Revise Entrepreneurship

Overview of Entrepreneurship

Chapter: I


1 CAMAD COLLEGE (SIXTH SEMESTER)


NATURE AND DEVELOPMENT OF ENTREPRENEURSHIP

The concept of entrepreneurship was first es-tablished in the 1700s, and the meaning has evolved ever since. Many simply equate it with starting one’s own business. Most economists believe it is more than that.

To some economists, the entrepreneur is one who is willing to bear the risk of a new venture if there is a significant chance for profit. Others emphasize the entrepreneur’s role as an innovator who markets his innovation. Still other economists say that entrepreneurs develop new goods or processes that the market demands and are not currently being supplied.

In the 20th century, economist Joseph Schumpeter (1883-1950) focused on how the entrepreneur’s drive for innovation and improvement creates upheaval and change. Schumpeter viewed entrepreneurship as a force of “creative destruction.” The entrepreneur carries out “new combinations,” thereby helping render old industries obsolete. Established ways of doing business are destroyed by the creation of new and better ways to do them.

The entrepreneurial function implies the discovery, assessment and exploitation of opportunities, in other words, new products,



services or production processes; new strategies and organizational forms and new markets for products and inputs that did not previously exist (Shane and Venkataraman, 2000).

The entrepreneurial opportunity is an unexpected and as yet unvalued economic opportunity. Entrepreneurial opportunities exist because different agents have differing ideas on the relative value of resources or when resources are turned from inputs into outputs. The theory of the entrepreneur focuses on the heterogeneity of beliefs about the value of resources (Alvarez and Busenitz, 2001: 756).

Entrepreneurship –the entrepreneurial function- can be conceptualized as the discovery of opportunities and the subsequent creation of new economic activity, often via the creation of a new organization (Reynolds, 2005).

Business expert Peter Drucker (1909-2005)“One who considers the changes that take place in market as an opportunity to do business? Innovation is his tool.” He took this idea further, describing the entrepreneur as someone who actually searches for change, responds to it, and exploits change as an opportunity. A quick look at changes in communications—from typewriters to personal computers to the Internet—illustrates these ideas.

Most economists today agree that entrepreneurship is a necessary ingredient for stimulating economic growth and employment opportunities in all societ-



ies. In the developing world, successful small busi-nesses are the primary engines of job creation, income growth, and poverty reduction. Therefore, government support for entrepreneurship is a crucial strategy for economic development. As the Business and Industry Advisory Committee to the Organization for Economic Cooperation and Development (OECD) said in 2003, “Policies to fos-ter entrepreneurship are essential to job creation and economic growth.” Government officials can provide incentives that encourage entrepreneurs to risk attempting new ventures. Among these are laws to enforce property rights and to encourage a competitive market system.

The culture of a community also may influence how much entrepreneurship there is within it. Different levels of entrepreneurship may stem from cultural differences that make entrepreneurship more or less rewarding personally. A community that accords the highest status to those at the top of hierarchical or-ganizations or those with professional expertise may discourage entrepreneurship. A culture or policy that accords high status to the “self-made” individual is more likely to encourage entrepreneurship.

This overview is the first in a series of one-page essays about the fundamental elements of entrepreneurship. Each paper combines the thinking of mainstream economic theorists with examples of practices that are common to entrepreneurship in many countries. The series attempts to answer:



Why and how do people become entrepreneurs?

Why is entrepreneurship beneficial to an economy?

How can governments encourage entrepreneurship, and, with it, economic growth?

According to GEM (Global Entrepreneurship Monitor) there are 6 phases to entrepreneurship. As shown in the figure below (from the 2012 GEM Global Report) — they include:

Potential Entrepreneurs — defined as those who have the capabilities and have identified opportunities — but are not planning to start their own business.

Intending to Start — those entrepreneurs who have identified opportunity; have the capabilities and are planning to start their own business.

Nascent (or Just Starting) — described as those entrepreneurs who have started but are less than 3 months in on their venture.

New Business Owners — those who are between 3 months and 3 ½ years into their new business.

Established — those entrepreneurs who have owned their business for more than 3 ½ years.

Discontinuance — defined as those entrepreneurs who have discontinued their business for whatever reason at some point after starting it.



Definitions of Entrepreneur

It is derived from the French word Entreprendre which means “to undertake.”Some of the famous definitions area as follows:

“A person who buys factors of production at certain prices in order to combine them into a product with a view to sell them at uncertain prices.” – Richard Carleton

Examples:



Considered as a risk bearer. Farmer pays definite price for seeds, fertilizers, pesticides, labor etc but not certain at which price he could sell his produce.

“A person who bears uncertainty (risk which cannot be insured &is incalculable) can be reduced by taking insurance.” – F.H. Knight

“One who combines the land of one, labor of another and capital of yet another and thus produces a product. By selling product pays rent wages and interest.” –J.B. Say

Characteristics of an entrepreneur

An entrepreneur is a person who initiates a business venture. There are some essential features of an entrepreneur which are describing below.

Risk taking capability: every business has risk of time money etc .so an entrepreneur must have the risk taking capability.Entrepreneur as risk bearer: Richard Cantilon defined entrepreneur as an agent who buys factors as production at certain prices in order to combine them into a product with a view to selling it at uncertain prices in future. He illustrated a former who pays contractual incomes, which are certain to land owners and laborers, and sells at



prices that are ‘uncertain’. He includes merchants also who make certain payments in expectation of uncertain receipts. Hence both of them are risk-bearing agents of production. P.H. Knight described entrepreneur to be a specialized group of persons who bear uncertainty. Uncertainty is defined as risk, which cannot be insured against and is incalculable. He made distinction between certainty and risk. A risk can be reduced through the insurance principle, where the distribution of outcome in a group of instance is known, whereas uncertainty cannot be calculated.

Creativity and innovation: an entrepreneur has an initiator possesses creativity and innovative power.Entrepreneur as an innovator: Joseph A SchumPeter in 1934 assigned a crucial role of ‘innovation’ to the entrepreneur. He considered economic development as a dynamic change brought by entrepreneur by instituting new combinations of factors of production, i.e. innovations. The introduction of new combination according to him may occur in any of the following forms.(a) Introduction of new product in the market.(b) Use of new method of production, which is not yet tested.(c) Opening of new market.(d) Discovery of new source of raw materials.(e) Bringing out of new form of organization.



Need for achievement: the entrepreneur has strong desire to achieve the goal of business. He is always driven by the needs for achievement.

Need for autonomy: an entrepreneur does not like to be under anybody. it is the need for autonomy which drives a person to be an entrepreneur.

Internal locus of control: an entrepreneur believes in him his work.

External locus of control: he also believes in fate for ultimate result.

Self confident: an entrepreneur has confidence in him. Leadership capability: an entrepreneur must have

leadership capability to lead works under him Industriousness: a successful entrepreneur must have

leadership capability to lead workers working under him. Decision making capability: the entrepreneur has

capability to take quick decision. Adaptability: he has the capacity to adapt with any kind

of situation that arise in the enterprise Foresightness: The entrepreneurs have a good foresight

to know about future business environment. Others; the other feature are dynamism, ambition,

education and training, long term involvement, future orientation.

Qualities of successful entrepreneur

To become a successful as an entrepreneur in its business life, a businessman should possess a quite a number of essential qualities. Those are noted below:



Moderate risk taking: an entrepreneur always takes calculated risk to operate the organization.

Hard work: an entrepreneur is very much hard worker, he or she always busy with various types work.

Accountability: a successful entrepreneur is accountable well as his associates always accountable to him.

Educated in real sense: successful entrepreneur is educated in real sense .he tries to implement his organizational objectives through his education.

Analytical mind: a successful entrepreneur is analytical minded. He scrutinizes every activity on the organization.

Dynamic leadership: a successful entrepreneur is always dynamic to operate the organization.

Presence of mind: a successful entrepreneur is always at present of mind he is always aware of activities that to happening in the organization and around him

Accommodative: a good entrepreneur has the capacity to make his own place at every sector.

Courageous and tactful: Corsages and techniques is very much essential for a successful entrepreneur.

Maker of right decision: A successful entrepreneur makes right decision in right time in right place.

Foresighted: successful entrepreneur foresights the future and take decision accordingly.

Right perception of things: A successful entrepreneur things in a right way.

Enjoy simple life: A successful entrepreneur always deals a simple life a general people of the society.

Strong desired to success: A successful entrepreneur have a strong desire to success. he is driven by the desire to success.



Innovation: innovation is the process of making new something. A successful entrepreneur is innovative.

Self confidence: A successful entrepreneur is self confidence. does not really on other for decision or fate.

Goal setting: a successful entrepreneur set the goal. Keen observation: A successful entrepreneur always

observes the origination. Sociable: A successful entrepreneur is sociable person. Loves to work; A successful entrepreneur is very much

addicted to work. Loves new ideas: A successful entrepreneur loves new

ides of the organization. Team builder: A successful entrepreneur builds a

suitable team. Clean understanding: A successful entrepreneur clearly

understands everything. Ability to conceptualize: A successful entrepreneur is

able to conceptualize the reality.

Types of Entrepreneurs

Schumpeter made the entrepreneur the adventurous innovator who acting on his own account, introduces changes that others do not dare to experiment with. Other writers have, however, identified some other categories of entrepreneurs.

Arthur H. Cole distinguishes between empirical, rational and cognitive entrepreneurs. The empirical entrepreneur hardly introduces anything revolutionary and follows the principle of rule of thumb. The rational entrepreneur is well informed about the general economic conditions and introduces changes that look more revolutionary. The cognitive entrepreneur is



well informed, draws upon the advice and services of experts and introduces changes that reflect complete break from the existing scheme of things.In a study of American Agriculture, Clarence Danhof classifies entrepreneurs into four types-innovative, imitative, Fabian and drone. The innovating entrepreneur is one who assembles and synthesizes information and introduces novel combinations of factors. He is an aggressive figure and an industrial leader. The imitative entrepreneur is also known as the adoptive entrepreneur. He simply adopts successful innovations introduced by other innovators. The Fabians entrepreneurs are timid and cautious. He will imitate other innovations only if he is certain that failure to do so may damage his business. Finally there is the drone entrepreneur. His entrepreneurial activity may be restricted to just one or two innovations. He refuses to adopt changes in production even at the risk of reduced returns.

This classification of Danhof brings into focus two important aspects:

(a) It shows that an economy which is making a lot of technical advancement has in its ranks a large number of innovating and adoptive entrepreneurs and less number of Fabians and drones.

(b) Technological advancement may not take place even if innovators are present, if the actual control and ownership of production is in the hands of Fabians or drones.

Another classification of entrepreneurs is between private and public entrepreneurs. Private entrepreneur is motivated by profit and as such would not enter those sectors of the economy



in which prospects of monetary rewards are not bright. In general, infrastructure industries fall under this category. For example electricity generation and distribution is Government owned. This forces the Government to take the initiative to start enterprises in these sectors. Thus, we have the category of public entrepreneurs. In the less developed countries the entrepreneurial functions of the Government has greatly widened due to the lack of sufficient private entrepreneurs.

Another classification based on the scale of enterprise is between small scale and large scale enterprises. This classification is especially relevant in the less developed countries. Private enterprise is usually found in households, small scale and medium scale industries. The small entrepreneur does not possess the necessary talents and resources to initiate large scale production and introduce revolutionary technological changes. In the developed countries most entrepreneurs deal with large scale enterprises. They possess the financial wherewithal and the necessary expertise to initiate large scale enterprises and introduce novel technical changes. The result is the developed countries are able to sustain and develop a high level of technical progress. It is this classification which has led to the wide technological gap between the developed and the less developed countries.

In the initial stages of economic development, entrepreneurs tend to have less initiative and drive. As development proceeds, they become more innovating and enthusiastic. Similarly, when entrepreneurs are shy and humble the environment is underdeveloped. Business environment becomes healthy and developed when entrepreneurs are innovating.1. Innovating entrepreneurs:



Innovative entrepreneurship is characterized by aggressive assemblage of information and the analysis of results derived from sound combination of factors. Persons of this type are generally aggressive in experimentation and cleverly put attractive possibilities into practice. An innovating entrepreneur sees the opportunity for introducing a new technique or a new product or a new market. He or she may raise money to launch an enterprise, assemble the various factors, choose top executives and set the organization going. Schumpeter’s entrepreneur was of this type. Such an entrepreneur introduces new products and new methods of production, opens new markets and re-organizes the enterprise.

Among the different types of entrepreneurs, the innovating entrepreneur is the most vigorous type of entrepreneur. Innovating entrepreneurs are very commonly found in developed countries. There is dearth of such entrepreneurs in underdeveloped countries. A country with little or no industrial tradition can hardly produce innovating entrepreneurs. Such entrepreneurs can emerge and work only when a certain level of development is already achieved and people look forward to change and progress. Innovating entrepreneurs played the key role in the rise of modern capitalism through their enterprising spirit, hope of money making, ability to recognize and exploit opportunities, etc.

2. Adoptive or imitative entrepreneurs:



These kinds of entrepreneurs are characterized by readiness to adopt successful innovations created by innovative entrepreneurs. These type of entrepreneur are revolutionary entrepreneurs with the different that instead of innovating the changes themselves, they just imitate the technology and techniques innovated by others. These entrepreneurs are most suitable for developing countries because such countries prefer to imitate the technology, knowledge and skill already available in more advanced countries. The Cochin Shipyard is a good example of the result of imitative entrepreneurship. The Shipyard has been constructed using the innovative technology provided by the Mitsubishi Heavy Industries Ltd. of Japan. Imitative entrepreneurs are most suitable for the underdeveloped nations because in these nations people prefer to imitate the technology, knowledge and skill already available in more advanced countries. In highly backward countries there is shortage of imitative entrepreneurs also. People who can imitate the technologies and products to the particular conditions prevailing in these countries are needed.

Sometimes, there, is a need to adjust and adopt the new technologies to their special conditions. Imitative entrepreneurs help to transform the system with the limited resources available. However, these entrepreneurs face lesser risks and uncertainty than innovative entrepreneurs. While innovative entrepreneurs are creative, imitative entrepreneurs are adoptive.

Imitative entrepreneurs are also revolutionary and important. The importance of these humbler entrepreneurs who exploit possibilities as they present themselves and mostly on a small scale must not be under-estimated. In, the first place, such adaptation requires no mean ability. It often involves what has



aptly been called subjective innovation that is the ability to do things which have not been done before by the particular industrialist, even though, unknown to him, the problem may have been solved in the same way by others. By western standards, an imitative entrepreneur may be a pedestrian figure, an adopter and imitator rather then a true innovator. He is more an organizer of factors of production than a creator. But in a poor country attempting to industrialized, he is nevertheless a potent change producing figure. He can set in motion the chain reaction’ which leads to cumulative progress. This humbler type of entrepreneur is important in under developed countries for another reason. These countries are placing great emphasis in their economic planning on small scale industries and decentralized industrial structure.

3. Fabian entrepreneurs:

Entrepreneurs of this type are very cautious and skeptical while practicing any change. They have neither the will to introduce new changes nor the desire to adopt new methods innovated by the most enterprising entrepreneurs. Such entrepreneurs are shy and lazy. Their dealings are determined by custom, religion, tradition and past practices. They are not much interested in taking risk and they try to follow the footsteps of their predecessors.

4. Drone entrepreneurs:

Drone entrepreneurship is characterized by a refusal to adopt and use opportunities to make changes in production methods.



Such entrepreneurs may even suffer losses but they do not make changes in production methods. They are laggards as they continue to operate in their traditional way and resist changes. When their product loses marketability and their operations become uneconomical they are pushed out of the market. They are conventional in the sense that they stick to conventional products and ideas. The traditional industries of Kerala are characterized by drone entrepreneurs. The coir and bamboo industries are still in the hands of laggards who refuse to innovate.

Entrepreneur and Entrepreneurship

Entrepreneur Entrepreneurship Entrepreneur is a

person. Entrepreneur is an

organizer. Entrepreneur is an

innovator. Entrepreneur is a risk

bearer. Entrepreneur is a

motivator. Entrepreneur is a

creator. Entrepreneur is a

visualize. Entrepreneur is a

leader.

Entrepreneurship is a process.

Entrepreneurship is an organization.

Entrepreneurship is an innovation.

Entrepreneur is a risk bearing.

Entrepreneur is a motivation.

Entrepreneur is a creation. Entrepreneur is a vision. Entrepreneurship is a

leadership. Entrepreneurship is an

imitation.



Entrepreneur is an imitator.

Differences between Entrepreneurship and Intrapreneurship

1. Intrapreneurs operate within the confines of an established organization. Due to the culture of the organization, he or she might have to dance to the music of the management and so may not exercise the freedom associated with entrepreneurship. Nevertheless, in practice, the intrapreneur is likely to act before asking for permission or if possible to act in an autocratic way to put through his entrepreneurial ideas. A case in point is when a Starbucks manager in one of the stores took advantage of the Starbucks' brand and made tapes to sell in his store which proved so popular with the customers that the company licensed them for sales. Now, music has become one of Starbucks' brand extensions. Schultz admits that he had 'to get talked into selling music...'

Entrepreneurship on the other hand thrives because the entrepreneur has the liberty needed to carry out all the trials until success is achieved because he or she is not under any obligation to follow any organizational culture. A typical example of this difference is Dr Land, the inventor of Polaroid.

Dr. Land did not give up on his vision of SX-70 instant camera, an improvement on his first invention with added features for Polaroid until he succeeded several years later.



2. Even though intrapreneurship is seen as a panacea to recent trend of business competitions, the intrapreneur is considered as intra-organizational revolutionary who challenges the status quo of the organization to change the system or culture. This creates frictions within the units if not mutually resolved.

Entrepreneurship on the other hand affects organizations from outside by trying to find alternative ways of creating more value for either already existing product which is not meeting the consumer needs or create a new product altogether. Chen Tianqiao, 31 year old Chinese entrepreneur who taking advantage of the collapse of the Chinese dot.com following the U.S dot.com bubble burst. He discovered that no one was engaged in the online gaming. With the vision to meet the insatiable appetite, he raised some funds from his previous start-up and ventured into that as there are no X-box and Play station anywhere to buy in China. He even came out with an innovative way of collecting cash in this country where e-commerce is not in operation at the moment by using a prepaid scratch-off card. He is now worth about $680million

3. Another issue which makes intrapreneurship different from entrepreneurship is that an intrapreneur readily has an easier access to ready- source of all kinds of resources within the organization which can be considered as very important to the individual since the project might have to be tried and tested several times to get the desired results. Thus with a ready source of finance or other form of resources it will be ideally welcomed. As expected, an intrapreneur might already be part of an R&D unit or in a key position and might have access to needed resources; money and or personnel. An example of an



intrapreneur with available resources is when in 1968 an American Don Wetzel, head of product planning for an automated baggage handling company called Docutel, used his entrepreneurial instinct to improve upon ATM when he was frustrated standing in a long queue one afternoon to cash a cheque in a bank. His company, Docutel, provided $4million for Wetzel and his engineers to build his idea. The result was a card equipped with a magnetic stripe and can be re-used after each transaction which was not the case previously; it was later patented by Docutel. This is something which normally eludes an entrepreneur who might have to borrow from the bank (if lucky), parents, friends, or turn to lifetime savings to go into the venture. Richard Branson used mostly acquaintances to start his entrepreneurial ventures and Chen had to use his $300,000 savings from a previous venture. The most significant thing about Chen is that every other successful Chinese company started as a copy of another company but not Chen's company Shanda. This implies that entrepreneurs are rewarded according to the successes of their efforts. The entrepreneur would have to fend for him or herself in terms of funds for carrying out any experiment. Unlike their counterparts, the intrapreneur is likely to go home with some pay packet even if he 'fails'. Some intrapreneurs are guaranteed some pay packet whilst they experiment with their ideas mostly through ’employee projects’ was being embarked on by companies who are trying to introduce entrepreneurship in their organizations.

To say the least in conclusion, all things being equal, both entrepreneurs and intrapreneurs need the backing of the society to develop their 'usually good' thoughts, and quoting Aristotle "it is the mark of an educated mind to be able to entertain a thought without accepting it". The Harvard Business Reviews also shared



a thought on this issue that “ninety percent of the task of the top manager is to ask useful questions. Answers are relatively easy to find, but asking good questions, that is the more critical skill".

ENTREPRENEUR INTRAPRENUER

Entrepreneur is employer Intrapreneur is employee

Independent in operation Depends on the organization to implement his ideas

Bears all the risk involved in enterprises

Does not bear all the risk

Exhibits higher need for achievement

May not have high need achievement

Profit in the reward Attractive salary, promotion and incentives are the reward

May not have formal qualification

Should have some professional or technical qualification

Do not have any boundary for operations

He has to operate within the organization policies.

ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT

The industrial health of a society depends on the level of entrepreneurship existing in it. A country might remain backward



not because of lack of natural resources or dearth of capital [as it is many times believed] but because of lack of entrepreneurial talents or it inability to tap the latent entrepreneurial talents existing in that society. Entrepreneurs historically have altered the direction of national economies, industry or markets- Japan, Singapore, Korea, Taiwan to name a few.

