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Entrepreneurship

Management

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Introduction:

An Entrepreneur is the person who is

responsible for

-- setting up a business or enterprise.

-- takes initiative-- innovative

-- and looks for high achievements.

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Definition of an Entrepreneur:

The word derived from the French word

µenterprendre¶ means ³to undertake´.

According to J.A Schumpeter:

Entrepreneur is an innovator who carries out

new combinations to initiate the process of

economic development through introduction

of new products, new markets, take over of new source of raw materials and

establishment of a new organization of

industry.

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According to Webster: ³Entrepreneur is one who

assumes the responsibility of the risk and

management of business.´

According to Peter Drucker:

³Entrepreneur is one who always searches for change,

responds to it and exploits as an opportunity.

Innovation is a specific tool of entrepreneurs, the

means by which they exploit change as an

opportunity for different business or service.´

According to Dewing: ³The function of entrepreneur is

one that promotes ideas into business.´

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Nature and Importance of an Entrepreneur:

1.Contributes for the economic development.

2.Speed up the process of activating the factorsof production.

3.Creation of employment opportunities.

4.D

evelopment of backward and Tribal areas.

5.Improvement in the standard of living of theweaker sections of the society.

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Types of Entrepreneur:

1. Trading Entrepreneurs

a.Real Estate,

b.Mall Trading.

2. Industrial Entrepreneurs:

a. Large, b. Medium and c. Tiny Sector.

3.Corporate Entrepreneurs.

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4.Agricultural Entrepreneurs

a.Plantation

b.Horticulture

c.Poultry [Poultry feed, poultry equipment, and

poultry processing sectors]

5.Service Entrepreneurs

a.Engineering

b.Beauty Parlours.

6.Health Entrepreneurs.

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Classifications of Entrepreneurs

1.Innovating Entrepreneurs

2.Imitative Entrepreneurs

3.Fabian Entrepreneurs [lack the will to adopt tonew methods of production]

4.D

rone Entrepreneurs [they are not ready tomake changes in their existing productionmethods. They struggle to exist, not to grow,continue to operate in a traditional way and

resist changes.

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Qualities and Characteristics of an

Entrepreneur.

According to James J.Berne

1.He is an enterprising individual, energetic,

hard working, resourceful, aware of newopportunities, able to adjust himself with

changing conditions with ease and willing to

assume risks involved in change.2.He is interested in advancing technology and

in improving the quality of his product or

service.

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Characteristics of an Entrepreneur.

Technical competence, initiative, good

judgment, intelligence, leadership qualities,self- confidence, energy, attitude,creativeness, fairness, honesty, tactfulnessand emotional stability.

1.Mental ability

2.Clear Objectives

3.Business Secrecy

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4.Human relations ability

5.Communication ability

6.Technical knowledge

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Intrapreneurship:

Intrepreneurship or intrapreneuring or

corporate entrepreneurship is the process bywhich other new ventures are born with in an

existing corporation.

It involves

-- expansion by exploring new opportunities

-- through new combinations of existingresources.

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Entrepreneur Intrapreneur

Independent Semi- independent

person

Raises the necessary Neither raises capital nor

Capital by himself and guarantees the investors.

Guarantees the return to theinvestors.

Takes full risks Does not fully bear the

risks.Operates from outside operating with in the orgns.

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Examples for Intrapreneurship:

1) 3M: Minnesota Mining and Manufacturing

a) Allows employees to devote a percentageof their time to independent projects.

2) HP: They failed to recognize the SteveWozniaks proposal for the personalcomputer. But PC is the base for the AppleComputers.

David Packard and Charles House[engineer invented the high quality video monitor. It wasused by N ASA also the heart transplants.

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3.IBM

-- separate organizations/ board of directors/

autonomous decision making authority.

-- products like Automatic Teller Machine for

Banks, Industrial robots, and the IBMPersonal Computer.

Intrapreneur ± Philip Estridge.

