Entrepreneurship

Defining Entrepreneurship

The term “entrepreneurship” comes

from the French verb “entreprendre” and
the German word “unternehmen”, both
means to “undertake”.
Despite its current prominence,
entrepreneurship still remains a vague
concept.
Understanding entrepreneurship
through various sciences

 Economics: - One who brings resources,

labor, material and other assets into
combinations that make their value greater
then before and also one who introduces
changes, innovation and new order.
 Psychology: - A person who is typically
driven by some forces, which create a desire
to obtain or attain something.
Understanding entrepreneurship
through various sciences

 Sociology: - A person whose actions would

determine his social status and who
contributes to the development of society.

 Management: - A person who has a vision

and generates an action plan to achieve it.
Entrepreneurship definition

 Joseph Schumpeter (1934) he added the

concept of innovation to the theory of
entrepreneurship. According to him
entrepreneur is the bearer of “mechanism for
change”, and anybody could be an
entrepreneur if he/she “carries out new
combinations”.
Entrepreneurship definition

Schumpeter listed five different kinds of innovations

or ways to act as entrepreneur:-
 The introduction of new good or quality of good.
 The introduction of new method of production.
 The opening of a new market.
 The utilization of some new sources of supply of
raw materials or intermediate goods.
 The carrying out of some new organizational form
of the industry
Entrepreneurship definition

 Stevenson and Sahlman (1987):

entrepreneurship is “the relentless pursuit of
opportunity without regard to resources
currently controlled. Moreover, they believe
that there is an underlying process in
entrepreneurship that starts with the
identification of opportunity and ends with
harvesting the fruits of one’s labours”
Entrepreneurship definition

 Peter Drucker he defines an entrepreneur as

one who always searches for change, responds
to it, and exploits it as an opportunity.

 Bygrave & Hofer (1991): defined the

entrepreneurial process as “all the functions,
activities, and actions associated with the
perceiving of opportunities and the creation of
organizations to pursue them”.
Entrepreneurship definition

 An individual, who identifies,

recognizes upcoming opportunity
and is able to organize resources
to establish an enterprise
capitalizing on that opportunity is
an entrepreneur.
Entrepreneurship – Highlights

 Diversity - Entrepreneurship principle is

applicable in diverse settings.
 Great potential - Mostly entrepreneurial
ventures are started as small enterprises but
grow rapidly
 Creative thinking - Entrepreneurs identify
opportunities creatively.
 Difference in entrepreneur & manager
Entrepreneur
 involved with the start-up
process
 assumes financial, material
and psychological risks
 driven by perception of
opportunity
 initiates change
 is his own boss
 gets uncertain rewards
Manager
 running the business over a
long period of time
 does not have to bear risks
 Driven by resources he
currently possesses
 follows rules & procedures
 is a hired employee
 gets fixed rewards and
benefits
Entrepreneurship characteristics

 Entrepreneurship is viewed as a function

involving identification and use of
opportunities which exist in the market.

 Entrepreneurs bear risks in converting the

ideas into action and pursuing opportunities.
Characteristics continued

 Entrepreneurship involves creative and

innovative action

 Entrepreneurs undertake managerial

activities as part of their work.

 An entrepreneur constantly strives for

excellence in his/her field of work.
Qualities of successful entrepreneurs

 Initiative
In the world of business,
opportunities come and go. He should be
able to initiate action and take advantage of
opportunity. Once you miss the opportunity it
will not come again. Therefore, initiative on
the part of entrepreneur is a must.
Qualities of successful entrepreneurs

 Willingness to assume risk

In any
business there is an element of risk. in other
words it is not necessary that every business
shall earn profit. This deters individuals to
take up business. However, an entrepreneur
always volunteers to take risks to run a
business and be successful.
Qualities of successful entrepreneurs

 Ability to learn from experience

An entrepreneur
may commit mistakes. However, once an
error is committed, it should not be repeated
as that will lead to heavy losses. So, one
should learn from his mistakes.
Qualities of successful entrepreneurs

 Motivation
Motivation is key to success. Once
you get motivated to do something you will
not rest unless you complete it. For example,
sometimes you become so much interested
in reading a story or a novel that you do not
sleep unless you complete it.
Qualities of successful entrepreneurs

