Entrepreneurship & New Venture Creation-(3.1)

BU-MBA-Semister-3

Entrepreneur

The term entrepreneur is derived from the French word ‘entreprendre’ which means ‘to undertake’.

It means the person who undertakes the risk of the new enterprise

In the 16th century the Frenchman who organized and led military expeditions were referred as Entrepreneurs

According to Richard Cotillion

An entrepreneur is a person who buys factor services at certain prices with a view to selling its product at uncertain price (un- expected price)

According to International Labor Organization (ILO)

Entrepreneurs as those people who have the ability to see and evaluate business opportunities, together with the necessary resources to take advantage of them and to initiate appropriate action to ensure success

According to Peter F.Drucker

An entrepreneur is one who always searches for change, responds to it and exploits it as an opportunity. Innovation is the specific tool of entrepreneurs, that means by which they exploit change as an opportunity for a different business or service

Nature/Characteristics of Entrepreneur Entrepreneur is a key

player in economic progress

Entrepreneurs introduce new things in the economy

They are considered as the business leader and not as simple owner of capital.

Importance of Entrepreneurs

The importance of any entrepreneur is as follows:-

Develop new markets Discover new sources of

materials Mobilize capital

resources Introduce new

technologies Create employment

Finally to become successful entrepreneur one should have the following characteristics:-

Need to achieve (goals should achieve) Independence (start business their own) Risk bearing (ready to face uncertainty) Locus of control (governing and shaping the goals with high control) Determination (working sincerely on goal achieving) Positive self-concept (thinking positive and analyze anything by SWOT

analysis) Ability to find and explore opportunities (finding/grab opportunities) Hope success (feeling success in each and every step they move no

failure) Flexibility (measuring pros and cons of decision and tend to change if

situation demands) Analytical ability of mind (unaffected by personal likes and dislikes) Sense of efficacy (oriented always to goals no deviation or diversion by

external influence)

Openness to feedback and learning from experience (ready to accept feedback) Confronting uncertainty (they are always optimistic, they take odd as the

opportunity) Interpersonal skills (they like dealing with people at all levels) Need to influence others (they influence the others by their goals and their

procedures/convince others) Stress takers (ready to work for long hours with full energy) Time orientation (they will stick on to the time, time is important) Innovators (they will introduce new products and services) Business communication skill (they must have good communication to lead

market) Telescopic ability (they will think every activity in microscope) Leadership (they will act as leaders to lead business) Business planning (they will plan present and future course of action) Decision making (they have quick decision making ability) Ability to mobilize resources (they will mobilize 6-M’s: Man, Money, Machinery,

Market and Method) Self-confidence (they must have self-confidence about their goal achievement)

FUNCTIONS

Primary Functions

Entrepreneur Function Functions Important for Developing

Countries

Other Functions

1. planning 1. Idea generation 1. Management of share resource

1. Diversification of production

2. Organizing 2. Determination of objectives

2. Dealing with public

2. Expansion of the enterprise

3. Decision making

3. Raising of funds 3. Acquiring and assembly of the factory

3. Maintaining cordial employer and employee relations

4. managing 4. Procurement of raw materials

4. engineering 4. Tackling labor problem

5. innovation 5. Procurement of machinery

5. New product 5. Coordination with outside agencies

6. Risk bearing

6. Market research 6. Parallel opportunities

7. Un-certainty bearing

7. Determination of form of enterprise

7. marketing

8. Recruitment of manpower

8. management

9. Implementation of the project

9. Customer relation

Role of Entrepreneur

1. Initiator A key man who imagine new opportunities, techniques, new products/services

2. innovator Brings overall change by innovation and creativity 3. coordinator Coordinate social and economic values of society 4. leader act as a leader with outstanding leadership qualities 5. Social worker He always works for the wellbeing of the society 6. Welfare agent He will encompass/cover all sectors and fields welfare 7. employer He will act as employer by in taking some unemployed 8. Development

agent Contributes service for development the country and building country economy

Quality of a Successful Entrepreneur

Inner drive to succeed( should have feeling to win in the heart)Strong belief in

themselvesSearch for new ideas

and innovationOpenness to changeCompetitive by natureRisk taker

Accepting of constructive criticism and rejection (ready to accepts mistakes)

Time managementVision and leadershipEthics and moralsDiscipline yourself

Highly motivated and energetic

Ethics and Social Responsibility of Entrepreneurs

The word ‘ethics’ is derived from Greek word ‘ethos’ which means standard or ideals that should prevail

Entrepreneurship ethics are the moral principles which should govern the entrepreneurship activities.

