of enterprises, ensuring better management of irregular revenue
cycles.
Technology Adoption
The MSME sector is characterized by low adoption of technology, which impacts the
sector’s competitiveness. In order to encourage enterprises to invest in technology, the
government also provides Credit-Linked Capital Subsidies (CLCS) for technology
investments. The government leverages the credit infrastructure of the public sector banking
network to make the subsidy available to MSMEs.
Cluster Development
A cluster is a location-based agglomeration of micro, small and medium enterprises
that are faced with similar opportunities and challenges. Clusters tend to provide ecosystem
support.
Drawing lessons from the success of clusters in the past, the government has
identified cluster development as one of the key approaches to make MSMEs more
competitive. In a cluster approach, the government provides support for skill development,
market-linkage, technology improvement and access to finance for specific clusters.
A detailed list of different aids is shown in the figure:
 Micro, Small and Medium Enterprise

https://wbmsme.gov.in/what_msme ​-----Characteristics of MSME

Act
 Formulating Business and Revenue Models
​Text Book: Entrepreneurship Start up India and Stand Up India. Pranabananda Rath
& Sarjue Pandita

Leveraging Technology
When a business leverages technology, that digital transformation will make
fundamental changes in the way it conducts every aspect of its business. SMBs can achieve
that change by leveraging the technologies that are being introduced at an increasing rate.
However, SMBs aren’t the first to do what’s necessary to achieve digital
transformation. According to research done by the SMB Group, only 48 percent of SMBs are
planning to find ways to move toward transformation, 36 percent have started to do things
that will support transformation and 16 percent have no digital plans in place.

IT’S CRITICAL FOR SMBS TO LEVERAGE TECHNOLOGY

This lack of progress comes at a time when the need for transformation is becoming
ever more important. The digital age has changed the way people interact with one another.
As a result, customers expect to have that same freedom with the brands they buy from.
These customer expectations exist for all businesses, regardless of the size of the
organization. A number of trends are driving this imperative for digital transformation.

PEOPLE ARE CHANGING THE WAY THEY WANT TO WORK

The days when everyone in a company worked in the company’s physical location are
going away. Today, many businesses need to develop new ways to support employees when
they are outside of the office or telecommuting.
The technology needs to support letting employees conduct business from their
telephones, including checking email, responding to meeting requests and more.

CUSTOMERS ARE CHANGING THEIR EXPECTATIONS

Often, the biggest challenge for SMBs is attracting and retaining customers. Being
responsive to customer expectations is a critical factor in meeting that challenge.
 Technology can help SMBs improve the customer experience by being accessible
online, providing self-serve capabilities, collecting and responding to customer information,
and much more.

TECHNOLOGY IS EVOLVING TO PROVIDE ANSWERS FOR COMPANIES OF ALL

SIZES
Strategic business consultants are quick to point out that, regardless of a company’s
IT maturity level, management can take the company to the next level with a well-planned
cycle of improvement. In today’s environment, there’s no reason why SMBs can’t use the
same type of technology that serves large enterprises.
The price of technology is falling and the capabilities offered are increasing, as these
examples show:
SMBs can use technology to integrate workflow automation to buy back time to focus
on critical business innovation.
Chatbots can take over customer service tasks that include interacting with customers,
answering routine questions and routing telephone calls.
Social media management becomes much less time consuming and more effective
when software such as Hootsuite is used to eliminate many of the time-consuming and
repetitive tasks that are required to maintain a vibrant social media presence.
Online project management software is helping companies of all sizes track projects
and provide a platform for communication among team members.
Cloud-based accounting systems are making it simple for SMBs to produce invoices,
send them via email, and keep track of revenue and expenses. These systems also integrate
with complex accounting programs like QuickBooks. As a result, business owners no longer
need to supply accounting activity to their CPA manually.
This partial list of technology demonstrates how an SMB can transform many of its
processes to save time, reduce costs and improve competitive advantage. The results that are
produced when companies leverage technology can be truly impressive.

LOOKING TO THE FUTURE

The things SMBs have done in the past to be successful won’t work as well in today’s
digital world. Building a brand, responding to customer expectations and developing a strong
competitive advantage is within reach of SMBs who leverage technology and take digital
transformation seriously.

Optimizing the risk and return:

Risks and entrepreneurship go hand in hand. No business owner should just believe it
and be passive. Of course, risks should be mitigated or at least be reduced.​ ​Entrepreneurs
should take the calculated risk.
Benefits of risks
● It refines vision and mission of the company
● It makes the organization more proactive in handling any kind of situation
● It makes decision makers more aggressive
● It helps in devising flexible strategies for the organization
● It sends positive energy to the middle and junior level management
● It helps organizations in reaching new height of growth
● It helps in forming much more loyal and dedicated team for execution
Challenges of risks
● Frequent failure of strategies may dishearten the top management
● Competitors may acquire the failed organization
● Execution team may leave the organization
● Sense of fear may develop across the organization
● Future contracts may be canceled
● There may be socioeconomic pressure from stakeholders including government
It is general notion that a start-up always faces a higher degree of risk. But, this is not
completely true. A bigger organization will always face a higher degree of risks because of
large size, huge financial obligation, bigger team, global operation etc. Shifting from one
strategy to another to reduce risk is time taking and by the time it takes the alternative course
of action, the aftermath of risk becomes severe and unmanageable.

In contrast, smaller organizations including start-ups can shift to alternative strategic

plans soon to mitigate or reduce risk.

General risks an organization may face:

● Management risk- any of the key persons leaving the organization
● Product risk- failure of product because of being out-dated or competitors came up with
much-advanced product or associated services
● Team risk- execution team leaving the running projects suddenly
● Suppliers’ risk- vendors/suppliers canceling the contracts at very short notice
● Legal risk- companies falling into litigations with competitors
● Environmental risk- sudden development of rules and regulations by state or central
government putting pressure hard to survive
● Financial risk- inability to service debt or not meeting financial expectations of outside
equity providers
A general approach for mitigating or reducing the impact of risks:
● Try to forecast the risk- although it is difficult in changing the business environment to
some extent it is possible as well as desirable.
● Do not ignore ifs and buts- always have back up plan; be it related to product/services
modification, new launch, execution team etc.
● Communicate well inside and outside the organization- miscommunication will create
risk
● Maintain relationship- develop and maintain relationships with current
customers/vendors and also with past vendors.
● Raise finance only to the extent of requirements and stage-wise
● Focus on cutting down the operational and other costs
● Develop new way of marketing