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Intrapreneurial Environment:

1.Organization operates on frontiers of

technology

2.New ideas encouraged

3.Trail and error encouraged

4.Failures allowed

5.Resources available and accessible

6.Multidiscipline teamwork approach

7.Long time horizon

8.Appropriate reward system

9.Sponsors and support of Top management

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Entrepreneurial Process

Stage I : Change in the economic environment,

creates needs for new goods and services.

Stage II: By starting a new venture.

Stage III: Intrapreneurship

Stage IV: Co-ordinating the varied activities to

achieve the entrepreneurial goal.

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I. Concept of Entrepreneurship:

Acc to McClelland;-- Doing things in a new and better way.

-- entrepreneurial role calls for decision

makingunder uncertainty.

According to Casson,-- entrepreneurship consists of an eccentric(unusual) evaluation of economic eventswhich other people are unwilling to support.

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Acc to Keynes:

--ability to mobilize the resources and

combine them to initiate change inproduction.

Aditya Mittal:-- Entrepreneurship is a state of mind and can

be applied to any number of different fields.

-- it is critical as it helps to prevent stagnation

by challenging traditional thinking and drivesprogress and development that can bringabout long term change.

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-- everyone has the potential to be

entrepreneurial in their thinking and approach.

Finally,

An entrepreneur may at best be defined as a

person responsible for existence of newbusiness enterprises.

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II. Phases of Entrepreneurship Development

Three Phases:

1. Initial Phase

2.Development Phase

3.Support Phase

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1.Initial Phase:

Creation of awareness about the

entrepreneurial opportunities based onsurvey.

2.Development Phase: [EDP]

Implementation of training programmes to

develop motivation and managerial skill.

3.Support Phase: Infrastructure support of

counselling and assisting to establish a new

enterprise and to develop existing units.

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Institutional Support to Training andInstitutional Support to Training and

Entrepreneurship Development:Entrepreneurship Development:

National Level: [Promotion of MSMEs]

1. NISIET ±National Institute Small Industry

Extension Training, Hyderabad.

2. IIE ± The Indian Institute of Entrepreneurship

Guwahati.

3. NIESBUD ± National Institute

Entrepreneurship and Small Business

Development

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To promote entrepreneurship development in

India, the Ministry has two schemes:

Promotion of;

1.EntrepreneurshipDevelopment Institutions[

EDI]

2. National Entrepreneurship Development

Board

[NEDB]

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Objectives of these Programmes:

1.Promoting entrepreneurship for creating

self- employment through enterprise

creating.

2.Facilitating creation of training infrastructure

3.Supporting research of entrepreneurship

related issues.

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III. Factors Influencing Entrepreneurship.

1.Technical knowledge

2.Entrepreneurial Training

3.Market contacts

4.Family business

5.Availability of capital

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6.Successful role models

7.Local manpower

8.Capable advisors& supporters

9.Supplier assistance

10.Governmental & Institutional support.

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Theories of Entrepreneurship

1.Leibenstein¶s X- Efficiency Theory

2.Hayek¶s Market Process Theory

3.Risk ±Bearing Theory of Knight

4.Schumpeter¶s Theory of Innovation

1.Leibenstein¶s X- Efficiency Theory

- Applied to analyze the role of the

entrepreneurs.

- X-efficiency is the degree of the inefficiency in

the use of resources with in the firm.

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-- it measures the extent to which the firm failsto realize its productive potential.

-- because of this theory we can find out thatwhy the productive capacity of a concerncannot be measured.

-- X-efficiency is meant to refer that the actualcost of production of a commodity exceeds

the minimum cost of production.

-- this theory also helpful to find out why theresources are used in the wrong way.

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2.Hayek¶s Market Process Theory

--This theory indicates that a fluctuating in the

market rate of interest directly influences onthe activities of the entrepreneur throughfluctuating in investment.

-- if the market rate of interest is reduced,investible fund will increase.