1. ENTREPRENEURSHIP AND ECONOMIC DEVELOPMENT

Entrepreneurship is basically concerned with creating wealth through production of goods and services. This results in a process of upward change whereby the real per capita income of a country rises overtime or in other words economic development takes place. Thus entrepreneurial development is the key to economic development. In fact it is one of the most critical inputs in the economic development of a region. It speeds up the process of activating factors of production leading to a higher rate of economic growth, dispersal of economic activities and development of backward regions. If a region is unable to throw up a sufficient number of entrepreneurs then alien entrepreneurs usually step in to provide goods and services needed by the people. However the profits earned by these entrepreneurs are usually not ploughed back but repatriated to their place of origin. As a result development in that region cannot take place. Dr. M.M.

Akhori refers to this practice as ‘The Leech Effect’. The above reiterates the importance of entrepreneurship development for fuelling economic growth of a region. Entrepreneurship begets and also injects entrepreneurship by starting a chain reaction



when the entrepreneur continuously tries to improve the quality of existing goods and services and add new ones. E.g. when computers came into the market there was continuous improvement in the models, their functions etc. like first generation computers, personal computers, laptops, palmtops etc. Not only had this fostered the development of the software industry, computer education institutes, computer maintenance and stationery units etc. but also other industries like banking, railways, education, travel, films, medical and legal transcriptions, business process outsourcing [BPOs] etc. In this manner by harnessing the entrepreneurial talent a society comes out of traditional lethargy to modern industrial culture. India needs entrepreneurs to capitalize on new opportunities and to create wealth and new jobs.

2. ENTREPRENEURSHIP AND EDUCATION

There is a positive linkage between entrepreneurship and economic development and the other was regarding the emergence of a strong hypothesis that entrepreneurship can be developed through planned efforts. Consequently planners realized that absence of a strong entrepreneurial base acts as a serious handicap in the industrial development of a region. The identification and development of first generation entrepreneurs through Entrepreneurial Development Programmes is an important strategy.

There is a growing realization that presence of resources and favorable government policies cannot automatically manufacture economic development. It is the entrepreneurial spirit of the people, which can transform the economy of that region. Both the quantity and quality of entrepreneurs are of utmost



significance for achieving the goal of economic development. The myth that entrepreneurs are born with some innate traits is fortunately no longer held. Many research studies have brought out that entrepreneurship can be taught and learned. Entrepreneurship is a discipline and like all disciplines it has models, processes and case studies, which can help an individual to study this subject. The necessary competencies required of a successful entrepreneur can be acquired through training and development.

Entrepreneurs play a vital role in economic development

Innovation Job Creation Increased Competition Increased Productivity New Markets





Usually the model used for entrepreneurial education has three phases:

Stimulatory Phase- This phase involves planned publicity for opportunities, motivation training and help and guidance in selection of product or service.

Support Phase- This provides help in registration of units, arrangement of finance as well as land, sheds, power, water, common facility centre etc. Help is also provided in marketing of products.

Sustenance Phase- Once the enterprise is set up then help is provided for modernization, diversification, additional finance etc.

Some of the other roles are:

Product – evolution process ( Process for developing and commercializing an innovator)

Iterative synthesis ( The intersection of knowledge and social need that starts the product development process)

Ordinary innovations (New products with little technological change)

Technological innovations (New products with significant technological advancement)

Breakthrough innovation (New products with some technological change)

Government as an innovator (A government active in commercializing technology)

Technology transfer (Commercializing the technology in the laboratories into new products.



Relationship between Entrepreneurship, Corporations, and Economic Development

We know that Corporations influence economic growth of the country by creating new plants which in turn provides ample of job opportunities. Researchers states that earlier analysis of economic development use to focus on big corporations ignoring the innovations that comes from small business .the potential entrepreneurs if thinking to start a business had to refer to Entrepreneurial Framework Conditions which means need to business is influenced by additional characteristics within the existing business environment. This have a significant effect on entrepreneurial process as this may lead to increase in innovation and competition having direct impact on national economic growth. Entrepreneurship is vital for larger economy. A nation’s economic development depends on successful entrepreneurship joint with the force of established corporations. However, the beneficial value of this mechanism varies with the national income, as measured by GDP per capital. At low levels of national income, self-employment provides job opportunities and scope for the creation of markets. As GDP per capital income increases, the emergence of new technologies and economies of scale allows larger and established firms to satisfy the increasing demand of growing markets and to increase their relative role in the economy. It is also observed that if people find stable employment, it will decrease business start ups. Studies states that in high income economy, where lower costs and technology development is fast, entrepreneurs plays competitive advantage.Therefore entrepreneurs in different countries having different levels of GDP per capital face different challenges. This means conditions and framework for entrepreneur in one country may not be favorable and as effective in other region



Family Business and Succession Strategies

If you own a family business, you probably worry even more than the average entrepreneur about ensuring that your company not only survives, but also thrives to nurture the next generation.

Several years ago, researchers David Sirmon and Michael Hitt examined the strategies behind successful family businesses. They found that success is tied directly to how well a company


INNOVATIVENESS

PROACTIVENESS

RISK - TAKING

NEW PRODUCTS

RADICAL PRODUCT CHANAGES

INITIATIVE CHANGE

FIRST TO INTRODUCE

HIGH RISK PROJECTS

FEARLESS AND POWERFUL


manages the five unique resources every family business possesses:

1. Human capital. The first resource is the family's human capital, or "inner circle." When the skill sets of different family members are coordinated as a complementary cache of knowledge, with a clear division of labor, the likelihood of success improves significantly.

2. Social capital. The family members bring valuable social capital to the business in the form of networking and other external relationships that complement the insiders' skill sets.

3. Patient financial capital. The family firm typically has patient financial capital in the form of both equity and debt financing from family members. The family relationship between the investors and the managers reduces the threat of liquidation.

4. Survivability capital. The family company must manage its survivability capital-family members' willingness to provide free labor or emergency loans so the venture doesn't fail.

5. Lower costs of governance. The family business must manage its ability to hold down the costs of governance. In nonfamily firms, these include costs for things such as special accounting systems, security systems, policy manuals, legal documents and other mechanisms to reduce theft and monitor employees' work habits. The family firm can minimize or eliminate these costs because employees and managers are related and trust each other.



Clearly delineating these unique family resources and leveraging them into a well-coordinated management strategy greatly improves your business's chances of success compared to nonfamily-owned companies.

10 strategies for succession of Family Business

Family owned businesses are complex and planning for an internal succession is challenging. There are a number of issues to deal with in a variety of areas, including financial, personal and family dynamics, tax, legal and business operations. So where to start? We have identified and developed 10 strategies to help you safely navigate the mine fields and create a smooth succession.

1. Family-Business Assessment – Are you, your family members and key personnel all “on the same page” regarding succession? What are their expectations? Is there support for your successor? What financial, legal and personal obstacles exist? Our first step is a 360° assessment process which includes gathering information about your family and business and interviewing as many of the stakeholders as possible, both inside and out of the business. Our goal is to understand all the relevant issues and the relationships between the family members. Result: A roadmap for succession that includes which strategies are critical to success, a cost estimate and suggested timeline. Exit strategies could include a full buy-out, gifting over time, “sweat equity” earn out, note payable over time or other financing techniques.



2. Contingency Plan – What would happen to the business and your family if you died today? Who would run things? What financial emergencies would this create? Who would fill the leadership vacuum? What taxes would be due? How would your banker and vendors react? Are there any key employees you could not afford to lose? It is important to have contingency plans in place in the event of any emergency. For a family business, this usually includes a buy-sell agreement, estate plan and key person coverage. Even if you have all these in place, it is critical to ensure that they will all work together smoothly at the right time. Result: A written contingency plan that can be shared with your family, key personnel and vendors to ensure the financial security of your family and the survival of the business.

3. Core Values – What values are most important to you and your family? What values have been key ingredients in the growth of your business? Have you shared these values and your beliefs with your key people? At the core of most successful family owned businesses is a set of shared values. These values can bring family members and employees together to work for a common goal. Succession involves major changes in the ownership and management structure of the organization. This is a critical time to identify, share and re-affirm the core values that will continue throughout the life of the business. Result: A clear and concise statement of the core values for your family and business that can be communicated to employees and customers.



4. Business Strategic Plan – Is your business well positioned for growth? What are the key drivers and metrics around which the business should be managed? Are you passing on a thriving or a stagnant enterprise to your successor? Only successful, growing businesses concern themselves with succession. Succession is about preparing the next group of owners and managers to take the business to the next level. A strategic plan is a blueprint developed with the input of your key employees and potential successors. Together you will create a shared vision to grow the business into the next generation. Result: A written plan with performance criteria that you can use to monitor progress towards your business goals.

5. Ownership Transition – How will the current owners and managers gracefully exit the business? Is there an ongoing role that they can and should play in the future? Have you created financial security for the owners? In our experience, business owners are not willing to step away from the business unless they have financial security separate from the business. In addition, your skills and experience have value to the business. Choosing a role as a mentor, focusing on your passion in the business or serving on the Board of Directors is often a good transition during succession. Result: Written analysis of your personal financial security and a clear plan of how to pursue your interests, whether within or outside of the business.

6. Family Participation Guidelines – How do you hire, compensate, evaluate and promote family members? What are the qualities that the next CEO needs to lead the business successfully into the future? How will you choose the next



successor? How will you ensure that the process appears “fair” to other key people and family members? How do you help family members utilize their full potential? How do you manage the expectations of family members? It is important to clearly communicate the opportunities and expectations for family members interested in working in the business. Establishing employment and work rules reduces family conflict and creates a sense of fairness rather than entitlement. Result: A written policy that can be shared with all family and key employees that will outline the rules and benefits of working in the business.

7. Business Value – Have you commissioned an independent valuation of the business? What is the value of your business and how was it determined? What are the key factors that affect the business value over time? What is the value for estate planning purposes and how does it differ from the value if you were to sell the business? A formal valuation is helpful to obtain financing, set a buy-out price, plan for estate taxes or develop a gifting strategy. We will help you define the purpose and focus for the business valuation. We will gather all the necessary information and coordinate with key advisors. Result: A comprehensive package that can be used by an independent valuation firm to provide a written valuation based on your needs.

8. Legacy Planning – What will be your legacy? How will your family manage wealth in the future? What are the leadership skills that will be needed in the next several generations? How do you want to be remembered? You



have created a successful business that positively impacts your employees, family members and the wider community. We will help you define the elements of your legacy. Result: A written plan of action that could include a charitable gift program, family foundation, education plan, family bank/entrepreneurial pool or other strategies.

9. Board of Directors – Do you have an independent and effective Board of Directors? Does your Board create new ideas? Does it ask the right questions? Does it help generate the right kind of contacts for your business? Does it hold your management team accountable for results? Do you have the right people on your Board? A Board of Directors is a cost effective way to bring a high level of expertise and talent into your business. You can utilize the experience of successful business people to take your firm to the “next level”. Independent, non-family, Board members bring new ideas, fresh perspectives and an expanded circle of contacts to your business. Result: A written statement of intention outlining the types of Board members you are seeking and assistance in identifying and qualifying candidates.

10. Family Meetings – Does the family meet regularly to discuss family issues and manage family assets? Does the family have a process for…. collaborative decision making and goal setting? Are you educating family members about business and financial issues? Family businesses require clear and



open communication to be fully effective. Regular meetings foster good relationships, reduce conflict and clarify expectations. Similar to a fully functioning Board of Directors, family meetings can bring unique expertise and perspectives to the business if their input is solicited and valued. Result: Family meetings facilitated to communicate current plans, educate family members and develop collaborative decision making.

These 10 Succession Strategies are not necessarily sequential and they do not all apply to every family business. Underlying all of these is the ongoing process of improving communication, providing opportunities for learning and education and developing skills in conflict resolution. Succession is a long-term and ongoing process. It generally takes 3 to 5 years to develop a viable succession plan and create the structure within the business and family to support the succession plan. The purpose is to create an environment in which the business and the family can thrive for the betterment of all involved.

The Challenges Working with Non - Family Business

To achieve long-term success, family owners must resist the desire to keep top jobs in the family. As the business expands they need to increase the diversity of their management



background by introducing experienced outsiders with special talents, fresh insights and a dispassionate perspective.

Family businesses need to work extra hard recruiting and retaining non-family talent. The job doesn't suit everybody, and many candidates think twice before applying. And, if they get the job, they sometimes end up resigning because they've run out of opportunities - or run out of patience, as family politics and emotional cross-currents repeatedly interfere with their work.

Bringing in non-family managers can cause cultural and integration challenges. Family businesses often have a strong defining culture that may be resistant to change. If outside executives have previous experience working in a family company, this may help them carry out their role in a way that's sensitive to the family's emotional involvement.

Successful non-family managers are often interesting, unusual characters - psychologically suited to a demanding work environment. Indeed, some top performers are attracted by the unique opportunities of working with a close-knit family team, building a business underpinned by family values and long-term stewardship principles. Some also play a valuable role as coach and mentor to succession candidates and the next generation.



Family companies need to devise imaginative reward structures that motivate and retain top-performers. Non-family executives will want to know that their efforts and achievements growing the business will be recognized - in salary and benefits terms, and possibly via an equity (or quasi-equity) stake in the company.



Family firms that confine equity share ownership to family members are at a disadvantage compared with competitors offering share options. However, effective alternatives include:

Restricted voting shares - identical to other equity shares, except they carry no rights (or restricted rights) to vote at general meetings.

Restricted transferability shares - shares that must be offered back to the company, the family or an employee trust when the executive leaves (or before they can be sold).

Phantom share options - a cash bonus plan where the amount of the bonus is determined by reference to the increase in value of a notional share option.

Percentage bonuses - not involving shares, real or phantom, but still enabling executives to participate in any appreciation in company value.

Attracting and keeping the best people. Some guidelines:

Set up a fair system by which both family and non-family are recruited and evaluated on merit.

Look at all aspects of non-family executive rewards to ensure you are offering a competitive, incentivizing benefits package.

Provide attractive career development opportunities. Work to instill a sense of responsibility, autonomy and

fulfillment.





Entrepreneurial Decision Process

Entrepreneurial Decision Process is about deciding to become an entrepreneur by leaving present activity i.e. a movement from the present lifestyle to forming a new enterprise. The decision to start a new company occurs when an individual perceives that forming a new enterprise is both desirable and possible.The decision to become an entrepreneur to start a new business consist of several sequential steps-

1. The decision to leave a present career or lifestyle (Pushing and pulling influences active in the decision to leave a present career or lifestyle.

2. The decision about desirability of new venture formation i.e. the aspects of a situation that make it desirable to start a new venture and this relates to culture, subculture, family, teachers and peers.

3. The decision about possibility of new venture formation i.e. factors making it possible to create a new venture like government, background, marketing, financial, role models.

Desirability of New Venture Formation :- (Aspects of a situation that make it desirable to start a new company)

1. The perception that starting a new company is desirable results from an individual’s culture, subculture, family, teachers and peers.

American culture places a high value on being your own boss, being a success and making money therefore, it is not



surprising to find a high rate of company formation in the United States.

On the other hand in some countries making money is not as valued and failure may be a disgrace. The rate of business formation in these countries is not as high.

2. Many subcultures that shape value systems operate within a cultural framework.

In the U.S. they include Route 128 (Boston), Silicon Valley (California), and North Carolina Triangle. In India they include Marwari, Gujrati, and Rajasthani Businessmen.

These subcultures support and even promote entrepreneurship.

3. Studies indicate that a high percentage of founders of companies had fathers and/or mothers who valued independence.

4. Encouragement to form a company is also gained from teachers, who can significantly influence individuals.

5. An area having a strong educational base is also a requirement for entrepreneurial activity.

6. Peers are important, also, as is an area with an entrepreneurial pool and peer-meeting place.



Possibility of New Venture Formation : - (Factors making it possible to create a new venture)

Although the desire of new venture formation derived from the individual’s culture, subculture, family, teachers and peers needs to be present before any action is taken, the second feature necessary centers around this question “What makes it possible to form a new company?”1. The government contributes by providing the infrastructure

to help a new venture.



The India has the necessary roads, communication and transportation systems, utilities, and Economic stability

The Indian tax rate for companies and individuals is better than in some European countries.

2. The entrepreneur must have the necessary background. Formal education and previous business experience give

a potential entrepreneur the skills needed to form and manage a new enterprise.

Although educational systems are important in providing the needed business knowledge, individual will tend to be more successful in forming in fields in which they have worked.

3. The market must be large enough and the entrepreneur must have the marketing know-how to put together the entire package.

4. The entrepreneur must have the marketing know-how to put together the entire package.

5. A role model can powerfully influence the perception of venture possibility.

6. Finally, financial resources must be readily available. Although most start-up money comes from personal

savings, credit, and friends, but there is often a need for additional capital.

Risk-capital availability plays an essential role in the development and growth of entrepreneurial activity.



Types of Start - Ups

1. Cottage Company: A small venture that generally employs fewer than 10 people and has revenues of less than $1 million.

2. Lifestyle firms: A small venture that supports the owners and usually does not grow.

3. Foundation Company: A type of company formed from research and development that usually does not go public.

4. High-potential venture: A venture that has high growth potential and therefore receives great investor interest gazelles Very high growth ventures

Generating the Business Ideas for starting a New Business

SOURCES OF NEW IDEAS

A sound idea for a new product or service, properly evaluated, is essential to successfully launch a new venture. Some of the more frequently used ideas for new entrepreneur include consumers, existing companies, distribution channels, the federal government and research and development.

Consumers- Potential entrepreneurs should pay close attention to the final focal point of a new product-the customer. This can be an informal or formal survey of consumers expressing their opinions. Care should be taken to ensure that the idea represents a large enough market.



Existing Companies- Entrepreneurs should establish a formal method for monitoring and evaluating the products and services in the market. This may uncover ways to improve on present products, resulting in new product ideas.

Distribution Channels- Because they are familiar with the needs of the market, channel members often have suggestions for new products. These channel members can also help in marketing the new product.

Government Offices- The files of the Patent Office contain numerous new product possibilities. The patents can suggest other new product ideas. Several government agencies and publications are helpful in monitoring patent applications. New product ideas can also come in response to government regulations.

Research and Development- The largest source for new ideas is the entrepreneur's own research and development. This can be a formal endeavor connected with one's current employment. Important Web link for Methods of Generating New Ideas

Methods of Generating New Ideas

1. Product Planning and Development Process

Once idea emerges from idea sources or creative problem solving, they need further development and refinement in to final product or service to be offered. This refining process- the product planning and development process is divided in to five major stages. Idea stage, concept stage, product development



stage, test marketing stage and commercializing; it result in the product life cycle.

2. Establishing evaluation criteriaAt each stage of product planning and development process, criteria for evaluation need to be established. These criteria should be broad, yet quantitative enough to screen the product carefully in the particular stage of development. Criteria should be developed to evaluate the new product in terms of market opportunity, competition the marketing system, financial factors and production factors. A market opportunity and adequate market demand must exist. Current competing producers, prices, and policies should be evaluated in their impact on market share.The new product should be compatible with existing management capabilities. The product should be able to be supported by and contribute to the company's financial structure. The compatibility of new product's production requirements with existing plant, machinery, and personnel should be determined. Entrepreneurs should formally evaluate an idea throughout its evolution.

3. Idea Stage

Promising new product ideas should be identified and impractical ones eliminated in the idea stage allowing maximum use of company's resources. In the systematic market evaluation checklist method, each new product idea is expressed in terms of its chief values, merits, and benefits. This technique can be used to determine which new products should be pursued. The company should also determine the need for the new product and its value to the company. Need determination should focus on the type of need, its timing, the users involved, the importance of



marketing variables, and the overall market structure and characteristics. In determining the product's value to the firm, financial scheduling should be evaluated.

4. Concept StageIn the concept stage the refined idea is tested to determine consumer acceptance without manufacturing it. One method of testing is the conversational interview in which respondents are exposed to statements that reflect attributes of the product. Features, price, and promotion should be evaluated in comparison to major competitors to indicate deficiencies or benefits. The relative advantages of the new product versusCompetitors should be determined.

5. Product Development Stage

In this stage, consumer reaction is determined, often through a consumer panel. The panel can be given samples of the product and competitors' products to determine consumer preference. Participants keep the record of their use of product and comment on its virtues and deficiencies. The panel of consumers is also given a sample of product and one or more competitive product simultaneously. One test product may already be on the market, whereas the other test product is new.

6. Test Marketing Stage

Although the results of product development stage provide the basis of the final marketing plan, the market test can be done to increase the certainty of successful commercialization. The last step in the evaluation process, the test marketing stage, provides actual sales results which indicate the acceptance level of



consumers. Positive test results indicate the degree of probability of a successful product launch and company formation.

The Fundamental issues in entrepreneurship

As evidenced by the many different definitions, the term entrepreneurship means different things to different people and can be viewed from different conceptual perspectives. However, in spite of the differences, there are some common aspects: risk taking, creativity, independence, and rewards. These commonalities will continue to be the driving force behind the notion of entrepreneurship in the future. One thing is clear: The future for entrepreneurship appears to be very bright. We are living in the age of the entrepreneur, with entrepreneurship endorsed by educational institutions, governmental units, society, and corporations. Entrepreneurial education has never been so important in terms of courses and academic research. The number of universities and colleges offering at least one course in entrepreneurship increases each year. The number of faculty teaching entrepreneurship as well as the number of endowed chairs increases regularly. There are some unique entrepreneurial programs as well, such as master’s programs in entrepreneurial science and technology entrepreneurship, and MBA with a concentration in bioscience.

