Embed Size (px)
Citation preview
1
ENTREPRENEURSHIP & SMALL
BUSINESS DEVELOPMENT
(MS 207)UNIT I
2
SYLLABUSUnit IEntrepreneurship: Concept and Definitions; Entrepreneurship and Economic Development;Classification and Types of Entrepreneurs; Entrepreneurial Competencies; Factor AffectingEntrepreneurial Growth – Economic, Non-Economic Factors; EDP Programmes; EntrepreneurialTraining; Traits/ Qualities of an Entrepreneurs; Entrepreneur; Manager Vs. Entrepreneur.(14 Hours)Unit IIOpportunity / Identification and Product Selection: Entrepreneurial Opportunity Search andIdentification; Criteria to Select a Product; Conducting Feasibility Studies; Project Finalization; Sourcesof Information. (14 Hours)Unit IIISmall Enterprises and Enterprise Launching Formalities : Definition of Small Scale; Rationale;Objective; Scope; Role of SME in Economic Development of India; SME; Registration; NOC fromPollution Board; Machinery and Equipment Selection; Project Report Preparation; Specimen of ProjectReport; Project Planning and Scheduling using Networking Techniques of PERT / CPM; Methods ofProject Appraisal.(14 Hours)Unit IVRole of Support Institutions and Management of Small Business : Director of Industries; DIC;SIDO; SIDBI; Small Industries Development Corporation (SIDC); SISI; NSIC; NISBUED; StateFinancial Corporation SFC; Marketing Management; Production Management; Finance Management;Human Resource Management; Export Marketing; Case Studies-At least 4 (four) in whole course.(14 Hours)
4
ENTREPRENEURSHIP: CONCEPT AND DEFINITIONS Entrepreneurship is the act of being an entrepreneur. French word ‘Entrependre’ and German word
‘uternehmen’ both referring to individuals who undertakes an ‘endeavor’.
Hence, anyone who exhibits the characteristics of self-development, creativity, self-decision making and risk taking.
According to oxford dictionary Entrepreneur is ‘one who organizes and manages enterprise involving high risk’. But researches indicates that entrepreneurs need not necessarily be high risk takers, however, they reduce risk and increase likelihood of success.
5
ENTREPRENEURSHIP: CONCEPT AND DEFINITIONS An Economist defines an entrepreneur as one who
brings resources, labour, material and other assets in to combinations that make their value greater than before and also one who introduces changes, innovations and a new order.
A Psychologist defines an entrepreneur as a person who is typically driven by a psychological force, which create a desire to obtain or attain something.
As per sociologist a person whose actions would determine social status & contribute to societal dev.
As per Management expert a person who has a vision and generates action plan to achieve it.
6
ENTREPRENEURSHIP AND ECONOMIC DEVELOPMENT Entrepreneurs occupy a central position in a market
economy. It’s the entrepreneurs who serve as the spark plug in the economy’s engine, activating and stimulating all economic activity.
The economic success of the nations worldwide is the result of encouraging and rewarding the entrepreneurial instinct.
Entrepreneurs seek disequilibrium- a gap between the wants and needs of customers and the products and services that are currently available.
The entrepreneur then brings together the factors of production necessary to produce, offer and sell desired products and services.
They invest and risk their money- and other people’s money- to produce a product or service that can be sold at a profit.
7
ENTREPRENEURSHIP AND ECONOMIC DEVELOPMENT An increase in the number of entrepreneurs leads to an
increase in economic growth. This effect is a result of a concrete expression of their skills, and more precisely, their propensity to innovate. This can be termed as “the carrying out of new combinations” by distinguishing five cases:
1. The introduction of a new product- that is one with which consumers are not yet familiar- or of a new quality of a product.
2. The introduction of a new method of production, that is one not yet tested by experience in the branch of manufacture concerned, which need by no means be founded upon a discovery scientifically new, and can also exist in a new way of handling a commodity commercially.
8
ENTREPRENEURSHIP AND ECONOMIC DEVELOPMENT 3. The opening of a new market, that is a market into
which the particular branch of manufacture of the country in question has not previously entered, whether or not this market has existed before.
4. The conquest of a new source of supply of raw materials or half manufactured goods, again irrespective of whether this source already exists or whether it has first to be created.