-- Hayek has suggested to maintain equilibriumbetween supply of bank credit and prevailingmarket rate of interest so that entrepreneurialactivities can be carried on continuously.

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3.Risk ±Bearing Theory of Knight

The risk bearing theory of Knight is based on

the Hawley¶s theory.

Acc to Hawley, profit is the reward for risk

taking by the entrepreneur.

Profit has no relation with the reward for managing or coordinating. Rather, profit is

indicated as a reward for acceptingresponsibility and risk bearing since thefunction of risk bearing is the function of thentrepreneur.

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4.Schumpeter¶s Theory of Innovation

--He has remarked that an entrepreneur is such

a person who brings innovation in economicactivities.

-- An innovator is such a person who createsobstacles to the present state of equilibrium

and develops the economy to a new stage.

--Acc to his conception, development is to

carrying out the new combinations.

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Entrepreneurs Vs Managers

1.Starting venture by Render service in an

setting up an enterprise enterprise set up by others

2.He is owner of the He is the servant in

enterprise the enterprise.

3.Profit for bearing the Gets salary as rewards

risks. for the service

4.Acts as an innovator Translate the entrepreneurs

& Change agent ideas into practices.

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Roles of Entrepreneur

1.Searching for and identifying business

opportunities2.Preparation of business plans and project

report

3.Risk taking4.Resource allocation

5.Performance of managerial function

6.Innovation

7.Leading

8.motivation

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Buying an Existing Business

Buying an existing business which comes with readymade

infrastructure and may be even human resource ± enablesa faster start to a potential entrepreneur.

Advantages:

1.It enable you to avoid a lot of problem likely to crop up in

opening a new business.

2.The existing business would have already got some

licences and government approvals, which would be

otherwise difficult to get. A new business would require a

lot of time and in some cases, even a lot of µspeed money¶

to get those licences and permits. Some existing units

have certain permits or incentives that are no longer open

to new units being set up.

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3.Land is scarce and it is difficult to find an

appropriate location. An existing business is

likely to bundle the purchaser with the land itoperates from. Also, the viability of its location

has already been tested. There is no need to

make separate efforts to deal with brokers

and haggle with landowners to acquire land.

4. The plant and machinery have already been

brought and have been installed and tested.

They also have a history of performance,which might be logged in factory log books.

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5. Employees are experienced. It might be

possible to pick up experienced employees

from other organizations too, but in this case,the employees have experience in that

particular business set ±up.

6. A supplier base has already beenestablished. Processes have been

established and a relationship has been built

up with the suppliers.

7. There is a ready made market. The firm has

been selling its products and a customer base

has been established.

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8. A distribution network has been set up and

money and effort has already been invested

in establishing a rapport with retailers andwholesalers.

9.Goodwill and reputation built up over the

years by the existing business would notchange to a large extent with the change in

ownership.

10. Banks may be more willing to lend to a

business with running operations, an

established customer base, and a steady

cash flow.

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Disadvantages:

1.The industry as a whole might not be doing

well and the situation might not improve in thenear future.

2. The owner may possibly be dishonest about

the business. The fact that the business is notdoing well might be hidden by false

statements by the owner, employees, etc. the

financial statements and other documents

might have been carefully camouflaged or

falsified.

3. The equipment is old and outdated.

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4. The location may be bad or likely to become

bad.

5.Employees may be unproductive or incapableof meeting the standards required of them.

6.If the company¶s products have not been

received well by the market, it will be difficultto gain market share for these products as

compared to a new product.

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The process of Buying

Through investigating of business is important.

1. Preliminary information collection.

-- the reasons for selling the business by

the owner.

2.Site Visit.

3.Assessment

-- Audited financial documents for past years,

-- sales data, purchase records for capital

equipment and raw material, employee

records, bank statements etc.

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4.Additional information collection

-- by interviewing customers, employees,

competitors, etc.-- accessing other documents from government

files etc.

5.Negotiation.

It is not about agreeing on price. That means

anytime during the deal, each party is free towalk away from it. There is no compulsion to

come to n agreement and finalize the deal.