Entrepreneurship education throughout the world is also growing. Many universities in Europe have well-established programs in entrepreneurship. Most universities and associations do research on entrepreneurship, followed by training courses and then education courses—courses for which degree credit is



given. Very few universities are yet involved in the actual enterprise creation process where the university, faculty, and/or students share in the sales and profits of the new venture.

This increase in course offerings has been accompanied by an increase in academic research, endowed chairs in the area, entrepreneurship concentrations and majors, and centers of entrepreneurial activity. This trend will continue, supported by an increase in PhD activity, which will in turn provide the needed faculty and research effort to support the future increases in course offerings, endowed positions, centers, and other research efforts.

Various governments are taking an increased interest in promoting the growth of entrepreneurship. Individuals are encouraged to form new businesses and are provided such government support as tax incentives, buildings, roads, and a communication system to facilitate this creation process. Encouragement by the federal and local governments should continue in the future as more lawmakers understand that new enterprises create jobs and increase economic output in the area. Some state governments in the United States are developing their own innovative industrial strategies for fostering entrepreneurial activity and the timely development of the technology of the area. The impact of this strategy is seen in the venture-capital industry, which is always sensitive to government regulations and policies. Many states now have their own state-sponsored venture funds, where a percentage of the fund has to be invested in ventures in the state.

Society’s support of entrepreneurship will also continue. This support is critical in providing both motivation and public



support. Never before have entrepreneurs been so revered by the general populace. Entrepreneurial endeavors in the United States are considered honorable and even, in many cases, prestigious pursuits. A major factor in the development of this societal approval is the media. The media have played, and will continue to play, a powerful and constructive role by reporting on the general entrepreneurial spirit in the United States and highlighting specific success cases of this spirit in operation.

1. Legal Issues for the Entrepreneur

Intellectual property Patents The Disclosure Document Trademarks Copyright Trade secrets Licensing Product safety and Liability Insurance

2. Availability of human resources3. Industrial innovative sensation4. Mobility of profession5. Large number of educated unemployed6. Tendency toward industries work 7. Preference in establishing agro-based industry in

Government planning8. Liberalization of Govt. industrial policy


The Entrepreneurial and Entrepreneurial Mind

Chapter: II




The entrepreneurship process is the process through which a new venture is created by an entrepreneur which involves more than just a problem solving in a typical management position. An entrepreneur must find, evaluate and develop an opportunity by overcoming the forces that resist the creation of something new. This process has four phases:

The Entrepreneurial Process:

1. Identify and evaluate the opportunity:

Opportunity assessment Creation and length of opportunity Real and perceived value of opportunity Opportunity versus personal skills and goals Competitive environment

2. Develop a business plan:

A good business plan must be developed in order to exploit the defined opportunity. It is essential for developing the opportunity and determining the resources required, obtaining those resources and successfully managing the resulting venture.

3. Determine the resources required:

Determine resources needed Determine existing resources Identify resource gaps and available suppliers Developing access to needed resources

4. Manage the enterprise:



Develop management style Understand key variables for success Identify problems and potential problems Implement control systems Develop growth strategy

(Refer text book Entrepreneurship 6th edition, pg. 38, and table

2.1)

Managerial Vs Entrepreneurship Decision MakingThe difference between the entrepreneurial and managerial styles involves five business dimensions.

Strategic Orientation

The entrepreneur's strategic orientation depends on his or her perception of the opportunity. This orientation is most important when other opportunities have diminishing returns accompanied by rapid changes in technology, consumer economies, social values or political rules. When the use of planning systems is the strategic orientation, there is more pressure for the administrative domain to be operant.

Commitment to Opportunity



The entrepreneurial domain is pressured by the need for action and has a short time span in terms of opportunity commitment. The administrative domain (the ways mangers make decisions) is not only slow to act on an opportunity, but the commitment is usually for a longer time span.

Commitment of Resources

An entrepreneur is used to having resources committed at periodic intervals, often based on certain tasks or objectives being reached. In acquiring these resources the entrepreneur is forced to achieve significant milestones using very few resources. In the administrative domain, the commitment of resources is for the total amount needed. Administrative-oriented individuals receive personal rewards by effectively administering the resources under their control.

Control of Resources

The administrator is rewarded by effective resource administration and has a drive to own or accumulate as many resources as possible. The entrepreneur, under pressure of limited resources, strives to rent resources on an as-needed basis.

Managerial Structure

In the administrative domain, the organizational structure is formalized and hierarchical in nature. The entrepreneur employs a flat organizational structure with informal networks.Entrepreneurial venturing inside a corporation



A project that is new to the company and carries a much higher risk of failure than other project.

Due to the level of uncertainty, it is often managed separately

Corporate ventures undertaken to move the company in new directions

Benefits of Corporate Venturing

Effective way to create new revenue streams Entrepreneurial activities stimulate product/process

innovation CV is a source of organizational growth Entrepreneurial activities spur the company to take risks

and pioneer, making it more competitive Entrepreneurial activities help the company overcome

resource limitations.

Climate for entrepreneurship In establishing an Entrepreneurial environment, certain factors and leadership characteristics need to be present. The first of these is that the organization operates on the frontiers of technology. Since research and development are key sources for new product ideas, the firm must operate on the cutting edge of technology and encourage and supporting new ideas instead of discouraging them.

Second is experimentation, or trial and error, is encouraged. Successful new products usually do not appear fully developed; instead they evolve. A company wanting to establish an



Entrepreneurial spirit has to establish an environment that allows mistakes and failures. Without the opportunity to fail, few corporate Entrepreneurial ventures will be developed.

Third an organization should make sure that there are no initial opportunity parameters, such as turf protection, inhibiting creativity in new product development.Fourth, the resources of the firm need to be available and easily accessible. Often, insufficient funds are allocated not to creating something new but instead to solving a problem that have an immediate effect on the bottom line. Some companies, such as Xerox, 3M, and AT&T have established separate venture capital areas for funding new internal ventures.

Fifth a multidisciplinary team approach needs to be encouraged. One key to Entrepreneurial success is the existence of "skunk works" involving key people. Developing the needed team work for a new venture is further complicated by the fact that a team member's promotion within the corporation is related to performance in the current position, not in the new venture. The corporate environment must establish a long time horizon for evaluating the success of the overall program.

Sixth the spirit of entrepreneurship cannot be forced on individuals; it must be voluntary. Most managers in a corporation are not capable of being successful Entrepreneurs. Those who do emerge from this self selection process must be allowed the latitude to carry a project through to completion. An Entrepreneur falls in love with the new venture and will do almost anything to ensure its success.



The seventh characteristic is a reward system. The Entrepreneur needs to be appropriately rewarded for the energy and effort expended on the new venture. An equity position in the new venture is one of the best motivational methods.

Eight a corporate environment favorable for entrepreneurship has sponsors and champions throughout the organization that supports the creative activity and resulting failures.Finally the Entrepreneurial activity must be whole-heartedly supported by top management.

INTREPRENEURIAL LEADERSHIP

CHARACTERISTICS

There are certain individual characteristics needed for a person to be successful Entrepreneurs, including:1. Understanding the environment2. being visionary and flexible3. Creating management options4. Encourage teamwork while employing a multi-disciplined

approach5. Encouraging open discussion6. Building a coalition of supporters, and persisting

An Entrepreneur needs to understand all aspects of the environment. Part of this ability is reflected in individual's level of creativity. Creativity tends to decrease with age and education. The individual must be creative and have a broad understanding of the internal and external environments of the corporation The Entrepreneurial person must be a visionary leader-a person who dreams great dreams.



Leadership is the ability to dream great things and communicate them in a way that people say yes to being a part of the dream. To establish a successful new venture, the Entrepreneurial leader must have a dream and overcome all obstacles to achieve it.

The third necessary characteristic is that the Entrepreneur must be flexible and create management options. An Entrepreneur is open to and encourages change. By challenging the beliefs and assumptions of the corporation, an Entrepreneur can create something new in the organization structure. He or she must possess the ability to encourage teamwork and use a multi-disciplined approach.

Every new company formation requires a broad range of business skills. The Entrepreneur must be a good diplomat to minimize disruption. Open discussion must be encouraged to develop a good team for creating something new. Many corporate managers have forgotten that frank, open discussion is part of the learning process. A successful venture can be formed only when the team feels the freedom to disagree and to critique an idea. The degree of openness among the team depends on the degree of openness of the Entrepreneur. Openness leads to a strong coalition of supporters and encouragers. The Entrepreneur must encourage each team member, particularly during hard times. A good Entrepreneur makes everyone a hero. Only through persistence will a new venture be created and successful commercialization result.

Qualities of Entrepreneurship Leadership

Vision and dissatisfaction with the present.



Knowing and taking advantages of your unfair

advantages.

The ability to get people on board and add to the vision.

Flexibility to adopt, openness to feedback and ability to

learn.

Persistence and execution.

CAUSES FOR RECENT INTEREST IN

INTREPRENEURSHIP

Interest in entrepreneurship has resulted from events occurring on social, cultural, and business levels. There is an increasing interest in "doing your own thing." Individuals frequently desire to create something of their own. They want responsibility and want more freedom in their organizations. Frustration can develop and result in the employee becoming less productive or leaving the organization. This has recently caused more discontent in structured organizations. When meaning is not provided within the organization, individuals often search for an institution, such as entrepreneurship, that will provide it.Entrepreneurship is one method for stimulating and capitalizing on those who think that something can be done differently and better, such as Xerox Corporation's commitment to Xerox Technology Ventures In large organization problems occur that thwart creativity and innovation. This growth and diversity that can result are critical, since large corporations are more efficient in a competitive market than are smaller firms. The resistance against flexibility, growth, and diversification can be overcome



by developing a spirit of entrepreneurship, called Entrepreneurship, within the existing organization.There are social, cultural, and business pressures for Entrepreneurship. Hyper competition has forced U.S. companies to focus on new product development and increased productivity. Reductions in large corporation's staff are being absorbed in the workforce, particularly in small businesses.

Entrepreneurial endeavors consist of four key elements.

1. New business venturing refers to the creation of new business within an existing organization.

2. Organizational innovativeness refers to product and service innovation with an emphasis on Development and innovation in technology.

3. Self-renewal reflects the transformation of organizations through the renewal of the key ideas on which they are built.

4. Proactive includes initiative and risk taking, as well as competitive aggressiveness.

Importance of Intrapreneurship



1. Growth: During the economic downturn most companies stopped investing in the future. Now they are sitting on piles of cash. They know they need to grow, they just aren’t sure how. Intrapreneurship answers the question of – HOW!

The goal of Intrapreneurship is to create the entrepreneurial mindset and infrastructure needed to support growth. It takes a systems view of growth. It is a framework for transformation.

Intrapreneurship helps organizations generate new business growth.

2. Innovation: Innovation is the key element in providing aggressive top line growth. But doing one or two innovation initiatives a year will not support or sustain innovation. Organizations need to be innovating all the time. Failure rates for innovation are still high, 50% to 90%.

Innovation alone is not enough. Organizations need to set the context for innovation; the right people, the right processes and the right environment. Innovation and intrapreneurship are entwined, they are tied together. You need both to be successful.

Intrapreneurship provides an environment to support and sustain innovation over time.

3. Leadership: Research has identified leadership as the key predictor of innovation success. The skills and capabilities that propelled most executives to the top in the past are not the skills required to build new growth businesses. Only 4% of leaders are Intrapreneurial.



Intrapreneurship requires a new set of competencies and behaviors. Intrapreneurial leaders think and act differently, they have different motivations and aspirations, and they prefer working in different work environments. It is this differentiation that makes them the perfect candidate to lead new growth initiatives.

Intrapreneurship is the one of the best ways to attract and retain your most entrepreneurial leaders.

4. Change: Change is one of the least understood and under developed management disciplines. Most studies report a 60% – 70% failure rate when it comes to change initiatives. Risk adverse cultures and resistance to change impede an organizations ability to grow.

Intrapreneurial leaders are change agents. They blaze new trails. They become the very change they wish to see. Not just driving change, but modeling change so others can change as well.

Intrapreneurship enables organizations to effectively accelerate and manage change.

5. Engagement: Gallup Research estimates that disengaged employees cost US organizations over $450 billion in lost productivity. In 2012, only 30% of American workers were engaged and committed to their workplace. Lost productivity translates to slow or no growth.

Intrapreneurship provides a platform to engage employees in work that is challenging and meaningful. Intrapreneurs are highly engaged in their work. Their passion and determination



inspire others to get involved and try new things. As they grow, the organization grows.

Intrapreneurship helps employees stretch and grow while keeping them engaged.

Intrapreneurship has become a critical imperative for all organizations and a survival strategy for others. Organizations that have embraced Intrapreneurship have achieved higher financial returns, increased productivity, more innovation and higher levels of employee engagement.




The Environment for Entrepreneurship

CHAPTER: III




The Context of Entrepreneurship This view of entrepreneurship education is built from years of experience and from solid theoretical studies.

Theoretical background

Olsen and Bosserman (1984, 53) says that “individuals will exhibit entrepreneurial behavior when they possess a combination of three attributes”, namely:

1. Role orientation - emphasizing effectiveness2. Abilities - to think both intuitively and rationally3. Motivation - the driving force behind action

According to Alain Fayolle (2002) to achieve these, it seems necessary to adopt an approach to learning that:

Gives participants ownership of their learning, including negotiating with their tutor, their own learning objectives, the resources, etc.

Involves participants in problem-solving in real-world situations, possibly in teams

Encourages participants to formulate decisions on data which are immediate, incomplete, “dubious” and, as appropriate, personally generated

Provides participants with role models who are involved in both the learning and assessment processes



This approach to learning is deeply founded in the Scandinavian educational tradition and is the basis for our approach to entrepreneurship education.

Goal of training programme

The goal of the training programme “Unleashing the Entrepreneurial Spirit” is:

To provide the participants with the understanding that they themselves can create a business and give them the tools to carry out this entrepreneurial desire.

The distinctive quality of the early stage entrepreneurial experiences arises from its focus on following factors:

Opportunity –orientation Unstructured and Uncertain Resource Security Fluid, Dynamic, Turbulent

Business Environment & Entrepreneur ship Environment

(a) Political – System, Stability, Leadership

(b) Socio– cultural – Culture, Community, Values, Ethics, Attitude

(c) Technological – Education, Absorption, Competition, Innovation



(d) Legal – Regulatory framework, Consumer protection, Concern for environment, Labor laws

(e) Economic – GDP, GNP, Resources, Fiscal, Non– fiscal policies, Incentives and Subsidies

Dimensions of Environment

(a) SPECTACLES – Social, Political, Economic, Cultural, Technological, Aesthetic, Customer, Legal, Environmental and Sectoral

(b) PEETS – Political, Economic, Ecological, Technological and Socio–demographical

(c) SLEPT – Social, Legal, Economical, Political and Technological



Government Policies

Entrepreneurial activity leads to economic growth and helps to reduce poverty, create a middle class, and foster stability. It is in the interest of all h governments to implement policies to foster entrepreneurship and reap the benefits of its activity. Thomas A. Garrett, a senior economist with the Federal Reserve Bank of St. Louis, says that government policies can be categorized as “active” or “passive” depending on whether they involve the government in determining which types of businesses are promoted. Active policies, such as targeted tax breaks, help specific forms of businesses, while passive policies help create an environment that is friendly to entrepreneurs without regard to specific firms.

Both active and passive policies are effective in promoting small business, Garrett says, but passive policies promote entrepreneur-ship most broadly. “It is this entrepreneurial-friendly environment that will allow any individual or business—regardless of size, location or mission—to expand and to thrive,” he says.

Among the most successful strategies for encouraging entrepre-neurship and small business are changes in tax policy, regulatory policy, access to capital, and the legal protection of property rights.

Tax Policy: Governments use taxes to raise money. But taxes increase the cost of the activity taxed, discouraging it somewhat. Therefore, policymakers need to balance the goals of raising revenue and promoting entrepreneurship. Corporate tax rate reductions, tax credits for investment or education, and tax



deductions for businesses are all proven methods for encouraging business growth.

Regulatory Policy: “The simpler and more expedited the regulatory process, the greater the likelihood of small business expansion,” says Steve Strauss, a lawyer and author, who specializes in entrepreneurship. Reducing the cost of compliance with government regulations is also helpful. Governments can, for example, provide one-stop service centers where entrepreneurs can find assistance and allow electronic filing and storage of forms.

Access to Capital: Starting a business takes money. There are required procedures and fees as well as the initial costs of the new enterprise itself. Therefore, the most important activity a government can undertake is to assist potential entrepreneurs with finding money for start-ups.

Legal Protection of Property Rights: Small business can thrive where there is respect for individual property rights and a legal system to protect those rights. Without property rights, there is little incentive to create or invest.For entrepreneurship to flourish, the law needs to protect intel-lectual property. If innovations are not legally protected through patents, copyrights, and trademarks, entrepreneurs are unlikely to engage in the risks necessary to invent new products or new methods. According to the World Bank report, “Doing Business 2007: How to Reform,” new technologies are adopted more quickly when courts are efficient. “The reason is that most innovations take place in new businesses—which unlike large firms do not have the clout to resolve disputes outside the courts.”



Infrastructures for entrepreneurship

Cost-effective “infrastructures” – both physical and legal – provide the essential platforms for the activities of all economies. In the physical realm, for example, it is hard to imagine life without roads, communications networks, airports, ports, sewer systems and electricity grids. Because of their “public good” nature, government plays a central role in financing, if not operating, such infrastructure facilities. In turn, because so many infrastructures are local, the planning and construction of many projects historically has been delegated to the states (although aided by federal financing).

As federal policymakers increase resources devoted to infrastructure projects in the coming years, it is important that they not overlook the important advantages that entrepreneurs can, and indeed must, provide.1 Modern infrastructure increasingly will be “smart,” incorporating the latest information technologies to manage traffic and scarce resources, such as energy and water, used on each network. To realize these goals policy makers must find ways of harnessing the experience, talent and innovation of private sector entrepreneurs in improving public infrastructure.



Assistance for entrepreneurship

Entrepreneurship is potential and vital to support economic growth and social stability. it is the policy and goal of many governments to develop a culture of entrepreneurial thinking. Entrepreneur needs several types of assistance to establish, grow and sustain the enterprise. This can be done in a number of ways: by integrating entrepreneurship into education systems, motivating to encourage risk- taking and establishing several institutions for their capacity development. The areas where the entrepreneur needs assistance are as follows:

Capacity building Access to finance Marketing linking Promotional schemes Concession on excise duty and other forms of taxes Credit facility to MSME



International Entrepreneurial Opportunities

THE NATURE OF INTERNATIONAL ENTREPRENEURSHIP

As more countries become market oriented and developed, the distinction between foreign and domestic markets is becoming less pronounced. International entrepreneurship is the process of an entrepreneur conducting business activities across national boundaries. It is exporting, licensing, or opening a sales office in another country. When an entrepreneur executes his or her business in more than one country, international entrepreneurship occurs.

THE IMPORTANCE OF INTERNATIONAL BUSINESS TO THE FIRM

International business has become increasingly important to firms of all sizes. The successful entrepreneur will be someone who understands how international business differs from domestic business and is able to act accordingly.

INTERNATIONAL VERSUS DOMESTIC ENTREPRENEURSHIP

Whether international or domestic, an entrepreneur is concerned about the same basic issues-sales, costs, and profits. What varies is the relative importance of the factors being considered. International entrepreneurial decisions are more complex due to uncontrollable factors such as the following-



Economics- A domestic business strategy is designed under a single economic system. Creating a business strategy for multiple countries means dealing with different levels of economic development and different distribution systems.

Balance of Payments- A country's balance of payments affects the valuation of its currency. This economic variable will affect how companies do business in other countries.

Type of System

Barter or third-party arrangements have been used to increase business activity with the Commonwealth of Independent States, the former U.S.S.R.

There are still many difficulties in doing business in developing and transition economies due to: Gaps in the knowledge of the Western system regarding

business plans, marketing, and profits Widely variable rates of return. Non-convertibility of the ruble. Differences in the accounting system. Nightmarish communications.

Political-Legal Environment- Multiple political and legal environments create different business problems. Each element of the international business strategy can potentially be affected by multiple legal environments. Laws governing business arrangements also vary greatly in the 150 different legal systems and sets of national laws.



Cultural Environment- The impact of culture on entrepreneurs and strategies is significant. Understanding the local culture is necessary when developing worldwide plans.Technological Environment- Technology varies significantly across countries. New products in a country are created based on the conditions and infrastructure of that country.