5. The carrying out of the new organisation of any industry, like the creation of a monopoly position or the breaking up of a monopoly position.
9
ENTREPRENEURSHIP AND ECONOMIC DEVELOPMENT Through his innovative activity, entrepreneur seeks to
create new profit opportunities. These opportunities can result from productivity
increases, in which case, their relationship to economic growth appears quite clearly.
Moreover, the disequilibrium created by the entrepreneur can be encouraging for additional innovations and profit opportunities.
Therefore, more entrepreneurs means more growth, which in turn leads to more entrepreneurs.
10
ENTREPRENEURSHIP AND ECONOMIC DEVELOPMENTIn a nut shell: Entrepreneur sets up business for transformation of
resources into products and services and meet the needs of the people.
Business activity involves production- manufacturing, retailing, mining and services- create employment opportunities.
Business creates wealth. Wealth results in a country’s economic growth.
Entrepreneurship, especially among women in developing countries seem to offer an improvement in the standard of living as well as a path out of poverty.
11
CLASSIFICATION AND TYPES OF ENTREPRENEURSEntrepreneurs are broadly classified according to the types of business, use of profession skills, motivation, growth and stage of development.
1. According to timing of venture creations:
a) Early Starters Start venture with little or no full-time work experience Often from family business Suhas Gopinath started his company Gopals Inc. at the age
of 14, in USA as Indian laws do not permit a minor to run a company.
b. Experienced Spent a few yrs in family business or a large company. Usually, the venture is related to the same business as
previously engaged in. Narayan Murthy together with his like minded professionals
started Infosys at the age of 35 years
12
CLASSIFICATION AND TYPES OF ENTREPRENEURSc. Mature • Very senior professionals, some at the level of CEO• Very high confidence and desire to do things in a way that
may not be totally acceptable to their earstwhile employers.• Ashok Soota and Subroto Bagchi quit Wipro to start
Mindtree.• BVR Subbu, ex-CEO of Hyundai India, recently started a
venture that brought the plant of Daewoo in India.
2. According to type of business:
a) Business Entrepreneurs :• Conceive an idea for a new product/service and then create
business to materialise idea in reality.• Tap both production and material resources to develop new
business opportunity.• Often small business entrepreneurs with small business units
eg. Printing press, advertising agency, textile processing house, readymade garments or confectionary.
13
CLASSIFICATION AND TYPES OF ENTREPRENEURSb. Trading Entrepreneur • Trading Activities not manufacturing work• Identifies potential markets, stimulates demand and creates
interest and demand among buyers to go in for his product.• Can be engaged in both domestic &overseas trade.• Whole sale trade, retail trade, Mall trading, exporters,
importers, stock trading, real estate.
c. Industrial Entrepreneur• Ability to convert economic resources and technology into
profitable venture• Essentially a manufacturer, identifies potential needs and
starts industrial units for new products.
14
CLASSIFICATION AND TYPES OF ENTREPRENEURSd. Corporate Entrepreneur• Individual who plans, develops & manages a corporate body.• Corporate body is a form of business organisation, one body
of many individuals, large corporations, which are registered as separate legal entity under some statute or act eg. Company registered under companies act, or trust under trust act.
e. Agricultural entrepreneur• Agricultural activities such as raising & marketing of crops,
fertilizers and other inputs of agriculture.• Motivated to raise the productivity through mechanization
and technology.• Plantation, horticulture, dairy, forestry, floriculture, animal
husbandry, poultry, seeds.
15
CLASSIFICATION AND TYPES OF ENTREPRENEURS3. According to use of technology:a. Technical Entrepreneur• Essentially an entrepreneur of craftsman type, develops high
quality goods due to craftsmanship.• Concentrates more on production than marketing.• Introduction techniques, innovations for production.
b. Non-technical Entrepreneur • Not concerned with technical aspect of production, but
developing alternative distribution strategies to promote their business.
c. Professional Entrepreneur• Interested in establishing a business but does not have
interest in managing or operating once it established.• Professional entrepreneur sells out running business and
starts another venture with the sales proceeds.• Such an Entrepreneur is dynamic who conceives new ideas
to develop new projects.
