CONTENTS Chapter One: Introduction to Entrepreneurship Chapter Two: Starting Technology Based New Ventures Chapter Three: Business Structures and Legal Ownership Chapter Four: The Entrepreneurial Cycle Chapter Five: Operations of Business Startups Chapter Six: Risk and Insurance in Business Enterprises Chapter One: Introduction to Entrepreneurship 1.1 Why We Study Entrepreneurship? 1.2 Meaning and Concept of entrepreneurship and an entrepreneur 1.3 The entrepreneur versus the manager 1.4 Motivation for straining one‘s own business 1.5 Personal competencies and Characteristics of Entrepreneurs 1.6 Kinds of Entrepreneurship 1.7 Success factors for entrepreneurs Why We Study Entrepreneurship Scientists and engineers who want to lead companies need to know how to back up ideas with numbers You will learn the complex business processes involved in commercialization You learn how to make trade-offs among features, benefits, price, markets, and operations You learn how to adapt to uncertainty and change You learn techniques for managing people An Entrepreneur Entrepreneurs are action-oriented, highly motivated individuals who take risks to achieve goals. have the ability to see and evaluate business opportunities, the ability to gather the necessary resources to take advantage of them the ability to initiate appropriate action to ensure success. Economists may view entrepreneurs as those who bring resources together in unusual combinations to generate profits Psychologists tend to view entrepreneurs in behavioral terms as those achievement- oriented individuals driven to seek challenges and new accomplishments. Individuals driven to seek challenges and new accomplishments. Peter Drucker states, as ―Entrepreneur is someone who always searches for change responds to it, and exploits it as an opportunity.‖ Example: It is the entrepreneur who only knows Opening of new university near the society Opening of Hotels near tourists‘ attraction-center Entrepreneurship Entrepreneurship (according to the classic definition) is the process by which individuals pursue opportunities without regard to resources they currently control. It is the dynamic process of creating incremental wealth. This wealth is created by individuals who assume the major risks in terms of equity, time and /or career commitments of providing value for some product or service. The product or service itself may or may not be new or unique but value must somehow be infused by the entrepreneur by securing and allocating the necessary skills and resources (Robert Ronstadt) It is very rarely a get rich-quick proposition; rather, it is one of building long-term value and durable cash flow streams. Entrepreneur Entrepreneurial function is the organization of production: Entrepreneurship is an economic concept. Economics describes four factors of production, namely, land, labor, capital and entrepreneurial ability (organizational skill). It is the entrepreneur who combines various factors of production, processes the raw material, creates utility in the product and converts the raw material into a finished product, organizes the marketing function and sells the product in the market in order to earn profit. Decision-making and calculated risk bearing: While organizing the production function, an entrepreneur plays a significant role. He is decision-maker, risk taker and goal setter. It is responsibility to take the decisions about product selection, size of investment, type of organization, technology, price determination, etc. Every decision may result in success or failure. But the risk is limited and calculated. An entrepreneur has an all-round personality: An entrepreneur possesses knowledge and insight into the quality and types of raw materials, machinery, manpower and their behavioral pattern, government machinery, labor laws, taxation, production process and marketing network. High levels of achievement motivation Innovative, creative, imaginative soul The entrepreneur is the owner of the business who enjoys the position of an employer. The Manager They may or may not be entrepreneurs. They own and manage a small enterprise, in a way, which fits with their personal motivations. They are more intent on survival than seeking innovative change and growth. Limited scope for innovativeness, creativity and imagination Managerial jobs are transferable As a manager in the business organization, his job is transferable from office to office, from one unit and location to another location Managers do not bear-risk Risk bearing capacity is an entrepreneurial quality Cond… Motivation for straining one’s own business What leads a person to strike out on his own and start a business? Perhaps a person has been laid off once or more. Sometimes a person is frustrated with his or her current job and doesn‘t see any better career prospects on the horizon. Sometimes a person realizes that his or her job is in jeopardy. A firm may be contemplating cutbacks that could end a job or limit career or salary prospects. Perhaps a person already has been passed over for promotion. Perhaps a person sees no opportunities in existing businesses for someone with his or her interests and skills. COND… Many people are pushed into founding a new enterprise by variety of factors including: Redundancy-Being without a job (idleness) Unemployment (or threat of) Disagreement with previous employer-Uncomfortable relation at work has also pushed new entrants into small business Some individuals are attracted towards small business ownership by positive motive such as a specific idea which they are convinced will work. Pull motives include: Desire for independence Desire to exploit an opportunity Turning a hobby or previous work experience in to a business Financial Incentive The promise of long-term financial independence can clearly be a motive in starting new firm, although it is usually not quoted as frequently as other factors. The dividing line between those ―pulled and those ―pushed is often blurred. Personal competencies and Characteristics of Entrepreneurs Generally, every career draws on the competencies of an individual. Some of these competencies may be general and some peculiar to the chosen career. You may understand competencies to mean abilities and skills. However, we would desist from calling these as personality traits as such a conceptualization only reinforces the mistaken belief that entrepreneurs are born rather than made. Figure Four Primary Characteristics COND… Need for Achievement: Passion: Willingness to take risks: All-roundness: Self-Confidence: Systematic Planning Innovation: Total Commitment: Creativity: Determination: Flexibility: Leadership: COND…. Other important Entrepreneurial skills Oral and written communication Basics of finance and accounting Teamwork Creativity and opportunity evaluation Real-time strategy and decision making Comfort with change and chaos