Strategic Issues- Four strategic issues are important to the international entrepreneur:

1. The allocation of responsibility between the U.S. and foreign operations.

2. The nature of the planning and control systems to be used.

3. The appropriate organizational structure for conducting international operations.

4. The degree of standardization possible.

With experience in international operations, entrepreneurs tend to change their approach to responsibility.Stage 1: In the first stages the entrepreneur typically follows a highly centralized decision-making process.

Stage 2: When success occurs, it is no longer possible to use completely centralized decision-making process.

Stage 3: Decentralization is scaled back and major strategic decisions are again centralized.



To understand what is required for effective planning, reporting, and control, the entrepreneur should consider:1. Environmental analysis.2. Strategic planning.3. Structure.4. Operational planning.5. Controlling the marketing program.

The first step in identifying markets is to analyze data in the following areas:

1. Market characteristics.2. Marketing institutions.3. Industry conditions.4. Legal environment.5. Resources.6. Political environment.

ENTREPRENEURIAL ENTRY INTO INTERNATIONAL

BUSINESS

The choice of entry method depends on the goals of the entrepreneur and the company's strengths and weaknesses.

ExportingAs a general rule, an entrepreneur enters into international business through exporting. Indirect exporting involves a foreign purchaser in the local market or using an export management firm. For certain commodities, foreign buyers seek out sources of supply. Export management firms, another indirect method, are located in many commercial centers.



Direct exporting through independent distributors or through one's own overseas sales office is another entry method. An independent foreign distributor directly contacts foreign customers and takes care of all technicalities. Entrepreneurs who do not wish to give up control over marketing can open overseas sales offices and hire their own salespeople.

Franchising

It is one of three business strategies a company may use in capturing market share. The others are company owned units or a combination of company owned and franchised units.

Franchising is a business strategy for getting and keeping customers. It is a marketing system for creating an image in the minds of current and future customers about how the company's products and services can help them. It is a method for distributing products and services that satisfy customer needs.

Franchising is a network of interdependent business relationships that allows a number of people to share:

A brand identification A successful method of doing business A proven marketing and distribution system

In short, franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with a common goal to dominate markets, i.e., to get and keep more customers than their competitors.



There are many misconceptions about franchising, but probably the most widely held is that you as a franchisee are "buying a franchise." In reality you are investing your assets in a system to utilize the brand name, operating system and ongoing support. You and everyone in the system are licensed to use the brand name and operating system.

The business relationship is a joint commitment by all franchisees to get and keep customers. Legally you are bound to get and keep them using the prescribed marketing and operating systems of the franchisor.

To be successful in franchising you must understand the business and legal ramifications of your relationship with the franchisor and all the franchisees. Your focus must be on working with other franchisees and company managers to market the brand, and fully use the operating system to get and keep customers.

Throughout this article we will discuss in detail some of the benefits of conducting business as part of a larger group.

Other franchisees and company operated units are not your competition. The opposite is true. They and you share the task of establishing the brand as the dominant brand in all markets entered and reinforcing the customers’ familiarity with and trust in the brand. So in this respect you are working as a team with others in the system. Other franchisees share with you the responsibility for quality, consistency, convenience, and other factors that define your franchise and insure repeat business for everyone. Increasing the value of the brand name is a shared responsibility of the franchisor and franchisee.



An "ownership mentality" destroys the reason franchised and company-operated units are successful. Think about it. If you think you "bought" a franchise, you become an "owner" and begin to think and act like an owner. You will want to change the system because of your needs, you will wonder what you are paying the royalty for, and you will begin thinking of other franchisees as your competitors. For these and many other reasons you do not want to think of yourself as an "independent owner."

As a franchisee you own the assets of your company, which you have chosen to, invest in someone else's brand and operating system and ongoing support. You own the assets of your company, but you are licensed to operate someone else's business system.

Finally, your desire to become a franchisee must be grounded in your belief that you can be more successful using someone else's brand and operating according to their systems and methods, than you could if you opened up your own independent business and competed against them. You want to look for a franchisor who is building a system of interdependent franchisees who are committed to getting and keeping customers, to growing faster than the market, to growing faster than the competitors, and to do all of that with high margins. When you discover a franchisor who understands this relationship, you have a franchisor worth your consideration.



Strategic Alliances

Strategic alliances are partnerships in which two or more companies work together to achieve objectives that are mutually beneficial. Companies may share resources, information, capabilities and risks to achieve this. According to Producer's Source, a common reason for entering into a strategic alliance is to obtain the advantage of another company's innovations without having to invest in new research and development. While companies have used acquisition to accomplish some of these goals in the past, forming a strategic alliance is more cost-effective. Example:

Apple

According to "An Overview of Strategic Alliances," Apple has partnered with Sony, Motorola, Phillips, and AT&T in the past. Apple has also partnered more recently with Clear well in order to jointly develop Clear well’s E-Discovery platform for the Apple iPod. E-Discovery is used by enterprises and legal entities to obtain documents and information in a "legally defensible" manner, according to a 2010 press release.

Strategic Alliances can take different forms, occur within an industry or between actors in different industries, and can range from simple agreements to mergers or equity joint ventures. There are basically three types of generic strategic alliances: Non-Equity Strategic Alliances, Equity Strategic Alliances, and Joint Venture Strategic Alliances.Types / Form of Strategic Alliances



1. Joint Venture Alliance

A Joint Venture Alliance occurs when two or more companies combine their resources—talent, money, business skills—to produce products and services. The synergy that occurs allows the products and services to be created; they would not exist otherwise

“Joint Ventures are agreements between parties or firms for a particular purpose or venture. Their formation may be very informal, such as a handshake and an agreement for two firms to share a booth at a trade show. Other arrangements can be extremely complex, such as the consortium of major U.S. electronics firms to develop new microchips,” says Charles P. Lickson in A Legal Guide for Small Business.

2. Non - Equity Strategic Alliance



Non – Equity Strategic Alliances is an alliance in which two or more firms develop a contractual-relationship to share some of their unique resources and capabilities to create a competitive advantage. Non-Equity Strategic Alliances can range from close working relations with suppliers, outsourcing of activities or licensing of technology and IPRs, to large R&D consortia, industry clusters and innovation networks. Informal alliances without any agreements, or based on "Gentlemen’s agreement", are common among smaller companies and within university research groups. Another form of informal non-equity alliances are geographic clusters where concentrations of interconnected players, industries, universities and government agencies co-exists, increasing local competition and productivity.

3. Equity Strategic Alliances

In Equity Strategic Alliances agreements are supplemented by equity investments, making the parties shareholders as well as stakeholders in each other. The investments are passive so each firm retains fully its decision power. The cross-shareholding of companies may result in a complex network where company A owns equity in company B that owns equity in C, creating direct and indirect ownership. Intuitively, when firms share profits the incentives for competing are reduced and are often done to enhance control and make takeovers more difficult.Alliances types based on two constructs alliances purpose and alliances parties.



Business Networking

A networking, network marketing or MLM (multi-level marketing) business entails recruiting business-minded people into an organization. A newly recruited business associate then purchases product from the networking company and builds his down line, or network of sponsors. You can earn monthly commissions off people in your down line when they start buying your product. Network marketing is a legitimate business opportunity, according to Entrepreneur.com. A company can legally sell through multi-level sales with a legitimate product.

Business networking is an effective low-cost marketing method for developing sales opportunities and contacts, based on referrals and introductions - either face-to-face at meetings and



gatherings, or by other contact methods such as phone, email, and increasingly social and business networking websites.

The shortened term 'networking' can be confused with computer networking/networks, which is different terminology, relating to connection and accessibility of multiple computer systems.

A business network of contacts is both a route to market for you, and a marketing method. Business networking offers a way to reach decision-makers which might otherwise be very difficult to engage with using conventional advertising methods.

Ten Principles of Business Networking

Elevator speech. Describe yourself concisely and impressively.

2. Be different. Differentiate yourself. Aim high. Be best at something.

3. Help others. Help others and you will be helped.

4. Personal integrity.

Integrity, trust and reputation are vital for networking.

5. Relevant targeting.

Groups and contacts relevant to your aims and capabilities.


http://www.businessballs.com/business-networking.htm#relevant-groups-contacts

http://www.businessballs.com/business-networking.htm#integrity-trust

http://www.businessballs.com/business-networking.htm#help-others

http://www.businessballs.com/business-networking.htm#be-different

http://www.businessballs.com/business-networking.htm#elevator-speech-pitch


6. Plans and aims. Plan your networking - and know what you want.

7. Follow up. Following up meetings and referrals makes things happen.

8. Be positive. Be a positive influence on everyone and everything.

9. Sustained focused effort.

Be focused - and ever-ready.

10. Life balance.


http://www.businessballs.com/business-networking.htm#sustained-effort

http://www.businessballs.com/business-networking.htm#positive-influence

http://www.businessballs.com/business-networking.htm#follow-up-commitments

http://www.businessballs.com/business-networking.htm#networking-strategy-plan


E - Entrepreneurship

An e-entrepreneur is defined as an individual willing to take the risk of investing time and money in an electronic business that has the potential to make a profit or incur a loss.

The creation of new ventures plays a decisive role for the social and economic development of every country. This is due to the fact that with each new venture created a market participant comes into existence which potentially stimulates the competition and drives the economy further. The formation of new companies within the Net Economy (e-entrepreneurship) is therefore – in spite of the current market turbulence – a key topic for every national industry. Consequently, e-business must not be ignored by decision makers; its technological advantages are obvious and therefore will most certainly lead to new business processes and business concepts as well. Because of those circumstances there will be a solid basis for new venture creation within the net economy in the future too.

Examples:

E-bay and Google

A classic example of entrepreneurship and innovation in the business world.

Google not only an entrepreneurial company but also a pioneer of innovation



E-Commerce and Business Start-Up and Growth

The Internet

The Internet started in the 1970s with a U.S. Defense Department program named ARPA. In the early 1990s the concept of World Wide Web pages was developed. The Internet is a channel for the creation of profitable companies. Electronic business (e-business) is any process that a business organization conducts over a computer-mediated network.Electronic commerce (e-commerce) is any transaction completed over a computer-mediated network that involves the transfer of ownership or rights to use goods or services.

Factors that facilitate the growth of e- commerce are:

The widespread use of personal computers. The adoption of intranets in companies. The acceptance of the Internet as a business

communications platform.

Starting an E-Commerce Company

The Internet is especially important for small and medium-sized companies as it lets them minimize marketing costs while reaching broader markets. An entrepreneur starting an Internet commerce venture needs to address many of the same strategic and tactical questions as other companies plus some specific online issues. One decision is whether to run the Internet operations within the company or outsource these operations. If handled in-house, expensive equipment and software have to be



maintained. There are numerous possibilities for outsourcing the Internet business.

The two major components of Internet commerce are front-end and back-end operations.

Front-end operations are encompassed in the website's functionality, such as search capabilities, shopping cart, and secure payment.

Back-end operations involve integrating customer orders with distribution channels and manufacturing capabilities.

Website

A website is an online connection between the company and its customers and can be developed in-house or outsourced.

There are several important features of every website.

Each website should have search capabilities. Other functions include shopping cart, secure server

connection, credit card payment, and customer feedback features.

Orders and other sensitive customer information should be transferred only through secure servers.

An Internet company should also obtain a merchant account, which will allow the acceptance of major credit cards.

A successful website has three characteristics: speed, speed, and speed. Short download time should be the primary concern of



website developers. A website should be easy to use, customized for specific market target groups, and compatible with different browsers. If the company is targeting international markets, then translation and cultural adaptation need to be considered. Probably the most difficult aspect of setting up an online business is advertising and promoting the web pages. A company can advertise its website through search engines, banner ads, e-mail, and classifieds. Banner ads can be targeted to the exact audience of the firm. The entrepreneur should collect e-mail addresses from customers for targeted e-mail campaigns.The Internet offers many low-cost or free services for small businesses, including Internet access, unlimited e-mail accounts, online calendar, instant messaging, and online conference rooms.

Tracking Customer Information

Electronic databases support personal marketing targeted at individual clients. The online company can capture customers' information in many ways. The U.S. government has generally maintained a policy of noninvolvement with Internet regulation, but the Federal Trade Commission has also pressed for new laws to protect minors.

Relationships and Endorsements by Other Companies

The company needs to establish strong connections with other companies in the supply chain to create an end-to-end value stream. The entrepreneur should protect its innovations and its relationship with other companies. Another type of relationship is endorsements by prominent Internet companies and associations. Participation in merchant networks can bring needed credibility.



Doing E-Commerce as an Entrepreneurial Company

The decision to go online should be made on a case-by-case basis.

The products should be able to be delivered economically and conveniently.

The product has to be interesting for a large number of people.

Online operations have to bring significant cost reductions compared with brick-and-mortar operations.

The company must have the ability to economically draw customers to its website. Conflict between traditional and online marketing channels can lead to a hostile, competing position of once partnering companies.

Opportunities and challenges of e-commerce for Entrepreneurial Firms

Opportunities/ Advantages/Benefits

Ability of small firms to complete with other companies both locally and nationally (promotional tools)

Convenient and easy way of doing business transactions(not restricted to certain hours of operations, open 24 hours a day, seven days a week)

Ecommerce allows people to carry out businesses without the barriers of time or distance. One can log on to the Internet at any point of time, be it day or night and purchase or sell anything one desires at a single click of the mouse.

The direct cost-of-sale for an order taken from a web site is lower than through traditional means (retail, paper



based), as there is no human interaction during the on-line electronic purchase order process. Also, electronic selling virtually eliminates processing errors, as well as being faster and more convenient for the visitor.

Ecommerce is ideal for niche products. Customers for such products are usually few. But in the vast market place i.e. the Internet, even niche products could generate viable volumes.

Another important benefit of Ecommerce is that it is the cheapest means of doing business.

The day-to-day pressures of the marketplace have played their part in reducing the opportunities for companies to invest in improving their competitive position. A mature market, increased competitions have all reduced the amount of money available to invest. If the selling price cannot be increased and the manufactured cost cannot be decreased then the difference can be in the way the business is carried out. Ecommerce has provided the solution by decimating the costs, which are incurred.

From the buyer’s perspective also ecommerce offers a lot of tangible advantages.

- Reduction in buyer’s sorting out time- Better buyer decisions- Less time is spent in resolving invoice and order

discrepancies.- Increased opportunities for buying alternative products.

The strategic benefit of making a business ‘ecommerce enabled’, is that it helps reduce the delivery time, labor cost and the cost incurred in the following areas:



- Document preparation - Error detection and correction- Reconciliation- Mail preparation- Telephone calling- Credit card machines- Data entry- Overtime- Supervision expenses

Operational benefits of e commerce include reducing both the time and personnel required to complete business processes, and reducing strain on other resources. It’s because of all these advantages that one can harness the power of ecommerce and convert a business to e-business by using powerful turnkey ecommerce solutions made available by e-business solution providers.

Challenges

Customers won’t trust your website Take advantage of social media- but only if you know

how to use it well Beware: your website will be hacked Master the sales funnel and increase your conversions

(i.e., sales) You need a multichannel shopping platform You need to define your site’s privacy settings Use deal-of-the-day sites to your advantage


http://www.ecommerceeducation.com/ecommerce_solutions.asp


Get involved with mobile commerce You will be using crowd sourcing Educational posters, brochures, interactive tools and even

e-books can also help position your site as one of the top search engine finds.

You will need to work on site SEO (Search Engine Optimization)

E commerce in Nepal

Many companies have started the trend of e-Commerce in Nepal decade ago, but the challenges are still the same. The actual sales have not been able to start due to lack of knowledge, awareness and online payment systems. Selling globally and inside the country is the same in years. Payment Gateways are being developed but they have their limitation due to legal and security issues. The lack of proper knowledge and awareness among the generation is the major hurdle in e-Commerce In past recent years due to education and reach to internet among the many people in Nepal has brightened the future of e-Commerce The interest of students in the field of IT, the growth of IT companies has helped a lot in the awareness and interest in young generation for internet and IT, has directly created more opportunities for the growth of e-Commerce in Nepal

Growth of Commerce in Nepal

Before a decade e-Commerce was setup as sending gifts and money online and other websites promoting “Send Gifts to Nepal” which had merely a concept of e-Commerce it was target



to Nepali residing in USA, UK, Australia and Europe. There was no effect of that business to support the e-Commerce concept in Nepal. Gradually the business was promoted by other companies who saw there was a marginal profit. Along with the rise of IT, and business concept many online stores were launched but they didn’t have the actual process of buying and selling online. They were the virtual stores with the best example which gave a concept of selling and buying online but not paying.

Current Practice of E commerce in Nepal

Many online portals and shopping portals are launched. Leaving the measurement of success behind, they are now on the top list. Peeping into the future of e-Commerce, launch of few large online shopping portals was thought as milestone, everyone thought there will be a turnaround in the e-Commerce industry in Nepal. Now having dozens of virtual Nepali stores in the web, they still have the same problem of payment and a belief of people, they still have a level of trust to build among the visitors.

Future of E commerce in Nepal

It’s a practice which no one can escape and avoid. It will be either today or tomorrow we must adapt to it. Both the development of payment system, legalizing and securing the payments, creating reliability from the portals is a major issue. With the growing generation every business will have to adapt and think about their online existence in future depending on the nature of business. It will not be too long; there will be a boom in the trend of e-Commerce business soon in Nepal.



Ethics and Social Responsibility of Entrepreneurs

Business Ethics: A Brief Definition

Ethics is the branch of philosophy concerned with the meaning of all aspects of human behavior. Theoretical ethics, sometimes called normative ethics, is about discovering and delineating right from wrong. It is the consideration of how we develop the rules and principles (norms) by which to judge and guide meaningful decision-making. Theoretical ethics is supremely intellectual in character, and, being a branch of philosophy, is also rational in nature. Theoretical ethics is the rational reflection on what is right, what is wrong, what is just, what is unjust, what is good, and what is bad in terms of human behavior. How we see 'ethical behavior' - in terms of what is right and wrong - is guided by these definitions.

Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations.

Business ethics can be defined as written and unwritten codes of principles and values that govern decisions and actions within a company. In the business world, the organization’s culture sets standards for determining the difference between good and bad decision making and behavior. In the most basic terms, a definition for business ethics boils down to knowing the difference between right and wrong and choosing to do what is right. The phrase 'business ethics' can be used to describe the



actions of individuals within an organization, as well as the organization as a whole.

There are three parts to the discipline of business ethics: personal, professional, and corporate. All three are intricately related. It is helpful to distinguish between them because each rests on slightly different assumptions and requires a slightly different focus in order to be understood. We are looking at business ethics through a trifocal lens: close up and personal, intermediate and professional, and on the grand scale (utilizing both farsighted and peripheral vision) of the corporation. In spite of some recent bad press, business executives are first and foremost human beings. Like all persons, they seek meaning for their lives through relationships and enterprise, and they want their lives to amount to something. Since ethics is chiefly the discipline of meaning, the business executive, like all other human beings, is engaged in this discipline all the time, whether cognizant of it or not.

Social responsibility: A Brief Note

Social responsibility is an ethical ideology or theory that an entity, be it an organization or individual, has an obligation to act to benefit society at large. Social responsibility is a duty every individual or organization has to perform so as to maintain a balance between the economy and the ecosystem. A trade-off always exists between economic development, in the material sense, and the welfare of society and the environment. Social responsibility means sustaining the equilibrium between the two. It pertains not only to business organizations but also to anyone whose action impacts the environment. This responsibility can be



passive, by avoiding engaging in socially harmful acts, or active, by performing activities that directly advance social goals. This shows the various ways that companies can invest in being socially responsible and the value those actions can bring to the company.

A report suggests that social responsibility is a way of conducting business through balancing the long-term objectives, decision-making, and behavior of a company with the values, norms, and expectations of society. Social responsibility can be a normative principle and a soft law principle engaged in promoting universal ethical standards in relationship to private and public corporations.

Companies can demonstrate social responsibility in a myriad of ways. They can donate funds to education, arts and culture, underprivileged children, animal welfare, or they can make commitments to reduce their environmental footprint, implement fair hiring practices, sponsor events, and work only with suppliers with similar values.

Social responsibility in business is also known as corporate social responsibility, corporate responsibility, corporate citizenship, responsible business, sustainable responsible business, or corporate social performance. This term refers to a form of self-regulation that is integrated into different disciplines, such as business, politics, economy, media, and communications studies.



Entrepreneurship v/s Ethics and social responsibility

Ethics and social responsibility are very important values in entrepreneurship ventures. This is particularly essential in decision making process. Ethical conscience reminds entrepreneurs to make trustworthy and profitable entrepreneurship decisions. Likewise, the social responsibility component sought entrepreneurs to make entrepreneurial decisions that can enhance benefits and repelling harms to the stakeholders.

The entrepreneur must establish a balance between ethical exigencies, economic expediency, and social responsibility. A managers attitudes concerning corporate responsibility tend to be supportive of laws and professional codes of ethics. Entrepreneurs have few reference persons, role models, and developed internal ethics codes. Entrepreneurs are sensitive to peers pressure and social norms in the community as well as pressures from their companies.

While ethics refers to the “study of whatever is right and good for humans,” business ethics concerns itself with the investigation of business practices in light of human values. The word “ethics” stems from the Greek ethos, meaning custom and usage. Development of Our Ethical Concepts Socrates, Plato, and Aristotle provide the earliest writings dealing with ethical conceptions; earlier writings involving moral codes can be found in both Judaism and Hinduism.