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Information is the key.

-- about the market share of the business that

is for sale-- assess whether want to employ the present

workforce, and whether they are willing to

work.-- check the familiarity with the technical

requirements of the business.

-- visit the adjacent businesses to get their views on the area and the business.

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Options for the buyer:

1.Purchase of shares

2.Aquaisation of assets.

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Production Planning and Control

Production: It is the intentional act of producing

useful.

Production Management : This is to carry out

the production activities scientifically andeconomically. It requires coordination of

activities and optimisation of processes.

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Production System

Inputs

Land

Building Outputs

Machine Goods

Labour Process & Services

Capital

Material

Management

Pl t L t It i b t ³h th i t

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Plant Layout: It is about ³how the equipments areplaced in factory to keep the material handlingcost low and risk of accidents bare minimum.

Flow of materials, productivity and humanrelationships are all affected by the

arrangement of the conversion facilities.

Maximum utilization of space, smooth flow of operation, proper light and ventilation, effectivesupervision, provision for maintenance,provision for future expansion all importantwhile designing the layout.

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Plant Location :

a) Tangible : Access to Raw Material

Transportation, Power, water

b) Non- Tangible: Favourable community

attitude

Labour attitude

Natural Calamities

Government Policies etc.

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Types of Production System

1.Assembly Line: Flow of materials and any

product along the line usually requires all thefacilities on the line.

2.Batch Processing

3.Continuous Processing

4.Group Processing

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Space technology applied to automobile production

Back to article

A manually controlled robotic part-positioner mounts an item on automobile, on a conveyor

belt.

Credits: Volkswagen Media Services

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Production Planning and Control.

It includes planning production in a

manufacturing organization

³before production starts and exercising

control activities to ensure the planned

production is realized in terms of quantity,quality, delivery schedule and cost of

production´.

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Stages of PPC.

1.Planning Stage

2. Action Stage

3.Control Stage

4.Dispatch

5. Monitoring and Control.

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Marketing Plan

Features of Entrepreneurial Marketing

1.Proactive orientation

2.Innovativeness

3.Focus on the customer

4.Utilizing an opportunity

5.Risk management

6.Value creation

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Marketing Mix

1.Product

2.Price

3.Promotion

4.Placement or distribution

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Marketing Research

MR : Any reliable information that improves the

marketing decision is market research.

Other sources of information related to the

market research are1. Systematic observation

2. Focus groups

3. Secondary sources4. Test marketing

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5.Convenience sampling

6.Snowball sampling

7.Omnibus sampling

8.Low cost surveyors

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Marketing Research Process

1.Conduct Situation Analysis

The researchers tried to get a feel for thesituation surrounding problem.

2.D

etermining the information needed

Primary sources : Own operation, distributors,clients, competitors, customers etc.

Secondary sources: libraries, magazines,government policies etc.

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Segmentation, Positioning, and Targeting

The bases for segmentation are

- geographical location, age, gender, income, andethnicity.

- Entrepreneurs may use benefit segmentation.

Positioning: It explains why a customer should buyyour product rather than that of the competitors.

It refers to the unique characteristics of the product

as perceived by the target segment.

It should focus on benefits and not on productfeatures.

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Types of Promotional campaigns

1.Contests

2.Coupons

3.Discounts

4.Continutity

5.Point of purchase

6.Sampling

7.Organizing events

8.Free gift

9.Partnership with other manufaturers.

O i ti l Pl i

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Organizational Planning

Types of ownership

1. Sole Proprietorship2. Partnership business

3. Family business

4. Corporate Entrepreneurship5. Government Entrepreneurship

Corporate Entrepreneurship:It also called as Intrapreneurship, whereinnovation that occurs inside the establishedcompanies through efforts of creative

employees.

G t E t hi

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Government Entrepreneurship:

The ownership and management by the central

and state government. Eg. Railways,Defence, etc.

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Human Resource Management

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