 Self-confidence
For achieving success in life,
one should have confidence in himself or
herself. A person who lacks confidence can
neither do any work himself nor can inspire
others to work. Self confidence is reflected in
courage, enthusiasm and the ability to lead.
Qualities of successful entrepreneurs

 Orientation towards hard work

There is no
substitute for hard work in life. While running
a business, everyday, one problem or the
other may arise. The businessman has to be
vigilant about it and solve it as early as
possible. This requires hard work on the part
of entrepreneur. He cannot afford to say that
now office time is over and I will not work.
Qualities of successful entrepreneurs

 Decision making ability

In running an enterprise, the
entrepreneur has to take a number of decisions. He
should therefore be capable of taking suitable and
timely decision. In other words he must take right
decision at the right time. In the present world things
move very fast. If an entrepreneur does not have the
ability to take timely decision, he might miss
opportunity and incur losses.
Functions of an entrepreneur

 Identifying entrepreneurial opportunity –

There are
many opportunities in the world of business. An
entrepreneur senses the opportunities faster
than others do. And therefore, keeps his eyes
and ears open and apply imagination, creativity
and innovativeness in attaining business
success.
Functions of an entrepreneur

 Turning ideas into action –

An entrepreneur
should be capable of turning his ideas into
reality. He collects information regarding the
ideas, products, practices to suit the demand
in the market. Further steps are taken to
achieve the goals in the light of the
information collected.
Functions of an entrepreneur

 Feasibility study –
The entrepreneur conducts
studies to assess the market feasibility of the
proposed product or services. He anticipates
problems and assesses quantity, quality,
cost and sources of inputs required to run the
enterprise. Such a blue print of all the
activities is termed as a ‘business plan’ or a
‘project report’.
Functions of an entrepreneur

 Resourcing –
The entrepreneur needs
various resources in terms of money,
machine, material, and men to running the
enterprise successfully. An essential function
of an entrepreneur is to ensure the
availability of all these resources.
Functions of an entrepreneur

 Setting up of the Enterprise –

For setting
up an enterprise the entrepreneur may need
to fulfill some legal formalities. He also tries
to find out a suitable location, design the
premises, install machinery and do many
other things.
Functions of an entrepreneur

 Managing the enterprise –

One of the important
function of an entrepreneur is to run the
enterprise. He has to manage men, material,
finance and organize production of goods
and services. He has to market each product
and service, after ensuring appropriate
returns (profits) of the investment.
Functions of an entrepreneur

 Growth and Development –

Once the
enterprise achieves its desired results, the
entrepreneur has to explore another higher
goal for its proper growth and development.
The entrepreneur is not satisfied only with
achieving a set goal but constantly strives for
achieving excellence.
Types of entrepreneurs

 Necessity based / Opportunity based

 Profit oriented / Social entrepreneurs
 Serial entrepreneurs
 Intrapreneurs
 First generation / family business
Intrapreneurship

 Pinchot (1985) defines an intrapreneur as a

"person who focuses on innovation and
creativity and who transforms a dream or an
idea into a profitable venture, by operating
within the organizational environment."
Intrapreneurship

 It is the practice of using entrepreneurial

skills without taking on the risks or
accountability associated with
entrepreneurial activities. It is practiced by
employees within an established
organization using a systemized business
model.
Intrapreneurship

 Employees, perhaps engaged in a special

project within a larger firm are supposed to
behave as entrepreneurs, even though they
have the resources and capabilities of the
larger firm to draw upon.
Intrapreneurship
Intrapreneurship types

 Employee Intrapreneur
 Self-employed Intrapreneur – franchising,
multi level marketing
How Intrapreneurship could be
promoted in organizations:-

 Support from ownership and top management

 Recognition that Intrapreneurship is compatible
to the existing culture
 Communication channels that are open
 Allocation of resources to the new innovations
 Rewards for Intrapreneurship
 Follow through by the intrapreneurs in order to
see the finished product.
Rules for the intrapreneur to get his or
her idea accepted

 Do any job needed to make your project work

regardless of your job description
 Share credit wisely
 Remember, it is easier to ask for forgiveness
than permission
 Come to work each day willing to be fired
 Ask for advice before asking for resources
Rules for the intrapreneur to get
his or her idea accepted