Ethics and social responsibilities of an entrepreneur is certainly an important issue considering the role of social responsibility in society and ethics in business. Social responsibility is beneficial



for business community and at the same time for global community. Social responsibility is significant owing to the realism of globalization. The people of the universe are becoming interconnected more owing to the advancement of technology, transportation and communication. The world market economy is affecting not only services and goods but values and ideas as well. Expansion on the global front, enhancing regulatory omission and the factors which is responsible for creating awareness regarding the significance of making for sectored, macro and operational hazards to both an organization’s and entrepreneur’s competitive position and reputation. As small business owners and entrepreneurs, activities which harm the people and the planet, will spoil the scope for your profits. For this reason there is great significance for “triple bottom line” which is profits, planet and people.

The world economy requires innovators and entrepreneurs to both advance and sustain global community. While ethics and social responsibilities of an entrepreneur and businesses undertake the plan and consider social responsibility a vital event in their activities, everybody benefits. The effect could be noticed within local communities and ultimate profit making from their business. With the extension of cooperation for businesses, governments and NGOs, they encourage in the matter of corporate social responsibility and entrepreneurship and take steps to improve the mechanism for its potential growth. Therefore, in regards ethics and social responsibilities, an entrepreneur has to become aware about his role and strive to obey them in perfect manner which would be beneficial to him as well as the community as a whole



An entrepreneur is actually running his own business and being a businessman he has some obligation of a business to meet his economic and legal responsibilities. Social responsibility is basically a business intention, beyond its legal and economic obligation to do the right things and act in ways that are good for society.

While we are talking about the business ethics, there are three things that need consideration:

1. Avoid breaking criminal law in one’s work related activity

2. Avoid action that may result in civil law suits against the company

3. Avoid actions that are bad for the company image.

For example, an entrepreneur made a chemical that looks like a pesticide and he started selling it like a pesticide in the market and earns the profit, this act is against the law.

Link between Ethics and Social Responsibility

You will probably note the link between business ethics and corporate social responsibility (CSR). The two concepts are closely linked:

A socially responsible firm should be an ethical firm An ethical firm should be socially responsible



However there is also a distinction between the two:

CSR is about responsibility to all stakeholders and not just shareholders

Ethics is about morally correct behavior

How do businesses ensure that its directors, managers and employees act ethically?

A common approach is to implement a code of practice. Ethical codes are increasingly popular – particularly with larger businesses and cover areas such as:

Corporate social responsibility Dealings with customers and supply chain Environmental policy & actions


Creativity and Business Idea

CHAPTER: IV




Nature of creative process

Creativity is the ability to bring something new into existence. Innovation is the translation of an idea into application, which has a commercial value. Creativity is a prerequisite for innovation. It can be developed by any individual who has a concern for excellence and is willing to work hard. A creative person develops new alternatives and offers innovative solutions.

Creativity is showing imagination & originality. It is basically an innovation generated by entrepreneur in business to solve or generate ideas to serve the market better. Creativity can decline due to age, education, idleness, and perceptual, cultural, emotional & organizational factors. Creative thinking is basically a process of searching, screening & connecting thoughts. Creativity can be used for development of better business ideas in terms of product, process, and market development aspects.

Definitions

Creative behaviors possessing an element of newness, novelty, and difference (Herrmann, 1996)

Creativity is an act, an idea, or product that changes an existing domain or that transforms an existing domain into a new one, and creative person is whose thoughts or actions bring these changes. (Csikszentmihalyi)



“Innovation is the specific instrument of entrepreneurship. The act endows resources with a new capacity to create wealth. Innovation, indeed, creates a resource.” (Ducker)

Early model of Creativity propose by Wallas. He divided the creative process into the four distinct phases of Preparation, Incubation, Illumination and Verification.

1. Preparation involves gathering knowledge and understanding the problem.

2. In the Incubation phase, the subconscious takes over, mulling over the problem without deliberate concentration.

3. Illumination occurs as a sudden flash of light, when the solution has been discovered.

4. Verification consists of evaluation of the newly formed idea.

Brilliant ideas do not simply materialize out of the blue.

They are the outcome of a creative process consisting of the following six stages:

Stage 1: Task Presentation: If one has a burning desire to discover or to do something then the seed of curiosity germinates to form a focused idea.



Stage 2: Preparation: A conscious search for collecting information and seeking solutions has to be made.

Stage 3: Incubation: This is the stage when the subconscious mind takes over and mulls over the problem. This stage can be short or it can run into months or even years sometimes.

Stage 4: Idea Generation: A number of ideas and solution are generated depending upon the personal knowledge, experience, insight etc. of the potential entrepreneur.

Stage 5: Idea Validation: Each idea that is generated is verified to test its usefulness, and application.

Stage 6: Outcome Assessment: The creative process ends with either the crystallization of an idea or the lack of it. If it is the latter then one goes back to stage 1 and starts the process all over again. However if an idea is zeroed on then its feasibility has to be evaluated and a project Report has to be prepared.

Components of Creativity

Motivation : Initial motivation which provides stimulus for processing information and exploring alternative solutions.

Skills in the Task domain: The extent of the knowledge, talents and technical skills of the entrepreneur will help in his search for solutions, pin pointing an idea and verifying the idea.



Skills in Creative thinking: These will help him to visualize different solutions, generating a number of alternatives, see divergent uses of a single idea etc. to come up with a workable idea or plan.

Role of creativity

Roger von Oech’s ” 4 Roles of Creativity”

1. The Explorer’s job is to collect the raw material for creativity. He is constantly asking questions, talking to different people, and processing as many inputs as possible.

2. The Artist takes the raw material from the Explorer and combines it in new and interesting ways. He’s playful and imaginative with no concerns about judging the quality of what he’s creating.

3. The Judge takes the Artist’s ideas and determines if they’re practical. He thinks critically and realistically about what can actually be done.

4. Finally, the Warrior takes an idea the Judge has determined worthy and tenaciously follows it to completion. The Warrior’s job is to overcome resistance, be courageous, and ship the idea.


http://litemind.com/creativity-roles/


Sources of new ideas for Entrepreneurs

Entrepreneurs frequently use the following sources of ideas:

1. Consumers– the potential consumer should be the final focal point of ideas for the entrepreneurs. The attention to inputs from potential consumers can take the form of informally monitoring potential ideas or needs or formally arranging for consumers to have an opportunity to express their concerns. Care needs to be taken to ensure that the new idea or the needs represents a large enough market to support a new venture.

2. Existing Companies– with the help of an established formal methods potential entrepreneurs and intrapreneurs can evaluate competitive products & services on the market which may result in new and more market appealing products and services.

3. Distribution channels– members of the distribution channels are familiar with the needs of the market and hence can prove to be excellent sources of new ideas. Not only do the channel members help in finding out unmet or partially met demands leading to new products and services, they also help in marketing the offerings so developed.

4. Government– it can be a source of new product ideas in two ways firstly, the patent office files contain numerous product possibilities that can assist entrepreneurs in obtaining specific product information, and secondly, response to government regulations can come in the form of new product ideas.


http://www.innovationmarketers.com/blog/


5. Research & development– Entrepreneur’s own R&D is the largest source of new idea. A formal and well-equipped research and development department enables the entrepreneur to conceive and develop successful new product ideas.

Most research and development projects are examples of a project, or one-shot, production system. Here, as opposed to the ongoing activity found in batch or continuous systems, resources are brought together for a period of time, focused on a particular task, such as the development of a new product, and then disbanded and reassigned. The management of such projects requires a special type of organization to administer project resources in an effective manner and maintain clear accountability for the progress of the project. This organization also must avoid the inherent conflict of authority between project managers and managers in the marketing, production, and other departments and coordinate members of R and D teams who are



assigned to more than one project and must divide their time among conflicting demands. The management of the whole process is a key to R and D and commercial success.

Business Incubator

"Business incubation is a unique and highly flexible combination of business development processes, infrastructure and people designed to nurture new and small businesses by helping them to survive and grow through the difficult and vulnerable early stages of development."

Business incubation provide SMEs ( Small and Medium Enterprises) and start-ups with the nurturing environment needed to develop and grow their businesses, offering everything from virtual support, rent-a-desk through to state of the art laboratories and everything in between. They provide direct access to hands on intensive business support, access to finance and experts and to other entrepreneurs and suppliers to really make businesses and entrepreneurs to grow.

Business incubation provides a nurturing, instructive and supportive environment for entrepreneurs during the critical stages of starting up a new business. The goal of incubators is to increase the chance that a start-up will succeed, and shorten the time and reduce the cost of establishing and growing its business. If successful, business incubators can help to nurture the companies that will form the true creators of a region or nation’s future wealth and employment.


http://www.google.com/url?q=http%3A%2F%2Fwww.ukbi.co.uk%2Findex.asp%3FSID%3D198&sa=D&sntz=1&usg=AFrqEzfZCM7fWHFCVxMoT_g3fcYOHkJVhw




Incubators serve as a launching pad for young and small businesses. Start-ups, which are innately dynamic entities, need access to support, and incubators are a means of providing this.

Definition:

An organization designed to accelerate the growth and success of entrepreneurial companies through an array of business support resources and services that could include physical space, capital, coaching, common services, and networking connections

Business incubation programs are often sponsored by private companies or municipal entities and public institutions, such as colleges and universities. Their goal is to help create and grow young businesses by providing them with necessary support and financial and technical services. There are approximately 900 business incubators nationwide, according to the National Business Incubation Association.

Incubators provide numerous benefits to owners of startup businesses. Their office and manufacturing space is offered at below-market rates, and their staff supplies advice and much-needed expertise in developing business and marketing plans as well as helping to fund fledgling businesses. Companies typically spend an average of two years in a business incubator, during which time they often share telephone, secretarial office, and production equipment expenses with other startup companies, in an effort to reduce everyone's overhead and operational costs.

Not all business incubators are alike, however, so if you have a specialized idea for a business, try to find the incubator that best suits your requirements. If you're interested in finding an



incubator in your state, visit the National Business Incubation Association's website. Or get in touch with your local economic development agency, located in the phone book under the listing for your state government. You can also call the information offices of your local colleges and universities to see whether they have any business incubation programs.

If an incubation program seems interesting to you, be prepared to submit a fleshed-out business plan. The plan will be reviewed by a screening committee to determine whether or not you meet the criteria for admission. Incubators carefully screen potential businesses because their space, equipment, and finances are limited, and they want to be sure they're choosing to nurture businesses with the best possible chance for success.

Effective Business Incubation Principles

The incubator aspires to have a positive impact on its community's economic health by maximizing the success of emerging companies.

The incubator itself is a dynamic model of a sustainable, efficient business operation.



Importance of Business Incubation

Finance

Incubators help start-ups save on operating costs. The companies that are part of an incubator can share the same facilities and share on overhead expenses, such as utilities, office equipment rentals, and receptionist services. Start-ups can also take advantage of lower lease rates if the incubator is located in low-rent industrial parks. Incubators may also help start-ups with their financing needs by referring them to angel investors and venture capitalists, and helping them with presentations. Start-ups may have better luck securing financing if they have the stamp of approval of incubator programs.

Management

In addition to financial help, start-ups also need guidance on how to compete successfully with established industry players. Incubators can tap into their networks of experienced entrepreneurs and retired executives, who can provide management guidance and operational assistance. For example, a biotechnology start-up would benefit from the counsel of retired pharmaceutical executives who have first-hand experience of the drug development and clinical approval process. Similarly, a restaurant entrepreneur could learn about the difficulties of overseas expansion from retired hospitality-industry executives. Start-ups usually benefit from having respected individuals on their boards of directors and scientific advisory panels, because these individuals bring invaluable connections and experience to the table.



Synergy

The close working relationships between an incubator's start-ups create synergies. Even after the start-ups leave an incubator, the connections and networks established through these relationships can endure for a long time. Start-up entrepreneurs can provide encouragement to one another, and employees may share ideas on new approaches to old problems. Start-ups may plan joint marketing campaigns and cooperate on product development initiatives. These synergies do not necessarily exist among start-ups funded by venture capitalists, because, as Kenneth Liss points out in a March 2000 Harvard Business School Working Knowledge article, the companies that receive the funds do not necessarily know one another and they may be located in different geographic locations.

Economy

By helping new businesses prosper, incubators assist in creating long-lasting jobs for their host communities. In a March 2003 Association for Small Business and Entrepreneurship conference paper hosted by the University of Central Arkansas Small Business Advancement National Center, Northwestern Oklahoma State University professor Patti L. Wilber and her colleague cited research to write that start-ups in incubation programs have greater viability and show superior financial performance over the long term. They create long-lasting jobs for new graduates, experienced mid-career personnel, and veteran executives. This benefits communities and drives economic growth.



Formation Process of Incubation

The basic structure of an incubator facility is determined by owner attributes and regional demographics. The following owner/sponsor classifications can generally be applied:

private local government university state government private nonprofit federal government

A typical organizational format includes executive and advisory boards, a CEO or operations manager, and support staff. Selections for board positions and other representative forums may come from the following: private enterprise, educational institutions, government, organized labor, development and investment community, and private citizens.

The role of the manager or chief executive officer of the incubator is both internal and external. This person is chiefly responsible for:

incubator policy and planning marketing and recruitment tenant selection and lease negotiation facility operations management tenant service and administration

The manager has multiple constituent groups representing both the sponsoring (funding) segments and the user (spinout)



population. Appropriately selecting advisory board members allows the manager to establish and maintain networks for the dissemination of information and policy to these disparate groups.

An important function is marketing the incubator, which will be driven, in part, by the results of the market analysis conducted during the feasibility study. The market analysis should consider the following major aspects of the local economy:

1. characteristics of large corporations in the area2. level of entrepreneurial activity in the community3. demand for incubator-type space4. Small-business support services by industry type, if

feasible.

Types of Business Incubations

Business incubators can offer startups various forms of assistance from economies related to share business services, to expert advice, and access to venture funding opportunities.

Dinah Adkins, executive director of the National Business Incubation Association (NBIA) suggests that, except for restaurant and retail operations, most start-up businesses are well-suited for an incubator. "The main areas [incubators] cover includes research and development, manufacturing and service."

Entrepreneurs can find support in one of three main types of incubators. NBIA statistics show that most incubators are mixed-use, meaning they serve a variety of industries.



Mixed-use incubators will have varying businesses in varying fields, which could encompass business services, consulting firms, high tech research companies, and manufacturing operations. These incubators are the majority incubator type, as indicated in the chart above. Mixed-use incubators are can better accommodate the start-up who has knowledge in the industry of choice and needs help to grow the business and answer the common operational questions unique to small business.

Technology incubators, which target clients involved in creating and commercializing new technologies, are another major category. Generally, these two types of incubators aim to bring outside investments into a particular geographic area to expand the tax base.

The third type involves a smaller number of incubators (only 5 percent), but it appears to be a fast-growing segment. Known as empowerment incubators, these mixed-use facilities focus on clients considered underprivileged and underserved, such as minorities and women. Such empowerment incubators are often situated in economically distressed areas in hopes of revitalizing the regions.

Perhaps one of the biggest benefits of incubators is being part of what is essentially an entire entrepreneurial community, says Joel Wiggins, assistant director for the Austin Technology Incubator in Austin, Texas. "There's a synergy that develops within incubators. Everyone celebrates when someone gets a contract."

It's this type of "doorway consulting" that makes incubators so valuable, says Sam Pruett, executive director of the Genesis Technology Incubator in Fayetteville, Arkansas. "Our experience



has been that there is a huge feeling of isolation for many start-up businesses," he says. "The incubator keeps them connected to other entrepreneurs in similar situations."

Although the drawbacks to incubator life are minimal, as you might have guessed, there are a few. Perhaps the biggest is that you're expected to participate in various communal incubator events, which, though helpful, will take you away from your business. You must also be willing to accept help.

The acceptance policy varies among incubators, but in general, they're looking for business ideas with potential and entrepreneurs who can make their visions realities. This often includes writing a solid business plan and submitting a personal financial statement.

Most incubators require tenants to graduate and move out after a specified period of time, usually after four or five years. Being booted from the nest may seem harsh, but if you've used your time there to the fullest, your business will be more than ready to spread its wings and fly unassisted to even greater heights.

Incubator facilities vary widely in size as measured by the square footage or total startup costs and the number of tenants resident in the facilities.



Techniques of idea generation

According to Smith [29] 172 idea generation techniques have been identified. According to the results of our interviews, 19 techniques were mentioned as appropriate idea generation strategies for design. The idea generation techniques identified are briefly introduced as follows:

1. Role Playing: Role playing involves designers acting out scenarios. These scenarios are often ones that the designers observed during the research phase of the design process when they participated in user research. This technique is used as a tool for both team-based ideation and communication to users and/or clients.

2. Active Search: Active search refers to designers hunting for a particular solution. This hunt could range from a web search for images of current vacuum cleaners to searching through books, magazines, newspapers, etc. to find the demographics of a particular population.

3. Attribute List: Attribute listing refers to taking an existing product or system, breaking it into parts and then recombining these to identify new forms of the product or system.

4. Brainstorm: Brainstorming involves generating a large number of ideas or solutions to a problem with a focus on quantity of ideas. During this process, no ideas are evaluated; in fact unusual ideas are welcomed. Ideas are often combined to form a single very good idea as suggested by the slogan “1+1=3”. Brainstorming can be used by groups as well as individuals. Since brainstorming was the first idea generation



technique created it is often referred to as, “the mother of all idea generation techniques”.

Steps /Process of Structured Brainstorming

Structured brainstorming can prove to be difficult as input comes from various team members. Hence, the following steps can be followed to ensure that constructive results can be obtained at the end.

i. State clearly the objective/theme behind the structured brainstorming. Make sure that each participant is fully aware of what is expected from the brainstorming session. This will save time and energy of the team.

ii. Give each team member a chance to demonstrate or voice his/her idea.

iii. During structured brainstorming, advise that team members are not allowed to criticize one another's opinion or idea. This promotes freedom of sharing one's idea without hesitation.

iv. Repeat the round until the team members do not have any more ideas or solutions.

v. Review the input from each team member and discard any duplicate input.

5. Collaborate: Collaboration refers to two or more people working together towards a common goal. Designers often work in groups and co-create during the entire creative process.



5. Concrete Stimuli: Concrete stimuli are used when designers want to gain new perspectives on a problem by manipulating physical materials. This could be looking at paint chips, feeling different material textures or physically maneuvering objects.

6. Critique: Critique refers to receiving input on your current design ideas. This could be collaborative such as receiving a design critique from a colleague or individuals critiquing their own ideas (either systematically or intrinsically). This technique often spurs new thought by finding solutions to design flaws within current concepts.

7. Documenting: Documenting refers to designers writing down ideas (physically or electronically). This includes journaling, writing stories, and taking notes.

8. Expert Opinion: Designers often elicit opinions from experts to identify potential problems with products or services before more comprehensive evaluations. This occurs when they are looking for an answer to a problem that is outside their domain knowledge or when they want to test a new idea.

9. Empathy/User Research: User research requires the designer to observe real people in everyday situations in order to develop empathy for the users. Many of the methods used to conduct this type of research are founded in ethnographic research methods such as observations, field studies and rapid ethnography



10. Encompass: Encompassing is an inspirational technique which involves designers immersing themselves in information relevant to the current project.

11. Forced Analogy: Forced analogy involves comparing the current problem with something else that has little or nothing in common in order to gain new insights and results. This technique often generates ideas for new areas of research.

12. Incubate: Incubation refers to stepping back from the problem to let the subconscious mind work.

13. Passive Searching: Passive searching refers to when designers look through material (web, magazines, books) for inspiration; they are not searching for a particular solution to a problem, they are merely looking to be inspired.

14. Prototyping: Prototyping, in this study, refers to a low-fidelity model of an idea. These models can be created with any type of material (paper, clay, etc.) as they are only used to conceptualize a thought.

15. Reflect: Reflection occurs when designers review their previous work (sketches, documents, prototypes, etc

16. Sketching: Sketching refers to a rough drawing of an idea.



17. Socializing: Socializing refers to talking with others about topics unrelated to the current project.

18. Storyboards: Storyboards are a way for designers to represent information gained in the research phase of the design process. Quotes from the user, pictures, and other relative information are placed on cork board or a similar surface, to represent a scenario and to help understand the relationships between design ideas. Designers often post information about users using as little detail as possible to allow for interpretation of information.


Business Development plan for a new venture

CHAPTER: V




Defining the business plan

Business plan is written document that is prepared by an entrepreneur that describe all the relevant internal and external elements for creating a new venture.

It is the integration of functional plans such as finance, marketing manufacturing, sales, HR etc.

A business plan is also a road map that provides directions so a business can plan its future and helps it avoid bumps in the road. The time you spend making your business plan thorough and accurate, and keeping it up-to-date, is an investment that pays big dividends in the long term.

Your business plan should conform to generally accepted guidelines regarding form and content. Each section should include specific elements and address relevant questions that the people who read your plan will most likely ask.