Risk-taking Selling, negotiation, and Motivation through influence and persuasion Every entrepreneur has these qualities in different degrees. But what if a person lacks one or more? Many skills can be learned. Or, someone can be hired who has strengths that the entrepreneur lacks. The most important strategy is to be aware of strengths and to build on them. Kinds of Entrepreneurship It is possible to identify entrepreneurship by the varied types of people and firms that exist and entrepreneurial leadership maybe classified into three types 1. Founding Entrepreneurs /Founders/ 2. General managers and 3. Franchisees 1.Founding Entrepreneurs: Generally considered to be the “Pure” entrepreneurs, funders may be inventors who initials business as an the basis of new or improved products or services. Founders refer to entrepreneurs who bring new firms into existence. They may also be artisans who develop skills then start their own firms. Or they may be enterprising individuals, often with marketing backgrounds, who draw upon the ideas of others in starting new firms whether acting as individuals or in groups these people bring firms not existence by surveying the market, raising funds and arranging for the necessary facilities. COND… 2.General Managers: As new firms become well established, founders become less innovators and more administrators. Thus, we recognize another class of entrepreneurs called general managers. General Managers preside over the operation of successful ongoing business firms. They manage the week to week and month to month production, marketing and financial functions of small firms. The distinction between under and general managers is often hazy. 3.Franchisees: A system in which semi-independent business owners (franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to become identified with its trademark, to sell its products or services, and often to use its business format and system COND… Franchising: A legal arrangement by which one company allows its products, services, or business format to be used by others for a fee Franchisee: A company or individual who pays for the legal right to use the product, service, or format of another Franchisor: A company that grants to another company or individual the legal right to use its product, service, or format Franchisees differ from general managers in the degree of independence. Because of the constraints and guidance provided by contractual relationships with franchising organizations, franchisees function as limited entrepreneurs Artisan Entrepreneurs and Opportunistic Entrepreneur a. The Artisan Entrepreneurs: those who starts business with primarily technical skill and little business knowledge. Artisan entrepreneur is limited to technical training. Such entrepreneurs have technical job experience, but they lack good communication skills. Their approach to business decision-making is characterized by the following features: They are paternalistic (They direct their business much as they might direct their own families) They are reluctant to delegate authority They define marketing strategy in terms of the traditional price, quality, and company reputation. Their sales efforts are primarily personal. Their time orientation is short, with little planning for future growth or change. 18 COND… b. The opportunistic Entrepreneur: An entrepreneur who enters business with both sophisticated managerial skills and technical knowledge. Their approach to business decision-making is characterized by the following features: They avoid paternalism They delegate authority as necessary for growth They employ various marketing strategies and different types of sales efforts They obtain capital from different source. They have a good plan for future growth 19 Success factors for entrepreneurs Most new ventures succeed because their founders are capable individuals. The entrepreneurial team: The term “team” is used because entrepreneurs do not start business by themselves; they have teams, parents, close associates, or extensive networks of advisors. Venture product or services: Nearly all-successful ventures start small and grow incrementally; few “gear-up” with substantial organizations for a big-bang start. Incremental expansion of products and services also tend to stay within the bounds of positive cash flow. Marketing and timing: Successful entrepreneurs tend to have a clear vision of both existing and potential customers. There are no short cuts; innovation requires market demand, not simply a good ideas. Market potential is critically influenced by timing of new products or services. COND… Business Ideology: From an entrepreneur‘s perspective, every venture has an ideology, a philosophy or rationale for existing .A business ideology is defined as a system of beliefs about how one conducts an enterprise. These beliefs include commitment to providing customers with value, the ability to take calculated risks, the determination to grow and to control the fate of the business, the perspective of creating wealth realistically, and so on. Self-determination: They probably have great faith in their ability to control their personal environment, rejecting too high an influence of chance or fate. Desire for independence: They wish for autonomy believing that independence of action is the only sure way to get what they need. Whilst entrepreneurs may share some of these characteristics, no one single trait can be said to be the secret of entrepreneurial success Information as one success factor for entrepreneurship Information is the result of processed data that helps to give decision. Decision without information cannot be successful. Information helps business in all direction. Doing business with out information is like walking in the dark Information gives the following importance to the businessmen‘s To know the position of their competitors that is their strength and weaknesses, business strategy they use and their long term plan. To know threats and opportunity in doing business Helps to design long term objectives and goals indicate capital requirement (labor, capital and machinery) Helps to know market position locally and internationally. Sources of information Information are obtained from two main methods of data collection. That is primary data collection and secondary data collection. Drawbacks of Entrepreneurship Uncertainty of income Risk of losing your entire investment Long hours and hard work Lower quality of life until the business gets established High levels of stress Complete responsibility and Discouragement Ten Deadly Mistakes of Entrepreneurship 1. 2. 3. 4. 5. Management mistakes Lack of experience Poor financial control Weak marketing efforts Failure to develop a strategic plan Uncontrolled growth 7. Poor location 8. Improper inventory control 9. Incorrect pricing 10. Inability to make the “entrepreneurial transition” 6. 24 Thank you 25