 Follow your intuition about people; build a team

of the best
 Build a quiet coalition for your idea: early
publicity triggers the corporate immune system
 Never bet on a race unless you are running in it
 Be true to your goals, but realistic about ways to
achieve them
 Honor your sponsors.
Successful entrepreneurs

 Arun Jain, Chairman & CEO of Polaris

Software Lab Limited, emphasizes that it is
quality consciousness which has made him
one of the most highly successful first
generation entrepreneurs.
Successful entrepreneurs

 Dhirubhai Ambani’s company Reliance is

one of the few Indian enterprises truly on the
world stage – employing thousands of people
and with a turnover of many crores of
rupees.
 Mr. D.H. Ambani is a perfect example of an
ENTREPRENEUR.
Successful entrepreneurs

 Madhuri Mathur, made the life of ladies in

kitchen easier by bringing out the idea of a
kitchen machine that would blend, chop,
mince and grind that culminated into sumeet
mixer.
Successful entrepreneurs

 Shahnaz Husain introduced herbal cosmetics

to the world. Her creams and lotions have
found their way into salons in different parts
of the globe. She has 650 salons at 104
countries.
Successful entrepreneurs

 As the inventor of Hotmail, Sabeer Bhatia

strengthened India's IT revolution. Hotmail went
from strength to strength as the Web email
address of choice for an estimated 200 million
users worldwide.
Shri Jhunjhunwala is an Entrepreneur

 Shri Jhunjhunwala of Varanasi is a

businessman engaged in the production of
“Jhula Vanaspati”. He started his business
career from a humble beginning. He had a
small retail shop of oil and ghee. His earning
was limited and not sufficient to meet the
needs of his family. He started looking for an
opportunity to earn more.
Government policies/programs related
to entrepreneurship promotion

Government specially focuses on development of :-

1. Rural areas
2. Women
3. Economically Weaker sections

Of the society in form of various policies and

programs to promote entrepreneurship.
Government policies/programs related
to entrepreneurship promotion

Indian Government has been very actively promoting

the cause of entrepreneurship in form of various
policy initiatives like:-
 IRDP – Integrated Rural Development Program
 PMEGP – Prime Minister Employment Generation P.
 NREGA – National Rural Employment Guarantee Act
 RGUMY - Rajiv Gandhi Udyami Mitra Yojna etc.
Government policies/programs related
to entrepreneurship promotion

 The
Ministry of Micro, Small and Medium Enterpri
ses
is the nodal Ministry for formulation of
policies, programmes and schemes, their
implementation and related co-ordination, for
the promotion and development of small
scale industries in India.
Government policies/programs related
to entrepreneurship promotion

 Micro, Small and Medium Enterprises Dev

elopment Organization (MSME-DO)
:- the Office of the Development
Commissioner (Micro, Small and Medium
Enterprises) . It is the apex body for assisting
the Government in formulating, coordinating,
implementing and monitoring policies and
programmes for micro, small and medium
enterprises (MSMEs) in the country.
Government policies/programs related
to entrepreneurship promotion

National Small Industries Corporation Ltd (NSIC) :- it

helps in promoting, aiding and fostering the growth of
micro, small and medium enterprises in the country,
with a focus on commercial aspect of their operations.
It deals in the areas of raw material procurement,
product marketing, credit rating, acquisition of
technologies, adoption of improved management
practices, etc.
Government policies/programs related
to entrepreneurship promotion

Khadi and Village Industries Commission (K

VIC)
:- established under the Khadi and Village
Industries Commission Act, 1956, as a
statutory organization engaged in promotion
and development of khadi and village
industries for providing employment
opportunities in the rural areas.
Government policies/programs related
to entrepreneurship promotion

Coir Board :- is a statutory body, for the promotion and

development of coir industry in India as well as for
uplifting the living conditions of the workers engaged
in this industry.
National Commission on Enterprises in the Unorgani
sed Sector (NCEUS)
has been set up for addressing the wide range of
issues affecting the productive potential of the
unorganized micro and small productive units.
Government policies/programs related
to entrepreneurship promotion