Scope and value of the business plan

The business plan may be read by employees, investors, bankers, venture capitalists, suppliers, customers, advisors and consultants.

Three perspectives should be considered in preparing the plan:



Firstly is the perspective of the entrepreneur, who understands about the creativity and technology, involved in the new venture.

Secondly is the marketing perspective, entrepreneur must try to view their business through the eyes of customers.

Thirdly entrepreneur should try to view his or her business through the eyes of the investor.

The depth and detail in the business plan depend on the size and the scope of the proposed new venture. Thus, the difference in the scope of the business may depend on whether the new venture is a service, involves manufacturing, or is a consumer good or industrial product. The size of the market; competition and potential growth may affect the scope of the business plan.

The business is valuable to the entrepreneur, potential investors, or even new personnel, who are trying to familiarize themselves with the venture, its goals and objectives. The business plan is importance to those people because:

It helps determine the viability of the venture in a designated market.

It provides guidelines to the entrepreneur in organization his or her planning activities.

It serves as an importance tool in helping to obtain financing.

Structure and components of business plan



Sample Business Plan Outline

Sample Business Plan Outline

Title Page Name of company, date, contact information, etc. Table of Contents Executive Summary

1. Business Concept 2. Company 3. Market Potential 4. Management Team 5. Distinct Competencies 6. Required Funding and its Use 7. Exit Strategy

Main Sections I. Company Description

Mission Statement Summary of Activity to Date Current Stage of Development Competencies Product or Service

o Description o Benefits to customer o Differences from current offerings

Objectives Keys to Success Location and Facilities



II. Industry Analysis

Entry Barriers Supply and Distribution Technological Factors Seasonality Economic Influences Regulatory Issues

III. Market Analysis

Definition of Overall Market Market Size and Growth Market Trends Market Segments Targeted Segments Customer Characteristics Customer Needs Purchasing Decision Process Product Positioning

IV. Competition

Profiles of Primary Competitors Competitors' Products/Services & Market Share Competitive Evaluation of Product

o Distinct Competitive Advantage o Competitive Weaknesses

Future Competitors

V. Marketing and Sales



Products Offered Pricing Distribution Promotion

o Advertising and Publicity o Trade Shows o Partnerships o Discounts and Incentives

Sales Force Sales Forecasts

VI. Operations

Product Development o Development Team o Development Costs o Development Risks

Manufacturing (if applicable)o Production Processes o Production Equipment o Quality Assurance o Administration

Key Suppliers Product / Service Delivery Customer Service and Support Human Resource Plan Facilities

VII. Management and Organization



Management Team Open Positions Board of Directors Key Personnel Organizational Chart

VIII. Capitalization and Structure

Legal Structure of Company Present Equity Positions Deal Structure Exit Strategy

IX. Development and Milestones Time may be specified on a relative scale rather than specific calendar dates. Milestones may include some or all of the following:

Financing Commitments Product Development Milestones

o Prototype o Testing o Launch

Signing of Significant Contracts Achievement of Break-even Performance Expansion Additional Funding Any other significant milestones

X. Risks and Contingencies Some common risks include:



Increased competition Loss of a key employee Suppliers' failure to meet deadlines Regulatory changes Change in business conditions

XI. Financial Projections

Assumptions (Start date, commissions, tax rates, average inventory, sales forecasts, etc.)

Financial Statements (Balance Sheet, Income Statement, Cash Flow Statement)

Break Even Analysis Key Ratio Projections (quick ratio, current ratio, D/E,

D/A, ROE, ROA, working capital) Financial Resources Financial Strategy

XII. Summary and Conclusions Appendices May include:

Management Resumes Competitive Analysis Sales Projections Any other supporting documents

Measuring plan progress



The entrepreneur should determine the points at which decisions should be made as to whether the goals or objectives are on schedule. One cannot wait for 12 month for whether plan has successfully achieved or not, instead entrepreneur should check the profit and loss statement, cash flow projections and information on inventory, production, quality, sales collection of account receivable and disbursements for the previous month.

A brief description for each of the control elements is given below:

Inventory control

By controlling inventory, the firm can ensure maximum service to the customer. The faster the firm gets back its investment in raw materials and finishes goods, the faster that capital can be reinvested to meet additional customer needs.

Production control

Compare the cost figures estimated in the business plan with day-to-day operation costs. This will help to control machine time, worker hour, process time, and delay time and downtime cost.

Quality control

This will depend on the type of production system but is designed to make sure that the product performs satisfactory.

Sales control



Information on units, dollars, specific product sold, price of sales, meeting of delivery dates, and credit term is useful to get good perspectives of the sales of the new venture. In additional an effective collection system for accounts receivable should be set up to avoid aging of accounts and bad debts.

Disbursements

The new venture should also control the amount of money paid out. All bills should reviewed to determine how much is being disbursed and for what purpose.

Updating a plan

You should be updating your business plan every month, every week and every day; whenever things change, you update your plan. And things always change. You should update your business plan when you're alone in the shower, when you're caught in traffic on the way to work, and when you're walking alone. Update your business plan when listening to customers and other managers.

While this might seem like chaos, it's actually the opposite; the constantly-updated business plan is what makes order out of chaos. It becomes a long-term planning process that sets up your strategy, objectives and the steps you need to take by constantly being aware of the results.



Managing the Planning Process

The Annual Update

Update your plan thoroughly at least once a year. You can start with an old plan and revise, but make sure you're taking a fresh look--distance yourself from the trees and look at the forest.

Talk to your customers and potential customers.Review your value proposition. What are your customers buying? What problems do you solve? What other solutions can they choose?

Try to come up with new market segmentation.Segmentation is the grouping or divisions you see in the market. For example, if you normally view your market by type of product, look at it by channel or buyer. If you divide by region, divide by size of Buyer Company. Think up a new segmentation to give you a fresh view.

Look at the larger potential market for the problems that need solutions.

Look at contiguous businesses. Look at changing trends and technologies.

The Monthly Update

Accounting and financial analysis normally works in months since the books close after every month. Make sure you have a



monthly review of the difference between planned results and actual results for your sales, profits, balance and cash.

For each of the standard pro-forma projections, always maintain a table with the plan, another with actual results, and a third with the difference between plan and actual, which is called variance.

As an annual plan marches through the months, you can use the table reserved for actual results to include changes in budget that affect the near future. For example, if the annual plan starts in January, then by the end of May you have an actual Sales Forecast that includes actual results for January through May and the latest revised forecast for June through December.

You must also review the activities, deadlines and planned results that don't fall into the financials. A good plan is full of milestones, assumptions and tasks, all of which should be measurable. Make sure you review and update these measured results every month.

Managing the Major Revisions

The business planning process involves an important paradox. Strategy works only when consistently applied over a long period, which means that you can't implement strategy without following a long-term plan. However, blindly following a long-term plan can also kill a company that stubbornly insists on following a plan that isn't working.

Resolution of the paradox is called management. It involves judgment. The owners, operators and managers of the business have the responsibility of distinguishing between consistently



applying long-term strategy and blindly following a failing plan. There are no easy rules for this, but the first place to look for clues is in false assumptions. Has the real world proven wrong the assumptions on which your strategy is based? This kind of subjective judgment is what makes business management so important. The planning process, with its regular review, is critical.

Every Business Plan is Wrong

You have to realize your business plan is wrong. All business plans are wrong. Plans are about the future--and nobody gets the future right very often, so keep the plan fresh and watch closely as reality moves forward. A planning process constantly watches the difference between the plan and actual results. Reality swallows our assumptions and we need to keep track of where, why and how we were wrong. This kind of tracking becomes the key to management.



Reasons for business failure

1. No Business Plan

Knowing what your business will be and how you will sell your products or services are not enough to keep it running. You need to have a business plan written out, including (but not limited to) the following:

your short and long term goals; the business’ finances for labor, production equipment, etc.; your target markets; and Marketing.

Having one which outlines every detail will guide your business to the right path.

2. Wrong Reasons

Starting a small business simply because you want to be rich can lead to an unfulfilling experience, where you will always be looking for schemes that can bring you fortune. Before you do, think first about your own interests and passions. Do you believe you can give something of value to people at large? Are you driven enough to overcome the many inevitable obstacles an entrepreneur will face?

3. Inefficient Management

Small business entrepreneurs usually come into their industries with little to no knowledge of handling the multiple facets of a business such as financial management, employee relations,



advertising and other essential responsibilities. Educate yourself through short business and finance courses, or hire managers who have expertise in the fields where you are lacking.

4. Lack of Capital

Some entrepreneurs think they will be making profits for their beginning operation cycles, spending most (if not all) of their resources immediately, only to find out later that they will not have enough funds to start the succeeding cycle/s. Consider every possible cost (overhead, production, equipment, etc.) and save enough money that can be used for at least one fiscal year despite poor sales.

5. Bad Location

It is not enough to set up a store at a location with high human traffic or with a very cheap lease. Opening a restaurant near a school campus can seem like a good idea, but don’t expect too many customers if the food is expensive and there are much cheaper alternatives around.

You need to consider your target market and their habits, as well as the direct competition in the area. Don’t be afraid of spending on prime location, as the increased rate of customers coming into your store and making a purchase will make up for the initial cost.

6. No Online Presence

In this age of high-speed information, people expect to find just about everything on the Internet with their computers and mobile



devices. Not having a website or at least a social media page will render your business virtually invisible to a great majority of the world’s population.

You can hire professionals to create a website for you or put up the website yourself. Make accounts for your business on Face book, Twitter and other leading social media platforms where your target market can usually be found.

7. Uncontrolled Growth

Growth is a good thing unless it is left unchecked and your generated revenue can’t keep up with the expansion. If your business experiences great success, do not be overeager to spend your profits by immediately buying more equipment or opening up new stores. Stick to the strategies you have set so you can still grow without bankrupting the business.

8. Financial Neglect

Cash is the lifeblood of any business, and there will be no business once that runs out. Therefore, it is imperative that small business entrepreneurs practice strict financial record-keeping so that every penny is duly accounted for. Knowing exactly how much money is going in and out of your business will correctly guide every decision you make.

9. Lackluster Execution

Having a great business plan will amount to nothing if each objective is tackled with incompetence. Employees who are lazy, dull, bad-mannered and unmanageable will not just cut down on



productivity, but will also have a negative effect on the work environment and customer/client relations. Follow strict hiring guidelines and subject your hires to rigorous training to ensure quality output from each one.

10. Poor Marketing

A small business needs to market its brand considering the tough competition it will face against more established businesses. You need to invest enough resources into promoting your products through the right channels. This is so your target market knows exactly that you can fulfill its needs. Online marketing is a must these days, but you should not ignore the physical reach of traditional marketing methods such as brochures, flyers and business cards.


Managing Early Growth and Challenges

CHAPTER: VI

MANAGING EARLY GROWTH AND CHALLENGES



Managing the early growth of the new venture: to grow or not to grow

Successfully established new enterprise provides the opportunity for the entrepreneur to grow his or her business. Introducing a new product into an existing market provides the opportunity to take market share for competitors, entry into new market and provides the opportunity to serve a new group of customers.

Whether to grow into a large organization, what are the strategies for growth, the challenges, opportunity and implication of growth and supporting the growth are the aspects of managing early growth.

To grow or not to grow

At some point between young and adulthood, many small profitable companies face a dilemma: should they keep growing or stay the same size? Completing the start-up stage, successful small business boast cash flow, loyal customers and rising demand for products and services. Then question arises should they go for becoming big or should they remain happy with their fates as small businesses?

Many of the business owner refuses to high grow and instead choose to remain with status quo. There are a whole lot of entrepreneur who believe that success isn’t about size, it’s about satisfaction. It’s completely reasonable for business owners to make a decision not to grow because they are satisfied with the current size of the enterprises.



Most common reason for not to grow are as:

To avoid risk and maintain their lifestyle. To avoid regulation authority. To avoid having to delegate responsibilities. Growth can increase an organization problem. Growth need not necessarily equal profitability. Customers may get ignored.

Dimensions and Strategies for expansion and growth

Most small companies have plans to grow their business and increase sales and profits. However, there are certain methods companies must use for implementing a growth strategy. The method a company uses to expand its business is largely contingent upon its financial situation, the competition and even government regulation. Some common growth strategies in business include market penetration, market expansion, product expansion, diversification and acquisition.

Market Penetration

One growth strategy in business is market penetration. A small company uses a market penetration strategy when it decides to market existing products within the same market it has been using. The only way to grow using existing products and markets is to increase market share, according to the article "Growth



Strategies" at gaebler.com. Market share is the percent of unit and dollar sales a company holds within a certain market vs. all other competitors. One way to increase market share is by lowering prices. For example, in markets where there is little differentiation among products, a lower price may help a company increase its share of the market.

Market Expansion

A market expansion growth strategy, often called market development, entails selling current products in a new market. There several reasons why a company may consider a market expansion strategy. First, the competition may be such that there is no room for growth within the current market. If a business



does not find new markets for its products, it cannot increase sales or profits. A small company may also use a market expansion strategy if it finds new uses for its product. For example, a small soap distributor that sells to retail stores may discover that factory workers also use its product.

Product Expansion

A small company may also expand its product line or add new features to increase its sales and profits. When small companies employ a product expansion strategy, also known as product development, they continue selling within the existing market. A product expansion growth strategy often works well when technology starts to change. A small company may also be forced to add new products as older ones become outmoded.

Diversification

Growth strategies in business also include diversification, where a small company will sell new products to new markets. This type of strategy can be very risky, according to gaebler.com. A small company will need to plan carefully when using a diversification growth strategy. Marketing research is essential because a company will need to determine if consumers in the new market will potentially like the new products.

Acquisition

Growth strategies in business can also includes an acquisition. In acquisition, a company purchases another company to expand its operations. A small company may use this type of strategy to expand its product line and enter new markets. An acquisition



growth strategy can be risky, but not as risky as a diversification strategy. One reason is that the products and market are already established. A company must know exactly what it wants to achieve when using an acquisition strategy, mainly because of the significant investment required to implement it.

Challenges and Opportunities of Global Expansion

Opportunities

By buying products from other nations customers are offered a much wider choice of goods and services.

Creates competition for local firms and thus keeps costs down. Globalization promotes specialization. Countries can begin to

specialize in those products they are best at making. Economic Interdependence among different nations can build

improved political and social links. Exporting Non-equity arrangement Direct foreign investment

Challenges

Cheap imports from developing nations could lead to unemployment in developed countries where the cost of production is high.

Choosing to specialize in certain products may lead to unemployment in other sectors which are not prioritized.

Increased competition for infant industry.



‘Dumping’ of goods by certain countries at below cost price may harm industries in order countries.

Cross countries legislations Social-cultural barriers Need for business localization Unstable economies and government Security and labor concerns Finding the first global employee Protecting intellectual property International business reputation

Economic implication of Growth

Growth makes the firm bigger and it begins to benefits from the advantages of size. It provides the economy with increased tax revenue, employment, reduction of trade deficit, and so on. At the organizational level the growth enable the firm to enjoy production efficiency, attractive to suppliers, increases bargaining power, credibility to financiers, reliable to stakeholders and other power to influence etc.

But the history has witnessed many businesses that were at one stage growing rapidly but later failed. Business failures are not considered as negative outcome for an economy, rather a source of knowledge that generates improvement and increase in future economic stability.

As in the economy, the firm’s growth has its implications to the entrepreneurs. As the form grows, it changes. These changes introduce a number of managerial challenges. These challenges arise from the following pressures. They are:



1. Pressures on Existing Financial Resources2. Pressures on Human Resource3. Pressures on the Management of Employees4. Pressures on the Entrepreneurs Time

Hitting the Growth Wall

Most small-business owners are capable technicians or marketers. Yet, they sometimes have difficulty developing the right company processes, systems and management practices to support and sustain business growth. They may sense that their company has "hit a wall" - become challenged to effectively and efficiently handle increased customer orders.

Resolving this situation requires the business founder to make the transition from entrepreneur to "business owner/manager." This requires scaling a number of business "growth walls" - specific and significant hurdles or challenges along a company's growth path. Along that way, the experienced business owner/manager proactively focuses on the right organizational issues at the right time, and ensures that similar issues don't resurface.

Once a company has become a successful start-up (developing a salable product, service or technology in a defined market niche) then, to grow effectively, it must build a sound organization infrastructure to be able to efficiently sell, make, deliver, service and support its offering.



The solution to this first growth challenge is:

Company Systematization, where the business needs to:

Acquire sufficient and appropriate human, material, and equipment and capital resources to fuel the business.

Develop day-to-day operating policies, procedures and systems to coordinate the organization's daily work.

Organize company functions (e.g., sales, operations, product development, administration, etc.) into separate and reasonably self-managed areas.

Install appropriate human resource practices to bring on, retain, motivate and develop capable and committed employees.

Company Management, where the business needs to:

Perform organizational and functional planning and budgeting.

Establish a functional area and individual performance management process.

Institute a useful management information and reporting system, and sound financial controls.

Build a capable and reasonably self-sufficient management team.

Business-Unit Coordination and Alignment, where the business needs to:



Move the company from a functional to business unit structure (along product lines or market niches) in order to better compete in the marketplace,

Diversify its products and markets, and possibly grow through mergers & acquisitions.

Create cross-company forums or teams for product/service innovation, quality/service improvement, process improvement and knowledge transfer.

Use organizational leadership and culture as leverage for organizational change.

The customer is always right. We've heard that as a basic business truth since the beginning of business. And for the most part, it's true. But there are times when it's appropriate to tell a particular buyer-the one who saps your strength and wastes your time again and again-that although the customer may be right, the relationship is wrong.

I'm not saying get rid of every customer who is difficult to deal with. I'm suggesting that it may be time to weed out your customer base so you can harvest the greatest rewards. Here are some ways to do that:

1. Know when to walk away. 2. Follow the 80/20 rule. 3. Ask the difficult questions.4. Measure your return on investment. 5. Leave the door open.

The next time you deal with a difficult customer, ask yourself this question: "Is the time I'm spending with this customer taking time away from others who need me more?" If the answer is



"yes," then it's time to cut your losses and walk away. So the next time you’re first thought is "The customer is always right," stop and ask yourself this instead: Is this customer right for me?

Financial Strategies to Support Growth

The pressure created by financial resources obstructs growth. To overcome pressure on existing resources, the entrepreneur could acquire new resources. However, the acquisition of new resources can be expensive, whether in terms of the equity sold or the interest payments from debts. Therefore the strategy is to manage the existing resources in a better way. These financial control strategies include:

1. Managing cash flow2. Managing inventory3. Managing fixed assets4. Managing costs and profits5. Taxes and other provisions6. Record keeping

6. Managing cash flow

Cash flow is vital when it comes to managing the finances of a small business as research shows that around 80 percent of small business failures are the result of poor cash flow.

Good cash flow management means delaying the outflow of cash for as long as possible while ensuring that those who owe you money pay it as soon as possible. It is important for you to prepare cash flow projections for a period of time, whether it is for next year, next quarter or next month. A sound forecast



model will enable you to anticipate problems and be prepared if and when financial trouble strikes. It can also be used to develop projections for sales, costs, credit and funding. Below are a range of steps to help SMEs effectively manage their cash position:

Prepare a sales forecast Estimate cash inflows Estimate cash outflows Calculate your net cash position Surviving shortfalls

Good cash flow management can often be the determining factor between a successful business and a failed one. In any business venture, cash is king, therefore it is important to understand your cash cycle and effectively manage cash coming in and cash going out during any given period.

7. Managing inventory

Most businesses hold inventory for many reasons. Among them are:

Meeting unexpected demands Smoothing seasonal demands Taking advantage of price discounts Hedging against price increase Getting quality discounts

8. Managing fixed assets


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Fixed Asset Management is an accounting process that seeks to track fixed assets for the purposes of financial accounting, preventive maintenance, and theft deterrence. Many organizations face a significant challenge in tracking the location, quantity, condition, and maintenance and depreciation status of their fixed assets. A popular approach to tracking fixed assets utilizes serial numbered Asset Tags, often with barcodes for easy and accurate reading. Periodically, the owner of the assets can take inventory with a mobile barcode reader and then produce a report. Some tracking methods automate the process, such as by using fixed scanners to read barcodes on railway freight cars or by attaching a Radio Frequency Identification (RFID) tag to an asset.

1. Managing costs and profits

Cost, revenue and profit are the three most important factors in determining the success of your business. A business can have high revenue, but if the costs are higher, it will show no profit and is destined to go out of business when available capital runs out. Managing costs and revenue to maximize profit is key for any entrepreneur.

Revenue is the same as total income for a business and measures all money taken in through sales of goods and services. Cost measures the total expenditures made by the business to run the operation: both the "direct" costs involved in creating the goods or services, as well as the "indirect" costs that stem from running a business, such as rent, salaries and legal or professional fees. Profit is the total revenue minus the total cost; this is the money made by the business and is the key indicator of success.


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2. Taxes and other provisions

The entrepreneur will be required to withhold different types of taxes for his/her employees. Each month or quarter, deposits or payments will need to be made to appropriate tax offices for fund withheld from salary and wages. If payments are late, there will be high interest and penalties assessed.Apart from government taxes the entrepreneur will be required to provision for provident fund, medical benefits, social welfare funds, bonus and other facilities. The entrepreneur should be careful not to use these funds.