16
CLASSIFICATION AND TYPES OF ENTREPRENEURS4. According to Motivation
a. Pure Entrepreneur • Motivated by psychological and economic rewards.• Undertakes entrepreneurial activities for personal; satisfaction in
work, ego or status.
b. Induced Entrepreneur• Induced to take entrepreneurship due to policy measures of the govt
that provides assistance, incentives, concessions and overhead facilities to start ventures.
c. Motivated Entrepreneur• Desire for self-fulfillment is the motivation• Making and marketing new products for consumers• If successful, further motivated by reward in term of profit.
d. Spontaneous Entrepreneurs• Start business out of their natural talents• Initiative, boldness and confidence as motivation• Strong conviction and confidence in their ability.
17
CLASSIFICATION AND TYPES OF ENTREPRENEURS5. According to Growth
a. Growth Entrepreneur• Takes up a high growth industry• Chooses an industry which has sustained growth prospects.
b. Super-Growth Entrepreneur• Those entrepreneur who have shown enormous growth of
performance in their venture.• The growth performance is identified by the profitability and liquidity
of funds.
6. According to stage of development
a. First-generation Entrepreneur• One who starts not from family business• Innovator, combining different skills and technologies to produce
marketable products or service.
b. Modern Entrepreneur• One who undertakes those ventures which go well along with
changing demand and suit in the current marketing needs.
18
CLASSIFICATION AND TYPES OF ENTREPRENEURSc. Classical Entrepreneur• Concerned with customer and marketing needs through the
development of self-supporting ventures.• Stereotype who aims to maximize economic returns at a consistent
level with the survival of the firm with or without the element of the growth.
7. Classification based on Socio-cultural Variables
a. Entrepreneurs from business family• Few socio-cultural groups have dominated business scene in India,
prominently , Marwadi, Gugrati, Parsee, Sindhi communities. Tatas, Birlas, Wadias and Singhanias are all from business community.
• Entrepreneurship is easier for someone from business family or business community as having solid support structure.
a. Women entrepreneurs• Progressive laws & incentives have boosted women presence in
entrepreneurial activities in diverse fields.• Kiran Majumdar Shaw founded Biocon, which is now a leading
Biotech firm in India.
19
CLASSIFICATION AND TYPES OF ENTREPRENEURSc. Social Entrepreneurs• As per Ashoka – Innovators, a global non-profit organization, a social
entrepreneur is one who recognizes the part of society which is stuck and provides new ways to get it unstuck.- child upliftment, environment, women empowerment, blind, social unprivileged.
• Verghese kurien of Amul, Rippan Kapur of CRY, Jeroo Billimoria of childline(toll free help)
8. Other Categories:
a. Innovative Entrepreneurs• Aggressive assemblage of information and analysis of results from
combination of factors.• Aggressive in experimentations and one who see and explore
opportunity.
b. Adoptive or Imitating Entrepreneurs• Readiness to adopt successful innovation.• Follow innovators,imitate techniq & technologies.
c. Fabian Entrepreneurs• Great caution and scepticism in practicing change.• Shy & lazy, no will to introduce change or new method.
20
CLASSIFICATION AND TYPES OF ENTREPRENEURSd. Drone Entrepreneurs• Refusal to adopt and use new opportunities to make changes in
production methods.• Traditional ways, products losses its marketability and operations
becomes uneconomical.
e. Aspiring Entrepreneurs• Have dream of starting a business, yet not made the leap from their
current employment into the uncertainty of a startup.• Lifestyle Entrepreneurs• Develop an enterprise that fits their individual circumstances and
style.• Basic intention is to earn an income for themselves & their families.
g. Mompreneurs• Homemaker entrepreneur
21
CLASSIFICATION AND TYPES OF ENTREPRENEURS• IT Entrepreneurs• DBMS, WWW, hotmail, kundli, portals, KIOSKs. i. Entrepreneurs - intra+entrepreneur• Person within large corporations who takes direct resp -onsibility for
turning an idea into profitable finished products through innovations & assertive risk taking
22
ENTREPRENEURIAL COMPETENCIESAn entrepreneurial competence is an underlying characteristic of a person, which results in effective and /or superior performance in a business venture.
It is an underlying characteristics of a person, in that it may be motive, traits, skills ,aspect of ones self-image, a body of knowledge, set of skills and cluster of appropriate motives/ traits that an individual possess to perform in his business.