For the development of training modules, undertaking

research and providing consultancy services for
entrepreneurship development in the small scale
sector:-
1. National Institute for Micro, small and Medium Enterpri
ses (NIMSME)
at Hyderabad
2. National Institute of Entrepreneurship and Small Busin
ess Development (NIESBUD)
at Noida
An entrepreneur has to obtain several clearances or
permissions depending upon the nature of
his unit and products manufactured.
 Regulatory or Taxation Clearances
 Environment & Pollution Related Clearances
 Product Specific Clearances
Regulatory or Taxation Clearances

 Registration under Sales Tax Act

 Commercial Tax officer of area concerned
 Registration under Central Excise Act
 Collector of Central Excise or his nominee for
area
 Payment of Income Tax.- ITO of the area
concerned
 Registration of Partnership deed - Inspector
General of area concerned
Regulatory or Taxation Clearances

 Calibration of weights & measures - Weights

and Measures Inspector of State
 Power Connection - Designated Officer of
State Electricity Board
 Employee strength exceeding 10 with power
connection or 20 without power - Chief
Inspector of Factories
Environment & Pollution Related
Clearances

 The method of granting consent under water

and air pollution to SSI units has been
simplified. Except for 17 critically polluting
sectors, in all other cases SSI units will
merely have to file an application and obtain
an acknowledgement which will serve the
purpose of consent.
Product Specific Clearances

 Establishing a Printing Press - District

Magistrate
 License for Cold Storage Construction -
Designated Official in State
 Pesticides - Central/State Agricultural
Department - Ministry of Agriculture
 Drugs and Pharmaceuticals - Drug license
from State Drug Controller
 Product Specific Clearances

 Safety Matches/ Fireworks - License under

Explosives Act from Directorate of Explosives,
Nagpur
 Household Electrical Appliances - License from
Bureau of Indian Standards
 Wood Working Industry within 8 km from forest -
District Forest Officer
 Milk Processing & Milk products manufacturing
units - Approval under Milk and Milk Products
Order from State Agricultural/ Food Processing
Industries Department above a designated
capacity.
Filing of Entrepreneurs Memorandum
with District Industry Centre of it’s area

 Any person who intends to establish a micro

or small enterprise, at his discretion shall file
the Memorandum of  Micro, Small Enterprise
with District Industries Centre of its area.
Business Plan Basics

 Students at any level of education can use

the concept of preparing a business plan as
a method of exploring all kinds of ideas for
starting a business. It is merely a series of
questions that lead you to think about the
requirements and the possibilities of any kind
of business. Until you start to ask these
questions, you aren't able to visualize the
details necessary to be successful in a
business.
Preparing a Business Plan

 The design of the business plan depends on

the kind of venture envisaged and what plan
should accomplish
 Clarity
 Objectivity
 Interest
 Simple
 Consistent style
 Realistic
Elements of a business plan

1. Executive summary
2. Product or service
3. Management team
4. Market and competition
5. Marketing and sales
6. Business system and organization
7. Operations and implementation schedule
8. Opportunities and risk
9. Financial planning
Elements of B-plan – Executive
summary

• Value to the customer

• Innovativeness
• Uniqueness
• Management expertise
• Financial profitability
• Readiness to launch the project
• Risk analysis
Elements of B-plan – product/service

 The product / service concept

 What customer need is proposed to be
fulfilled
 How your product is different from others
 Ability to sustain the innovation
 Stage of development
 Quality specifications
Elements of B-plan – management
team

 Capability of the team to run a

promising business
• The core entrepreneurs
• Professional experience
• Genesis of the project idea
• The management team
Elements of B-plan – management
team

 The company description

• Legal ownership
• Mission and objectives
• Geographical information
Elements of B-plan – target market

• Targeted market segment

• Demographic profile
• Buying sensitivity
• Purchasing patterns
• Potential revenues
• Special strategies required
Elements of B-plan – Market
analysis
• Size and growth trends
• Maturity of the industry
• Vulnerability to economic factors
• Seasonality factors
• Technological factors
• Regulatory issues
• Supply and distribution requirements
• Other Influencing factors
Elements of B-plan – Competition