3. Record keeping

Good record keeping can help you protect your business, measure your performance and maximize profits. Records are the source documents, both physical and electronic, that specify transaction dates and amounts, legal agreements, and private customer and business details.

Developing a system to log, store and dispose of records can benefit your business by allowing you to:

plan and work more efficiently meet legal and tax requirements measure profit and performance generate meaningful reports protect your rights Manage potential risk



Organizational Changes during Growth

Larry E. Greiner's organizational development theory research

An organization developmental theory developed by Larry E. Greiner is helpful in change management when examining the problems associated with growth on organizations and developing a proactive framework to cope with such situations.

It can be argued that growing organizations move through five relatively calm periods of evolution, each of which ends with a period of crisis and revolution.

Each evolutionary period is characterized by the dominant management style used to achieve growth, while

Each revolutionary period is characterized by the dominant management problem that must be solved before growth will continue.



Five Stages of Organizational Growth

Creativity / Leadership

The first stage of organizational growth is called creativity. This stage is dominated by the founders of the organization, and the emphasis is on creating both a product and a market.

These "founders are usually technically or entrepreneurially oriented, and they disdain management activities; their physical and mental energies are absorbed entirely in making and selling a new product."



But as the organization grows, management problems occur that cannot be handled through informal communication and dedication. Thus the founders find themselves burdened with unwanted management responsibilities? and conflicts between the harried leaders grow more intense.

Direction / Autonomy

It is at this point that the crisis of leadership occurs and the first revolutionary period begins. "Who is going to lead the organization out of confusion and solve the management problems confronting the organization?" The solution is to locate and install a strong manager "who is acceptable to the founders and who can pull the organization together." This leads to the next evolutionary period-growth through direction.

During this phase the new manager and key staff "take most of the responsibility for instituting direction, while lower level supervisors are treated more as functional specialists than autonomous decision-making managers." As lower level managers demand more autonomy, this eventually leads to the next revolutionary period-the crisis of autonomy. The solution to this crisis is usually greater delegation.

Delegation / Control

Yet it is difficult for top managers who were previously successful at being directive to give up responsibility. Moreover, lower level managers are not accustomed to making decisions for them. As a result numerous organizations flounder during this revolutionary period, adhering to centralized methods, while



lower level employees grow more disenchanted and leave the organization.

When an organization gets to the growth stage of delegation, it usually begins to develop a decentralized organization structure, which heightens motivation at the lower levels. Yet, eventually, the next crisis begins to evolve as the top managers "sense that they are losing control over a highly diversified field operation? Freedom breeds a parochial attitude."

The crisis of control often results in a return to centralization, which is now inappropriate and creates resentment and hostility among those who had been given freedom.

Coordination / Red Tape

A more effective solution tends to initiate the next evolutionary period—the coordination stage. This period is characterized by the use of formal systems for achieving greater coordination with top management as the "watch dog."

Yet most coordination systems eventually get carried away and result in the next revolutionary period-the crisis of red tape. This crisis most often occurs when "the organization has become too large and complex to be managed through formal programs and rigid systems."

Collaboration /?

If the crisis of red tape is to be overcome, the organization must move to the next evolutionary period-the phase of collaboration. While the coordination phase was managed through formal



systems and procedures, the collaboration phase "emphasizes greater spontaneity in management action through teams and the skillful confrontation of interpersonal differences. Social control and self-discipline take over from formal control."

Greiner is not certain what the next revolution will be, but he anticipates that it will "center around the 'psychological saturation' of employees who grow emotionally and physically exhausted by the intensity of teamwork and the heavy pressure for innovative solutions."

It is felt that to overcome and even avoid the various crises managers could attempt to move through the evolutionary periods more consistently with the sequencing -direction to coordination to collaboration to delegation-rather than the ordering depicted by Greiner.

Entrepreneurial skills and strategies:

Some of the skills of entrepreneur are as follows:

1. Personal characteristics2. Interpersonal skills3. Critical and creative thinking skills4. Practical skills5. Business knowledge



1. Personal characteristics

They’re goal-orientated

Entrepreneurs are all about setting goals and putting their all into achieving them; they’re determined to make their business succeed and will remove any encumbrances that may stand in their way. They also tend to be strategic in their game plans and always have a clear idea in mind of exactly what they want to achieve and how they plan to achieve it.

They’re committed to their business

Entrepreneurs are not easily defeated; they view failure as an opportunity for future success, and if they don’t succeed the first time, they’ll stay committed to their business and will continue to try and try again until it does succeed. A true entrepreneur doesn’t take ‘no’ for an answer.

They’re hands-on

Entrepreneurs are inherently proactive, and know that if something really needs to get done, they should do it themselves. They’re ‘doers’, not thinkers, and tend to have very exacting standards. They view their business as an extension of themselves and like to be integral in its day-to-day operations—even when they don’t have to be.



They thrive on uncertainty

Not only do they thrive on it—they also remain calm throughout it. Sometimes things go wrong in business, but when you’re at the helm of a company and making all the decisions, it’s essential to keep your cool in any given situation. True entrepreneurs know this and secretly flourish and grow in the wake of any challenges.

They continuously look for opportunities to improve

Entrepreneurs realize that every event or situation is a business opportunity, and they’re constantly generating new and innovative ideas. They have the ability to look at everything around them and focus it toward their goals in an effort to improve their business.

They’re willing to take risks

A true entrepreneur doesn’t ask questions about whether or not they’ll succeed—they truly believe they will. They exude this confidence in all aspects of life, and as a bi-product, they’re never afraid to take risks due to their unbinding faith that ultimately they will triumph.

They’re willing to listen and learn

The most important part of learning is listening—and a good entrepreneur will do this in abundance.



They have great people skills

Entrepreneurs have strong communication skills, and it’s this strength that enables them to effectively sell their product or service to clients and customers. They’re also natural leaders with the ability to motivate, inspire and influence those around them.

They’re inherently creative

This is one trait that, due to their very nature, entrepreneurial business people have by the bucket load. They’re able to not only come up with ingenious ideas, but also turn those ideas into profits.

They’re passionate and always full of positivity

Passion is perhaps the most important trait of the successful entrepreneur. They genuinely love their job and are willing to put in those extra hours to make their business grow; they get a genuine sense of pleasure from their work that goes way beyond just cash.

2. Interpersonal skills

Interpersonal skills are measures of how adept you are at interacting with others. Active listening is an interpersonal skill, as knows how to communicate to someone else that you respect him or her. When problems arise you use your interpersonal skills to resolve conflict with others. People learn interpersonal skills by interacting with family members, going to school, and



socializing with their peers. Healthy interpersonal skills reduce stress, resolve conflict, improve communication, enhance intimacy, increase understanding, and promote joy. Others are leadership and motivation, communication skills, listening, negotiation.

3. Critical and creative thinking skills

Creative thinking skills use very different approaches to critical thinking skills. They involve a much more relaxed, open, playful approach. This can require some risk-taking. Creative thinking skills involve such approaches as:

Looking for many possible answers rather than one. Allowing you to make wild and crazy suggestions as well

as those that seem sensible. Not judging ideas early in the process - treat all ideas as if

they may contain the seeds of something potentially useful.

Allowing you to doodle, daydream or play with a theory or suggestion.

Being aware that these approaches necessarily involve making lots of suggestions that are unworkable and may sound silly.

Making mistakes. Learning from what has not worked as well as what did.

4. Practical skills



For successful entrepreneur following practical skills are required:

Goal Setting:Setting goals is an integral part of choosing the business that's right for you. After all, if your business doesn't meet your personal goals, you probably won't be happy waking up each morning and trying to make the business a success. Sooner or later, you'll stop putting forth the effort needed to make the concept work.Goal setting should be (SMART) – Specific, Measurable, Attainable, Realistic and Time bounded.

Planning and Organizing:Planning is the intellectual process and entrepreneur should think a head future oriented planning process for organizational objectives and goals.Organizational skills are defined as the skills, strategies and qualities needed in order to be able to organize your time, deadlines and productivity. The different kinds of organizational skills include desktop organization, task organization and self organization.

Decision Making:

Decision made by the entrepreneur should be rational and logical.

5. Business knowledge



Many companies base their organizational structures on various functional areas, creating departments around these functions and assigning responsibilities according to employees' job titles and experience. A functional organizational structure groups employees by various skills and expertise, leading to greater efficiency, according to the online Encyclopedia of Management. Several key types of functional areas are typically seen in business environments.

Human Resources

The human resources or personnel department is responsible for hiring employees and ensuring that they get the proper training to perform their jobs. Human-resources directors or managers have employees fill out proper paperwork, including W-4 and I-9 forms. The W-4 form determines how much is deducted from each paycheck; the I-9 or employment eligibility verification form ensures that a recently hired worker can legally work in the United States. Human-resources professionals establish pay scales for all employees, basing salaries on comparable compensation packages in the industry.

Marketing

Marketing professionals determine the products that their companies introduce to the marketplace, often using marketing research surveys to determine what consumers need and want. This helps the company to better align its strategies. Marketing workers help to establish prices for products, based on manufacturing costs. Marketing managers and directors decide which types of advertising and promotions their companies use.



Some marketing departments have advertising directors or managers who handle these functions; they establish budgets for various types of advertising, such as television, radio and Internet ads, and track the results. The marketing department determines the right distribution channels for the company's products. For example, a consumer products company may sell its products in grocery stores and mass-merchandise outlets.

Accounting/record keeping

Accounting professionals usually work in one of three areas: accounts receivable, accounts payable and payroll. Accounts-receivable specialists track the debts owed to the company. For example, customers who purchase items on credit fall within the bailiwick of accounts-receivable employees. These professionals prepare and send invoices to apprise customers when payments are due. Accounts-payable employees track payments that the company owes, including amounts owed for parts or to repair and maintenance vendors. Payroll specialists ensure that employees are paid on time and distribute annual W-2 and 1099 forms to employees and independent contractors, respectively, for tax purposes.

Financial Controls

Financial controls are a critical part of any financial system. They ensure that the resources of the Housing Association are being correctly and effectively used and that activities are correctly and accurately reported. Poor controls can lead to the risk that resources are used inefficiently or are subject to theft, fraud or abuse.



Management control (as exercised in planning, performance evaluation, and coordination) of financial activities aimed at achieving desired return on investment. Managers use financial statements (a budget being the primary one), operating ratios, and other financial tools to exercise financial control.

Inventory Control

Inventory Control is designed to support the requisition processing, inventory management, purchasing, and physical inventory reconciliation functions of inventory management through a set of highly interactive capabilities. The design of Inventory Control is based on the following key objectives:

To provide information on the availability of stocked items and the status of stocked requisitions

To facilitate timely requisition processing To automatically record and service backorders To help minimize inventory investments consistent with

service objectives by basing purchasing decisions on usage history

To provide automated tools to assist servicing, purchasing, and management of the inventory

To improve financial control of the inventory by chargeback’s to the user organizations

To improve financial control of the inventory by periodic reconciliation of the inventory balances with the physical counts.

Strategic Planning Skills


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In today's highly competitive business environment, budget-oriented planning or forecast-based planning methods are insufficient for a large corporation to survive and prosper. The firm must engage in strategic planning that clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress, and make adjustments as necessary to stay on track.

An entrepreneur must have a vision for the future. He / She must be able to see the bigger picture and know where he/she is going with everything. Setting clear objectives and effective strategic are essential for running a business successfully.

A simplified view of the strategic planning process:

1. Mission and objectives2. Environmental scanning3. Strategic formulation4. Strategic implementation5. Evaluation and control

1. Mission and Objectives

The mission statement describes the company's business vision, including the unchanging values and purpose of the firm and forward-looking visionary goals that guide the pursuit of future opportunities.



Guided by the business vision, the firm's leaders can define measurable financial and strategic objectives. Financial objectives involve measures such as sales targets and earnings growth. Strategic objectives are related to the firm's business position, and may include measures such as market share and reputation.

2. Environmental Scan

The environmental scan includes the following components:

Internal analysis of the firm Analysis of the firm's industry (task environment) External macro environment (PEST analysis)

The internal analysis can identify the firm's strengths and weaknesses and the external analysis reveals opportunities and threats. A profile of the strengths, weaknesses, opportunities, and threats is generated by means of a SWOT analysis.

An industry analysis can be performed using a framework developed by Michael Porter known as Porter's five forces. This framework evaluates entry barriers, suppliers, customers, substitute products, and industry rivalry.

3. Strategy Formulation

Given the information from the environmental scan, the firm should match its strengths to the opportunities that it has identified, while addressing its weaknesses and external threats.



To attain superior profitability, the firm seeks to develop a competitive advantage over its rivals. A competitive advantage can be based on cost or differentiation. Michael Porter identified three industry-independent generic strategies from which the firm can choose.

4. Strategy Implementation

The selected strategy is implemented by means of programs, budgets, and procedures. Implementation involves organization of the firm's resources and motivation of the staff to achieve objectives.

The way in which the strategy is implemented can have a significant impact on whether it will be successful. In a large company, those who implement the strategy likely will be different people from those who formulated it. For this reason, care must be taken to communicate the strategy and the reasoning behind it. Otherwise, the implementation might not succeed if the strategy is misunderstood or if lower-level managers resist its implementation because they do not understand why the particular strategy was selected.

5. Evaluation & Control

The implementation of the strategy must be monitored and adjustments made as needed.

Evaluation and control consists of the following steps:

1. Define parameters to be measured2. Define target values for those parameters



3. Perform measurements4. Compare measured results to the pre-defined standard5. Make necessary changes

Entrepreneur strategies are:

Strategic innovation Integrative strategies Vertical Horizontal Modular Intensive strategy Diversification Global strategy


Short Notes

Write short notes on:

1. Ethics and social responsibility in entrepreneurship

Ethics and social responsibility are very important values in entrepreneurship ventures. This is particularly essential in decision making process. Ethical conscience reminds entrepreneurs to make trustworthy and profitable entrepreneurship decisions. Likewise, the social responsibility component sought entrepreneurs to make entrepreneurial decisions that can enhance benefits and repelling harms to the stakeholders.

The entrepreneur must establish a balance between ethical exigencies, economic expediency, and social responsibility. A managers attitudes concerning corporate responsibility tend to be supportive of laws and professional codes of ethics. Entrepreneurs have few reference persons, role models, and developed internal ethics codes. Entrepreneurs are sensitive to peers pressure and social norms in the community as well as pressures from their companies.

While ethics refers to the “study of whatever is right and good for humans,” business ethics concerns itself with the investigation of business practices in light of human values. The word “ethics” stems from the Greek ethos, meaning custom and usage. Development of Our Ethical Concepts Socrates, Plato, and Aristotle provide the earliest writings dealing with ethical conceptions; earlier writings involving moral codes can be found in both Judaism and Hinduism.


Short Notes

Ethics and social responsibilities of an entrepreneur is certainly an important issue considering the role of social responsibility in society and ethics in business. Social responsibility is beneficial for business community and at the same time for global community. Social responsibility is significant owing to the realism of globalization. The people of the universe are becoming interconnected more owing to the advancement of technology, transportation and communication. The world market economy is affecting not only services and goods but values and ideas as well. Expansion on the global front, enhancing regulatory omission and the factors which is responsible for creating awareness regarding the significance of making for sectored, macro and operational hazards to both an organization’s and entrepreneur’s competitive position and reputation. As small business owners and entrepreneurs, activities which harm the people and the planet, will spoil the scope for your profits. For this reason there is great significance for “triple bottom line” which is profits, planet and people.

2. Types of Start – Ups

a. A lifestyle firm is privately held and usually achieves only limited growth.

This type of firm may grow after several years to 30 or 40 employees.

A lifestyle firm exists primarily to support the owners and usually has little growth opportunity.

b. Foundation Companies. A foundation company is a type of company

formed from research and development and lays the foundation for a new business area.


Short Notes

This firm can grow in five to ten years from 40 to 400 employees.

This type of start-up rarely goes public and draws little outside investor interest.

c. High-Potential Venture.

The High Potential venture is an emerging company that is venture-backed, with a seasoned management team that possesses relevant experience. This type of venture is growing rapidly, and is characterized by proven market acceptance (significant sales). With growth comes the need to fund continued product development and marketing.

While this venture type has medium to high ratings in all categories, and as such is well balanced, there is room for improvement in each area.

This type of venture receives the most investor interest. The company may start out like a foundation company,

but its growth is far more rapid. After five to ten years the company could employ around

500 employees, with $20-30 million in revenues. These firms are also called gazelles and are most

important for the economic development of an area.


Short Notes

3. Fundamental issues in entrepreneurship

Strategic planning and decision making issue decentralized participative.

Expertise of CEO and other managers should gain knowledge and experience by both professional learning and doing.

Staffing should be based on expertise, skills, knowledge and talent not on kith and kin relationship

Technology: should have non imitable, unique and cutting edge technology

Infrastructure issue: should have adequate infrastructure of water power supply, communication, transportation.

Issues on entrepreneurial skills and strategies: entrepreneur should possess various entrepreneurial skills and strategies, via, inventory mgmt, financial management ,strategic planning skill, HRM etc

Financial issue: sources of funding should be well identified so that they can be made available at the time of expansion and crisis.

Issues on government supports: government should provide supportive policies and facilities so that the new start-ups can flourish easily.

Market issue: an entrepreneur should be able to create the market of own.

Structural and leadership issue: most appropriate structure should be formed and leader should possess required qualities to drive the organization according to the strategy adopted.


Short Notes

4. Hitting the growth wall

Rapid growth phase where operation are out of control Cash run out, key employees leave organization for stable

job Top line revenue flatter out Inventory control problem Lack of loyal customer

Three types of growth hurdles are:

Company systemization:Acquire sufficient capital resource material, human to fuel the business.

Company management:Perform organizational and functional planning and budgeting.

Business unit coordination and alignment:More company from functional to business structure to better complete in market place

5. Techniques for idea generation

brainstorming focus group problem inventory analysis research and development techniques

6. Front-end and back-end operation of an e- business


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The integration of systems inside and outside the organization can provide value for both customers and the organization. One of the requirements for e-business is to link front-end with back-end systems in order automates the online operations of the organization.

Front-end activities deal directly with the customer while back-end systems include all of the internal support activities that do not deal directly with the customer. Some enterprises have different geographic locations for front-end and back-end office activities and rely on the integration of the associated computer and network systems for successful corporate operations.

7. Inventory control


http://www.prudens.com/patens/ebusiness/busmodel.html#p12

Short Notes

Inventory management is the process of efficiently overseeing the constant flow of units into and out of an existing inventory. This process usually involves controlling the transfer in of units in order to prevent the inventory from becoming too high, or dwindling to levels that could put the operation of the company into jeopardy. Competent inventory management also seeks to control the costs associated with the inventory, both from the perspective of the total value of the goods included and the tax burden generated by the cumulative value of the inventory.

Balancing the various tasks of inventory management means paying attention to three key aspects of any inventory. The first aspect has to do with time. In terms of materials acquired for inclusion in the total inventory, this means understanding how long it takes for a supplier to process an order and execute a delivery. Inventory management also demands that a solid understanding of how long it will take for those materials to transfer out of the inventory be established. Knowing these two important lead times makes it possible to know when to place an order and how many units must be ordered to keep production running smoothly.

8. Entrepreneurial skills

There is one thing to keep in mind. Not all Entrepreneurs have these skills. Some have them and some don’t. That being said skills and characteristics can be broken down into three different categories.

Innate Characteristics – Natural or characteristics that you are born with.


http://www.barcodesinc.com/solutions/market-applications/inventory.htm

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Learned Characteristics – Characteristics that have been developed with much practice.

Experiential Characteristics – Characteristics that have been developed through different interactions and occasions in the entrepreneur’s life.

There are many different types of skills or characteristics that entrepreneurs may possess that are unappealing, and will do more harm than good. Those include;

invulnerability machismo/feminism impulsiveness over-controlling perfectionism

9. Strategic Alliances

A strategic alliance is an agreement between two or more players to share resources or knowledge, to be beneficial to all parties involved. It is as way to supplement internal assets, capabilities and activities, with access to needed resources or processes from outside players such as suppliers, customers, competitors, companies in different industries, brand owners, universities, institutes or divisions of government.

Reasons for entering a Strategic AllianceFirms entering strategic alliances often have multiple objectives, some of them listed below:

Access to intellectual property rights Access to knowledge


Short Notes

Access to new technology Access to new markets Access to distribution skills Access to manufacturing capabilities Access to marketing skills Access to management skills Access to capital Create critical mass Create common standards Create new businesses Create synergies Diversification Improve agility Improve quality Improve R&D Improve material flow Improve speed to market Influence structural evolution the industry Inhibit competitors Reduce administrative costs Reduce R&D costs Reduce risk and liability Reduce cycle time Utilize by-products


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10. Strategic Planning

Strategic planning is critical to business success. Different from classic business planning, the strategic variety involves vision, mission and outside-of-the-box thinking. Strategic planning describes where you want your company to go, not necessarily how you're going to get there. However, like all other "travel plans," without knowing where you want to go, creating details on how to arrive are meaningless. Strategic planning defines the "where" that your company is heading.