Personal Entrepreneurial Competencies - The EMPRETEC Model
Research by McClelland and McBer, funded by USAID, has identified 14 personal entrepreneurial competencies (PECs) which appear to characterize the behaviour of successful entrepreneurs. The study, conducted in India, Ecuador and Malawi, also found that these PECs transcended culture, country and continent.
These competencies can be grouped into 3 main clusters and the EMPRETEC model has merged some of these competencies to derive 10 PECs.
23
ENTREPRENEURIAL COMPETENCIESAchievement Cluster
1. Opportunity Seeking and Initiative
- Does things before asked or forced to by events
- Acts to extend the business into new areas, products or services
- Seizes unusual opportunities to start a new business, obtain financing, equipment, land work space or assistance
2. Risk Taking
- Deliberately calculates risks and evaluates alternatives
- Takes action to reduce risks or control outcomes
- Places self in situations involving a challenge or moderate risk
3. Demand for Efficiency and Quality
- Finds ways to do things better, faster, or cheaper
- Acts to do things that meet or exceed standards of excellence
- Develops or uses procedures to ensure work is completed on time or that work meets agreed upon standards of quality
24
ENTREPRENEURIAL COMPETENCIES4. Persistence
- Takes action in the face of a significant obstacle
- Takes repeated actions or switches to an alternative strategy to meet a challenge or overcome an obstacle
- Takes personal responsibility for the performance necessary to achieve goals and objectives
5. Commitment to the Work Contract
- Makes a personal sacrifice or expends extraordinary effort to complete a job
- Pitches in with workers or in their place to get a job done
- Strives to keep customers satisfied and places long term good will over short term gain
25
ENTREPRENEURIAL COMPETENCIESPlanning Cluster
6. Information Seeking
- Personally seeks information from clients, suppliers or competitors
- Does personal research on how to provide a product or service
- Consults experts for business or technical advice
7. Goal setting
- Sets goals and objectives that are personally meaningful and challenging
- Articulates clear and specific long range goals
- Sets measurable short term objectives
8. Systematic Planning and Monitoring
- Plans by breaking large tasks down into time-constrained sub-tasks
- Revises plans in light of feedback on performance or changing circumstances
- Keeps financial records and uses them to make business decisions
26
ENTREPRENEURIAL COMPETENCIESPower Cluster
9. Persuasion and Networking
- Uses deliberate strategies to influence or persuade others
- Uses key people as agents to accomplish own objectives
- Acts to develop and maintain business contracts
10. Independence and self-confidence
- Seeks autonomy from the rules or control of others
- Sticks with own judgement in the face of opposition or early lack of success
- Expresses confidence in own ability to complete a difficult task or meet a challenge
27
FACTORS AFFECTING ENTREPRENEURIAL GROWTH1. ECONOMIC FACTORS
a) Lack of adequate overhead facilities:
Profitable innovations require basic facilities like transportation, communication, power supply etc. They reduce cost of production and increase profit.
b) Non availability of capital
Inventions are capital oriented. In less developed countries most capital equipment have to be imported which involves foreign exchange which acts as a difficult problem.
c) Great risk
Risk is high in case of less developed countries as there is lack of reliable information, markets for good and services is small etc.
d) Non availability of labor and skills
Though there is abundant labor supply there is generally scarcity of skills at all levels.
28
FACTORS AFFECTING ENTREPRENEURIAL GROWTH2. SOCIAL FACTORS
A society that is rational in decision making would be favorable for decision making. Education, research and training is given less importance in less developed countries therefore there is very little vertical mobility of labor.
3. CULTURAL FACTORS
Religious, social and cultural factors also influence the individual taking up an entrepreneurial career, in some countries there is religious and cultural belief that high profit is unethical. This type of belief inhibits growth of entrepreneurship.
4. PERSONALITY FACTORS
In less developed countries the entrepreneur is looked upon with suspicion. Public opinion in the less developed nations sees in the entrepreneur only a profit maker and exploited.