• Competing services
• Competitive position
• Strengths and weaknesses of
competitors
• Barriers to entry
• Possible future competition
• Positioning vis-a-vis the competition
Common pitfalls – Market
 Everybody is waiting for my product
 Lack of clarity on dimensions of
dissatisfaction
 Insensitive to potential competition
 No clear appreciation of the entry barriers
 What stage of product life cycle you are
entering
 Planning and action based on analysis of
industry competitiveness
How to get market knowledge

 Gut feel is not good enough

 Volume determination – quantitative analysis
 Behavior determination – qualitative analysis
 Data collection – primary and secondary
sources
 Questionnaire design
 Careful extrapolation
Elements of B-plan – operations

• Location
• Sources and complexity of technology
• Plant, equipment, facilities,
infrastructure
• Recruitment, training and retaining
personnel
• Input materials – sources, cost
• Production, capacity utilization
Common pitfalls - Technology
 In-house
Challenges of prototype and commercializing
Technology expertise with only one person
 Collaboration
Proven technology, Untested technology
Exclusivity, technical feasibility
 Absorption
Acquisition, Assimilation, Fine tuning
Elements of B-plan – Implementation
schedule

 Prepare a realistic 3 to 5 yr. plan to inspire

credibility
• Identify major milestones
• Plan for aggregating resources
• Ramp up plan
• Human resource planning
• Investment scheduling
• Strategic partnerships
Common pitfalls - Roll out plan

 Location – poor home work on availability,

suitability, cost and further development cost
 Availability of quality inputs – workforce,
power, water, transport, parking space
 Equipment – installation and after sales
support
 Personnel – attracting, training and retaining
Elements of B-plan – Opportunities
& risks

 Identify major trends in external environment

 Identify major competitive forces operating
on the firm
 Possible impact of the forces on the firm’s
competitiveness in future
 Which are the most likely scenarios and what
are their implications to us
Elements of B-plan – Financial plan

 Is the business concept profitable an worth

investing in
 Plan for investment, source of funds, cash
flow, liquidity and steps for improving
profitability
Elements of B-plan – Financial plan

 Prepare
• Project cost
• Projected income
• Break-even analysis
• Projected cash flow statements
• Pro forma balance sheets
Common pitfalls - Finance

 Optimistic assessment of project cost and

funding
 Lack of budgeting of trial production
 Not taking fully into account the cost
implications
 Improper assessment of working capital
 The gap between sanction and disbursement
 Lack of efforts in confidence building with
investors
Business Plan Basics

 Basic components of a business plan can be

organized as follows:
 providing a description of the business,
 choosing the best marketing strategy,
 identifying the management plan, and
 analyzing the finances needed to start the
business and make it successful.
Business Plan Basic- questions

 How can you describe the business...in only

one paragraph please?
 What is your product, or service?
 Who will buy it?
 Where should you locate the business?
 How can you attract customers?
 What is your competition?
 How much should you charge for the products
or service?
Business Plan Basic- questions

 What advice do you need and who can

provide it?
 How will you organize the managers and/or
workers of the business?
 How will you split the profits? Who is
responsible for the losses?
 What should you consider to be able to
produce the product and get it to the
customer?
Business Plan Basic- questions

 How much money is needed to get the

business started?
 How many customers will you have per
month and how much will they buy per
month?
 How much does it cost to make the product
or provide the service?
 What are your operating costs? (Include your
own salary)
 Business Plan Basic- questions
 How much money will your business earn each
month by selling your product or service?
 How much investment will you need to keep the
business going until you make a profit?
 What is your potential profit per year for Year I,
Year II, and Year III?
 How much money do you need to borrow to start
this business?
 How will you make the business grow in the future?
QUESTIONS FOR CREATIVE
THINKING

 What kind of business would you start if your

family would lend you $5000 to get it started?
 What kind of business would you start if you
and two classmates had access to a loan for
$100,000?
 What kind of business could you start if you
want to do business with another country?
 What type of business could you start while
still going to school?
QUESTIONS FOR CREATIVE
THINKING

 What type of business could you start using

the skills you have now?
 What type of business could you run while
also working in a part time job (to provide the
security of a salary while the business
grows)?
 How could you start a business and then
later make it into your own franchising
business for purposes of expansion?
Questions- Financing the venture

 How much will be needed for development of the

product or service?
 How much will be needed for setting up
operations?
 How much will be needed for working capital?
 Where will the money come from? What if more
is needed?