It also referred business ethics

Business ethics refers to the application of ethics to business

Business ethics is a specialized study of moral right or wrong. It concentrates on moral standards as they apply to business policies, institutions and behavior

Principles of Entrepreneurs Ethics

An Entrepreneur will think of themselves as a part of community not just ‘profit maker’

An Entrepreneur will treat the environment as a silent ‘stakeholder’, a party to which they are wholly accountable

An Entrepreneur will protect the privacy rights of the suppliers, customers and employees

An Entrepreneur will deliver what they promises, and promise what they can deliver

Misconceptions about Entrepreneurs

Entrepreneurs are born and Entrepreneurship is Hereditary

Entrepreneurs are profit Hungry and Exploit(hard work done by Labor)

Entrepreneurs are Dishonest(fraud & cheating)Entrepreneurs are favored by luckOnly Rich people can become entrepreneursEntrepreneurship is monopoly (a market in

which there are many buyers but only one seller )of certain communities

Entrepreneurship

The Entrepreneurship was defined as ,” Entrepreneurship is the attempt to create value through recognition of business opportunity, the management of risk taking appropriate to the opportunity and through the communicative and management skills to mobilize human, financial and material resources necessary to bring a project to successful”

According to A.H.Cole,” Entrepreneurship is the purposeful activity of an individual or a group of associated individuals, undertaken to initiate, maintain or maximize wealth, profit by production or distribution of economic goods and services

Entrepreneurship = Entrepreneur + Enterprise

(Process) (Person) (Object)

Nature/Characteristics of Entrepreneurship

Purposeful activity Decision making Accepting challenges Risk taking Building organization Dynamic process (bring new opportunities) Gap filling function (filling goods and services to society) Skillful management Innovation Mobilization of resources Economic Activity (creation and operation of an enterprise)

Difference

Entrepreneur Entrepreneurship 1. Refers to a person 1. Refers to a process 2. visualizer 2. vision 3. creator 3. creation 4. organizer 4. organization 5. innovator 5. innovation 6. technician 6. technology 7. initiator 7. Initiative 8. Decision maker 8. decision 9. planner 9. planning 10. leader 10. leadership 11. motivator 11. motivation 12. programmer 12. action 13. Risk taker 13. Risk taking 14. communicator 14. communication 15. Administrator 15. administration

Factors Affecting Entrepreneuship Internal Factors

Entrepreneur Oriented Factors

Production Related Factors

Finance Related Factors

Marketing Related Factors

1. Low Risk Bearing capacity

1. Location Disadvantages

1. Lack of access to non-institutional finance

1. Promotional plans

2. Low motivation

2. High cost of Inputs

2. Excessive dependence on financial institutions

2. Expansion plans

3. Lack of technical Knowledge

3. Poor capacity utilization

3. Inadequate working capital

3. New Product introductions

4. Lack of Training

4. Poor quality controls

4. non availability of credit at right time

4. Product cancellations

5.Lack of proper Estimation

5. Inadequate inventory

5. Delay in payment of customers

5. Sales force changes

6. Delay in loan sanction

6. Pricing policies

7. Market expansion to new customers

External Factors

Government polices & regulations Shortage of power, water,

transport and critical raw materials

Business trends Changes in population Economic fortunes of customer Changes in buying habits Competitive pressures and

conditions Economic cycles

Changing demand patterns Industry trends Unions Inflation International events Competitors Rigid institutional formalities State of technology

Entrepreneurial Decision Process

Entrepreneurship is the process of creating something new with value by devoting the necessary time and effort and assuming the risk

The new venture is formed through a very personal human process

There are 3 steps in the entrepreneurial decision process

The decision to leave a present career or lifestyle The decision to form new venture The decision that both external and internal factors

make new venture creation possible

Types of Start Up Firms by Entrepreneurs

1. Salary Substitute Firms

These are small firms that afford their owner or owners a level of income similar to what they would earn in a conventional job (fixed income) Example:- Dry cleaners, saloons

2. Life style firms

Lifestyle firms provide their owner or owners the opportunity to pursue a particular lifestyle and earn a living while doing Example:- Tour Guides

3. Entrepreneurial Firms

These firms create value towards the customers Example:- E-Bay, Google

Scope of EntrepreneurshipEntrepreneurship Works in different ways in different economic systems, such as……

Capitalism

Socialism

Mixed Economy

Scope of Entrepreneurship

Capitalism(Private) Socialism(Public) Mixed Economy(Private+ Public)

A capitalist economy represents free enterprise, which means freedom to save and invest