29
FACTORS AFFECTING ENTREPRENEURIAL GROWTH5. MOTIVATING FACTORS
Motivation is the act of stimulating someone or oneself to get a desired course of action, to push the right button to get the desired results. Some of these are:
1.Education background
2.Occupational experience
3.Family background
4.Desire to work independently in manufacturing line
5.Assistance from financial institution
6.Availability of technology
7.Other factors
30
ENTREPRENEURSHIP DEVELOPMENT PROGRAMMESSince 1950, a substantial volume of study has gone into the facets of entrepreneur development in India.It is possible to identify the individuals in all communities with entrepreneurial talent, to motivate and train them through properly organized programmes.The EDP thus became a new concept for harnessing the vast untapped human resources.It strikes a welcome note in respect of change in perception and in recognition of critical role the entrepreneurs play in industrial development by creating potential avenues for self development.
31
ENTREPRENEURSHIP DEVELOPMENT PROGRAMMESEntrepreneurship Development Program covers the entire venture creation process, from idea generation to building viable global businesses, with special emphasis on the nurturing roles of corporations, universities, governments and foundations.Using entrepreneurial culture as a model, participants learn what they need to know in order to develop ideas into successful businesses and to increase entrepreneurial opportunities in their corporations, institutions and regions.
32
ENTREPRENEURSHIP DEVELOPMENT PROGRAMMESFeatures Of EDP: Identification and careful selection of
entrepreneurs for training Developing the entrepreneurial capabilities of
the trainee Equipping the trainee with basic managerial
understanding Helping him/her to secure necessary financial
infrastructural and related assistance
33
ENTREPRENEURSHIP DEVELOPMENT PROGRAMMESObjectives Of EDP: To identify the potential entrepreneurs To develop necessary knowledge and skills
among the participants To understand the process and procedure of
setting up of small business To train the entrepreneurs to entrepreneurs to
understand environmental threats and opportunities
To provide help in identification and formulation of viable projects
To impart training in managerial understanding and skills
34
ENTREPRENEURSHIP DEVELOPMENT PROGRAMMESObjectives Of EDP: To provide post training assistance and
monitoring facilitiesRelevance of EDP: For rapid industrial development To remove or reduce regional industrial
imbalance A vehicle for social economic revolution
35
ENTREPRENEURIAL TRAININGPeter F. Drucker (1985): “The entrepreneurial mystique? It’s not
magic. It’s not mysterious, and it has nothing to do with the genes”
It’s a disciplineAnd, like any discipline, it can be learnedObjectives: To provide factual information To give good examples To provide policy recommendations
36
ENTREPRENEURIAL TRAININGCharacteristics of training of EntrepreneursEntrepreneurial: Traditional: Training “in”, learning (Education “about”) Personal competences (Qualifications in
disciplines) Flexible, adaptable (Fixed study plan) Student oriented (Teacher oriented) Group interaction (Class) “Clash room”, diversity (Classroom) Coaching (Lecturing) Project, across disciplines (Topic, disciplines) Close to business (Close to research,
academia) Action oriented (Study, theory
oriented)
37
TRAITS/QUALITIES OF AN ENTREPRENEURJohn Hornday of Bobson College has developed a composite list of entrepreneurial traits: 1. Self Confidence and optimism
2. Positive response to challenges
3. Ability to take calculated risk
4. Flexibility and ability to adapt
5. Knowledge of markets
6. Ability to get along with others better
7. Independent mindedness
8. Versatile knowledge
9. Energy and efficiency
10. Creativity, need to achieve
11. Dynamic leadership
12. Response to suggestions
38
TRAITS/QUALITIES OF AN ENTREPRENEURJohn Hornday of Bobson College has developed a composite list of entrepreneurial traits: 13. Take initiatives
14. Resourceful and persevering
15. Perceptive and foresight
16. Response to criticism
39
MANAGER VS. ENTREPRENEURThe terms manager and entrepreneur have different approaches in:1. Motive: The motive of an entrepreneur is to start a venture
by setting up an enterprise. He understands the venture for his personal gratification but the main motive of a manager is to render his services in an enterprise already setup by someone else.
2. Status: An entrepreneur is the owner of the enterprise whereas a manager is an employee
3. Risk Bearing: An entrepreneur being the owner of the enterprise assumes all risks and uncertainty involved in running the enterprise whereas a manager does not bear any risk
4. Objective: Entrepreneur’s objective is to innovate and create and he acts as a change agent whereas a manager’s objective is to supervise and create routines and to implement the entrepreneur’s plans and ideas
5. Rewards: The reward of an entrepreneur is the profit which is highly uncertain whereas the manager gets a salary as the reward for his service which is fixed and certain