As critical as business planning is to the success of your company, all plans are useless unless followed by action. An additional side benefit of strategic planning is the natural action plan that stems from identifying your preferred strategy. While strategic planning involves your vision, mission and dreams, it also further defines the rudiments of your action plan to achieve the results you want. For example, if you adopt a strategy of increasing business-to-business -- B2B -- revenue, you've also identified a basic action plan.

11. Reason for failure of some business

Wrong Reasons No Business Plan Not Enough Experience Lack of Capital Poor Management Bad Location Can’t Handle Competition Overlook The Importance Of Getting Online Inefficient Handling of Finances


Short Notes

Poor Marketing Invisible Hurdles Comparing Yourself To Others Lack of Business Mindset Unwilling To Take Risks No Real Time Experience Your Business Isn’t Your Passion Fear

12. Business incubation

Business incubation is a business support process that accelerates the successful development of start-up and fledgling companies by providing entrepreneurs with an array of targeted resources and services. These services are usually developed or orchestrated by incubator management and offered both in the business incubator and through its network of contacts. A business incubator’s main goal is to produce successful firms that will leave the program financially viable and freestanding. These incubator graduates have the potential to create jobs, revitalize neighborhoods, commercialize new technologies, and strengthen local and national economies.

Critical to the definition of an incubator is the provision of management guidance, technical assistance and consulting tailored to young growing companies. Incubators usually also provide clients access to appropriate rental space and flexible leases, shared basic business services and equipment, technology support services and assistance in obtaining the financing necessary for company growth.


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Incubators vary in the way they deliver their services, in their organizational structure and in the types of clients they serve. Highly adaptable, incubators have differing goals, including diversifying rural economies, providing employment for and increasing wealth of depressed inner cities, and transferring technology from universities and major corporations. Incubator clients are at the forefront of developing new and innovative technologies – creating products and services that improve the quality of our lives in communities around the world.

13. Franchising

Franchising provides benefits for both seller and buyer. For franchisors, the primary benefit is the ability to use other people's money to expand the brand more rapidly than they could either on their own or through investors or lenders. The initial franchise fee and ongoing royalties they collect allow franchisors to build their brand without sacrificing control to outsiders or the pressure of repaying lenders. The fees and royalties are used to fund operations at corporate headquarters, train and support franchisees, market and advertise the brand, improve the quality of goods or services, and build the brand in the marketplace.

For franchisees, benefits include: a higher chance of success than in a sole proprietorship; shorter time to opening; initial training and ongoing support; assistance in finding an optimal site; the selling power of a known brand; lower costs through group purchasing; use of an established business model; national and regional advertising campaigns; customer lead generation through websites and centralized call centers; and a network of peers (fellow franchisees) to provide advice and moral support


Short Notes

through a company intranet, annual conferences, and franchisee associations; and, increasingly, assistance with securing funding.

14. Financial strategies to support growth

The pressure created by financial resources obstructs growth. To overcome pressure on existing resources, the entrepreneur could acquire new resources. However, the acquisition of new resources can be expensive, whether in terms of the equity sold or the interest payments from debts. Therefore the strategy is to manage the existing resources in a better way. These financial control strategies include:

7. Managing cash flow8. Managing inventory9. Managing fixed assets10. Managing costs and profits11. Taxes and other provisions12. Record keeping13.

15. E- entrepreneurship

An e-entrepreneur is defined as an individual willing to take the risk of investing time and money in an electronic business that has the potential to make a profit or incur a loss.

The creation of new ventures plays a decisive role for the social and economic development of every country. This is due to the fact that with each new venture created a market participant comes into existence which potentially stimulates the


Short Notes

competition and drives the economy further. The formation of new companies within the Net Economy (e-entrepreneurship) is therefore – in spite of the current market turbulence – a key topic for every national industry. Consequently, e-business must not be ignored by decision makers; its technological advantages are obvious and therefore will most certainly lead to new business processes and business concepts as well. Because of those circumstances there will be a solid basis for new venture creation within the net economy in the future too.

Examples:

E-bay and Google

16. Creative Process

Early model of Creativity propose by Wallas. He divided the creative process into the four distinct phases of Preparation, Incubation, Illumination and Verification.

1. Preparation involves gathering knowledge and understanding the problem.

2. In the Incubation phase, the subconscious takes over, mulling over the problem without deliberate concentration.

3. Illumination occurs as a sudden flash of light, when the solution has been discovered.

4. Verification consists of evaluation of the newly formed idea.


Short Notes

17. Opportunity analysis

Opportunity identification – The process by which an entrepreneur comes up with the opportunity for a new venture.

The ways to identify opportunity analysis is:

Opportunity assessment Creation and length of opportunity Real and perceived value of opportunity Risk and return of opportunity Opportunity versus personal skills and goals Competitive environment

Though most of the entrepreneurs do not have formal mechanisms for identifying business opportunities, some sources are often fruitful: consumers and business associates, members of the distribution system and technical people. Often consumer is the best source of ideas for a new venture.

Many other entrepreneurs have identified business opportunity through a discussion with a retailer, wholesalers or manufacturer representative.

Technically oriented individuals often conceptualize business opportunities when working on other projects. Whether the opportunity is identified by using input from consumer, business associates, channel members or technical people, each opportunity must be carefully screened and evaluated.


Short Notes

18. Updating a plan

You should be updating your business plan every month, every week and every day; whenever things change, you update your plan. And things always change. You should update your business plan when you're alone in the shower, when you're caught in traffic on the way to work, and when you're walking alone. Update your business plan when listening to customers and other managers.

While this might seem like chaos, it's actually the opposite; the constantly-updated business plan is what makes order out of chaos. It becomes a long-term planning process that sets up your strategy, objectives and the steps you need to take by constantly being aware of the results.


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EXREA CONTENTS

Entrepreneurial Skills and Competency Requirement

Every role has a skill and competency requirement. For a teacher or a performing artist, for example, it is the skill to communicate that plays a decisive role in their effectiveness besides, of course, their knowledge. For a craftsman or an artist, it is the creativity and skill in the chosen craft. Talking about entrepreneurship, you need to have a knack for spotting business opportunities and creativity and innovation in developing and delivering a product or service.It is hoped that after reading this chapter you will actually see the potential of a career in entrepreneurship, and experience a desire to start a venture of your own .At the same time there might be certain inhibitions in your mind whether such a task is feasible, practical and sustainable. For every task one needs certain competencies. In this Blog post, we would be talking about the entrepreneurial competencies. Whereas competencies reinforce a person’s perception of feasibility of a career option, there also has to be the will and urge, a ‘perception of the desirability.’ Is it not paradoxical that entrepreneurship has a key role to play in economic development, yet there are very few who ever think of it as a career option? And, it is not that they may be lacking in skills. What one often finds is the lack of motivation!Competencies equip you with the knowledge of how to do (‘know-how’) of entrepreneurial behavior and motivation provides answers to why to do (‘know-why’) of entrepreneurial behavior. You would also be learning about why people opt for entrepreneurship. The question of ‘why entrepreneurship’ is also linked to reward expectations, be these financial, social status or


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psychological satisfaction. In case of entrepreneurship, successful performance of the venture itself becomes a reward for the entrepreneur.As noted in above, 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. We believe that recognition of these competencies as abilities and skills makes entrepreneurship as a teachable and learnable behavior. In this blog post we would discuss about a set of entrepreneurial competencies developed by the Entrepreneurship Development Institute of India (EDI) Ahmadabad. These competencies were identified by a thorough research procedure based on critical analysis of the case studies of the successful entrepreneurs. We also annex a questionnaire that you can use to evaluate your score on each of these competencies. We would also suggest how you might improve on your scores.

ENTREPRENEURIAL COMPETENCIES IDENTIFIED BY THE EDI

Initiative- acting out of choice rather than compulsion, taking the lead rather than waiting for others to start. Sees and Acts on Opportunities- A mindset where one is trained to look for business opportunities from everyday experiences. Recall ‘oranges’ example.


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Persistence- A ‘never say die’ attitude, not giving up easily, striving Information seeking continuously until success is achieved. Knowing- Knowing who knows, consulting experts, reading relevant material and an overall openness to ideas and information. Concern for High Quality of Work- Attention to details and observance of established standards and norms. Commitment to Work Contract- Taking personal pains to complete a task as scheduled. Efficiency Orientation- Concern for conservation of time, money and effort. Systematic Planning- Breaking up the complex whole into parts, close examination of the parts and inferring about the whole; e.g. simultaneously attending to production, marketing and financial aspects (parts) of the overall business strategy (the whole). Problem solving-Observing the symptoms, diagnosing and curing. Self-confidence- Not being afraid of the risks associated with business and relying on one’s capabilities to successfully manage these. Assertiveness- Conveying emphatically one’s vision and convincing others of its value. Persuasion- Eliciting support of others in the venture. Use of Influence Strategies- Providing leadership. Monitoring- Ensuring the progress of the venture as planned. Concern for Employee Welfare- Believing in employee well being as the key to competitiveness and success and initiating programmes of employee welfare.


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The self-administered questionnaire in the annexure to this chapter would help you measure where you stand on these competencies. Given that these competencies matter in entrepreneurial success. EDI estimates that development of these competencies can substantially (as much as 33%) bring down incidence of business failures/industrial sickness.

DEVELOPING COMPETENCIES

‘Awareness,’ they say, is the first step towards ‘improvement’ and ‘success.’ Now that you are aware of the critical competencies for entrepreneurial success and also have a measure of your scores on these, it is appropriate that you also think in terms of how to improve your scores. Suppose, you find yourself lacking in the competency- ‘opportunity spotting,’ you may start practicing to think like an entrepreneur (See Box entitled ‘Thinking like an Entrepreneur’). With just a little change in perspective, the world changes for you. Similarly you may work on the other competencies as well.

The role of Prior Work Experience

Project work, summer training as well as prior work experience hone the entrepreneurial competencies. Whichever area you might decide upon to start a venture be it a school, restaurant, garments, courier service, interior decoration etc. along with the educational qualifications, if any, you need to acquire practical experience in that field. For it is while you get on the job training/experience that you familiarize yourself with all aspects of the venture. You can learn as to how to handle customers, suppliers, and government officials, financiers. You will also be able to acquaint yourself with the nitty-gritty’s of the production


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process, bottlenecks like power disruptions, delay or non-availability of raw materials and a host of other things. Day to day dealings of the various facets of business will equip you to handle your own venture deftly, with confidence and with minimal of costly mistakes.

Distinguish Between Traditional Managers and the Entrepreneur

Features Managers Entrepreneur

Primary MotivesWant promotion and traditional Corporate rewards. Power-motivated.

Wants freedom, goal oriented Self-reliant, and self-motivated

Time Orientation

Respond to quotas and Budgets, weekly, monthly, quarterly, annual planning Horizons, the next promotion or transfer.

End goals of 5-10 year growth Of business in view as guides. Takes action now to move theNext step along way.

ActionDelegate action. Supervising and Reporting take most of energy.

Gets hands dirty. May upset Employees by suddenly doing their work.

Skills

Professional training. Often business School trained. Abstract analytical tools, People-management and political skills.

Business acumen than managerial Or political skill. Often technically

RiskCareful

Like moderate risk. Invests heavily, but expects to succeed


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Market Research

Has market studies done to discover needs and guide product Conceptualization.

Creates needs. Creates products that often can’t be tested with market research-potentialCustomers don’t yet understand them.Talks to customers and forms own opinions

Failure and MistakesStrives to avoid mistakes and surprises. Postpones recognizing failure.

Deals with mistakes and failures as learning experiences

Family HistoryFamily members worked for large Organizations.

Entrepreneurial small-business, professional or agricultural Background.

Problem-solving style

Works out problems within the system.

Escapes problems in large and formal structures by leaving andStarting his own.


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Creating a Business Culture

Governments can also show that they value private enterprise by making it easier for individuals to learn business skills and by honoring entrepreneurs and small business owners. Policy makers can:

Offer financial incentives for the creation of business incubators. These usually provide new businesses with an inexpensive space in which to get started and services – such as a copier and a fax machine – which most new businesses couldn’t otherwise afford. Often business incubators are associated with colleges, and professors offer their expertise.

Enhance the status of entrepreneurs and businessmen in the society. Governments might create local or national award programs that honor entrepreneurs and call on business leaders to serve on relevant commissions or panels.

Entrepreneur skill and strategies

Under following circumstances entrepreneur choose to grow or not grow his venture

Market factors that affect growth Size and characteristics Competition Intellectual property rights predictability

Management factors that affect growth


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Ability to adapt and change business overtime even if the business is successful.

Various growth stages are:

Start up success Initial growth Rapid growth stable and maintenance

Problem of growth

Inability to respond to the business environment

Framework for growth

Scan the access the environment Plan the growth strategy Hire for growth Create a growth culture Build a strategy advisory board

Strategic Skills

An entrepreneur must have a vision for the future. He / She must be able to see the bigger picture and know where he/she is going with everything. Setting clear objectives and effective strategic are essential for running a business successfully.


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Managerial Skills

Planning Organizing Staffing Directing Controlling

Human Relations Skills

The entrepreneur needs to have the ability to manage people as well. He / She have to build good relationship with all workers and needs to know who to employ in his / her business.

HR issues Faulty Recruitment Wage Structure Industrial Relations – Strikes Low Productivity

Financial Skills

The success of a business is measure by the profit it makes. It is essential that the entrepreneur has knowledge about managing income and costs. The long-term future success of the business is also determined by the time of investment the business makes and how successful the entrepreneur manages those investments.

Financial issues


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(a) Capital structure(b) Capacity to bring capital(c) Poor resources management(d) Costing/pricing policy(e) Over-dependence on concessions & subsidies(f) Diversion of capital(g) Over-trading(h) Unfavorable gearing(i) Lack of tax planning

Marketing Skills

The challenge in marketing is that the entrepreneur must know how to promote and advertise his/ her business and products. It is essential for him / her to have good knowledge about the market and what things the customers want and prefer.

Marketing issues

(a) Over-dependence on a single customer(b) Marketing myopia(c) Sales &distribution set-up(d) Market feedback/ research(e) Marketing strategies


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Causes of success and failure of entrepreneur:

An entrepreneur may sometime become successful and sometime becomes failure. There are some causes of such success and failure. They are noted below:1. Selection of business: It is an important aspect. That means

an entrepreneur has to determine what type business he is going to start. Form various points of view the feasibility of the business should be tested.

2. Proper planning: Proper planning me s also important. For planning, planning premises like political, economic, social premised should be considered first. The steps of planning should be followed properly.

3. Initial capital: if the initial capitals are not an optimal level the organization would fall. So whether the enterprise is big or small the initial capital should be sufficient enough.

4. Determination o0f market demand: Through research the demand in the market should be identified. Both for long term and short term it should be considered.

5. Marketing of product: If the promotion policy, channel of destitution, transportation is not good the enterprise would fall.

6. Education and experience: One of the important tasks of the entrepreneurs is to select right person for the right post because the success of an enterprise depends on the right selection of employees.

7. Joint initiative: One may have much money and another may have more merit. Through joint initiative it can be balanced. But sometime for joint initiative misunderstanding arise, or sometimes corruption occur which may result in fall of enterprise.


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8. Employment: Recruitment and appointment should be properly done. Those who have specialized skill should be appointed to that specialized job. Inefficient, corrupted employees may be responsible for fall of business.

9. Location of business: Site selection is an important factor. While starting a new business, an entrepreneur should think about the location of the business. In this case, many factors should be considered such as availability of raw materials, proper communication system, availability of labor, marketing facilities and so on. 10. Qualities of management: The management must have a minimum quality to success otherwise it would fall.

These are the common causes for which one enterprise may become successful and another may fall.

Needs for growth

survival economies of scale owners mandate expansion of the market latest technology prestige and power government policy self – sufficiency Forms of growth Organic and inorganic


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Growth strategies

Organic/internal growth strategy

inorganic/external growth strategy

intensive mergerdiversification joint venturemodernization

While making a business plan keep the following points in mind:

the target audience business strategy competition be realistic involvement of people for the creating the business plan you should keep your business plan factual and brief

Basic start - up problems

selection of the industry product selection choice of factory site forms of organization problem of construction supply of raw materials financing the unit recruitment and training of staffing trial run


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marketing gestation period

Forms of organization

solo proprietor partnership company co- operative clearances and approvals

Strategy Planning

Strategic planning is the formulation of long range plan for the effective management of the environment threats and opportunities in the light of venture strength and weakness.

It involves: venture mission specifying achievable objectives developing strategies setting policy guidelines

Importance of Strategic Planning


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1. Build the distinct and sustainable advantages.2. Creates a dynamic strategic effort on company

performance3. Creates a unity and consistency of action in an

organization.

Steps required in preparing strategic plan

1. Examine the internal and external environment of a venture:

The first steps in strategic planning are examine the environments of the venture.

Identifying its threats and opportunities.2. Formulate venture long range and short range

strategies:The formulation of plans according to the examination of environment is necessary.

3. Implement the strategic plan:

After the formulation of strategy then it must be implemented in order to take it into action.

4. Evaluate the performance of the strategy:After implementing the strategy then the performance of the strategy is evaluated and necessary changes are made.

5. Take follow up action through continuous feedback:The final step is strategic planning is follow up action and necessary changes through continuous feedback.


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Entrepreneurship as economic development tools:

capital formation employment creation increasing productivity balanced development equitable distribution export promotion industrialization technology transfer opportunities for an entrepreneur(better life style, profit,

satisfaction and value)

The elements of entrepreneurial strategy are as follows:

1. power distribution2. people3. decision making4. idea generation

Techniques of idea generation are: brainstorming focus group problem inventory analysis research and development techniques

Major factor affect the Development of Entrepreneurship

Lack of a viable concept Lack of market knowledge


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Lack of technical skills Lack of seed capital Lack of business know how Complacency—lack of motivation Social stigma Time presence and distractions Legal constraints and regulations Monopoly and protectionism Inhibitions due to patents

Potential Hazards

People tend to think that office environments are not very hazardous. However, hazards do exist in the office and can result in health and safety problems for workers.

There are many potential occupational health and safety hazards in offices. However, with workplaces following appropriate health and safety procedures, many of these hazards are eliminated or avoided.

These are among the ailments most frequently reported by computer operators. These vision problems can result from:

improper lighting glare from the display screen poor positioning of the screen itself Copy material that is difficult to read.

Office equipment is not the only cause of hazards in the office. Other potential hazards include:


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Manual handling (lifting or moving objects) Office temperature and humidity Noise and/or vibration Air quality and ventilation Office decor Workplace conditions Electrical hazards


Long Questions

Long Questions

1. What is e- commerce? Explain the opportunities and challenges of e-commerce in the context of Nepalese business.

2. What are the various e-commerce strategies?3. What is brainstorming? Describe the process of structured

brainstorming for generation of new business ideas.4. What is business incubation? List and describe various

types of business incubations.5. What are the potential hazards that should be evaluated in

the risk assessment section of business plan? How would they differ for a retail chain and an insurance company?

6. Why is strategic planning importance to a new venture? Describe the important steps required in preparing a strategic plan.

7. Define entrepreneur as risk bearer and innovator with suitable examples.

8. Why modern organizations want to introduce entrepreneur culture in their system? Discuss.

9. Define entrepreneurial strategy. Discuss the importance elements of entrepreneurial strategy.

10. Discuss the entrepreneurial process through which a new venture is created by an entrepreneur.

11. Discuss briefly how the economic environment can affect the entrepreneurship growth.


Long Questions

12. Why business plan fails? What are the things to be considered to avoid the failure of a business plan? Discuss.

13. Define business plan. Explain the components of a business plan.

14. Discuss the importance of business incubators for new start –up.

15. Discuss some of the pressures an entrepreneur had to face during the growth stage of his/her venture. Discuss.

16. Discuss in detail the different phases of the creative process.

17. Define Strategic Alliances. Explain any three types of strategic alliances with example.

18. What Strategic planning skills are required by an entrepreneur? Explain.

19. Define entrepreneurship. Explain the roles played by entrepreneurship in economic development of a country.

20. How does an entrepreneur differ from a manager of a firm?

21. What is meant by intrapreneurs? Explain the characteristics of intrapreneurial leadership.

22. Explain the main factors that affect the development of entrepreneurship in the country?

23. Discuss the various methods of entrepreneurial entry into international business.

24. “Environmental forces influence the performance and outcomes of entrepreneurship.”Elaborate.


Long Questions

25. What are managerial skills and strategies an entrepreneur would need during the growth stages of a venture?

26. What is family business? Discuss the common problems facing family business. Explain briefly the ways of dealing with such problems.

27. The entrepreneurial decision process involves a a movement from an individual’s present life-style to forming a new venture.” Explain.

28. An entrepreneur and a manager have different strategic orientation while making business decision. Clarify and explain.

29. Government can help a lot for the development of entrepreneurship. Considering the statement explain how the Government in Nepal is helping entrepreneurs.

30. “An entrepreneur requires market, operations and financial information for preparation of a business plan.” Evaluate the statement.

31. What is hitting the growth wall? How can a business avoid it?


Documents

Revise Entrepreneurship