Free competition very less interference

from Government Price of the

product/Service may be determined on the basis of the force of demand and supply

A Socialism economy represents free service towards the society development

No competition Good Interference

from Government Price of the

Product/Service may be determined on the basis of service providers /sponsors

A Mixed economy represent both services for free of cost and sometimes pay and use

Good Competition They have to satisfy the

customer and Government This is Stability in Nature Price of the

Product/Service may be determined by the Government Sometimes

Role of Entrepreneurship in Economic Development

Increase in National Income Balanced Regional Development Bringing Change in Structure of Business and

Society New Products, New Services and New Business Dispersal of Economic Power Better Standards of Living Creating Innovation Production Evolution Process

Product/Service Evolution Process

Before starting a product or service an Entrepreneur should follow the evolution steps in order to produce a product or provide a service1.Exploration 2.Screening3.Business Analysis

(risk/return/features/recommendations/creativity)4.Development5.Testing6.Commercialization (full scale production )

Problems of Entrepreneurship

Wrong surveysLack of identification of projectsLack of infrastructureLack of quality controlLack of market promotionLack of technologyLack of financeLack of consulting services

Factors Favoring Entrepreneurship as a Career Options High need for Independence To satisfy the dream of having high financial rewards Opportunity to deal with all aspects of a business Achievement orientation Implantation of Ideas Insecurity of Job Family Business Risk Taking Government Economic Policy (Assistance from

Government) Vision to Leave a Long Lasting Mark (Zeal to Innovate

new product/Service)

Indian Entrepreneurs

Dhirubhai Ambani JRD Tata Jamsetji Tata Adi Godrej Anil Ambani Dr. K. Anji Reddy Azim Premji Bhai Mohan Singh B.M. Munjal Ekta Kapoor Ghanshyam Das Birla Karsanbhai Patel Kiran Mazumdar Shaw K.P. Singh Kumar Mangalam Birla Lalit Suri M.S. Oberoi Mukesh Ambani Nandan Nilekani Kasturbhai Lalbhai S.L. Kirloskar

Naresh Goyal Dr. Pratap Reddy Rahul Bajaj Ramalinga Raju Ratan Tata Raunaq Singh Shiv Nadar Subhash Chandra Subroto Roy Sunil Mittal Tulsi Tanti Verghese Kurien Vijay Mallya Mallika Srinivasan Naina Lal Kidwai Shahnaz Hussain Sulajja Firodia Motwani Shobhana Bhartia Aditya Vikram Birla Gulshan Kumar Vaman Srinivas Kudva

Creating Indian Entrepreneurs

A recent Mckinsey & Company-Nasscom report estimates that India needs at least 8,000 new businesses to achieve its target of building a US$87 billion IT sector by 2008.

Similarly, in the next 10 years, 110-130 million Indian citizens will be searching for jobs, including 80-100 million looking for their first jobs.

This does not include disguised unemployment of over 50% among the 230 million employed in rural India.

Since traditional large employers- including the government and the old economy player-may find it difficult to sustain this level of employment in future, it is entrepreneurs who will create these new jobs and opportunities.

Today’s knowledge based economy is fertile ground for entrepreneurs, in India.

It is rightly believed that India has an extraordinary talent pool with virtually limitless potential to become entrepreneurs.

Therefore, it is important to get committed to creating the right environment to develop successful entrepreneurs.

To achieve this, India must focus on Four areas as follows……………….

The Four Areas

1. Create the Right Environment for Success

2. Ensure that Entrepreneurs have access to the Right Skill

3. Ensure that Entrepreneurs have access to ‘Smart Capital’

4. Enable Networking and Exchange

The Future of Entrepreneurship

⁇ Both the Central Government and various State Governments are taking increased interest in promoting the growth of entrepreneurship.

⁇ Individuals are being encouraged to form new businesses and are being provided such government support as tax incentives, buildings, roads, and a communication system to facilitate this creation process.

⁇ The encouragement by the central and state governments should continue in future as more lawmakers are realizing that new enterprises create jobs and increase the economic output of the region.

⁇ Every state government should develop its own innovative industrial strategies for fostering entrepreneurial activity and timely development of the technology of the area.

⁇ The states should have their own state-sponsored venture funds, where a percentage of the funds has to invested in the ventures in the states.

⁇Society’s support of entrepreneurship should also continue.

⁇This support is critical in providing both motivation and public support.

⁇A major factor in the development of this societal approval is the media.

⁇ The media should play a powerful and constructive role by reporting on the general entrepreneurial spirit in the country highlighting specific success cases of this spirit in operation.