entrepreneurship-aima hughes ppt 1

8/2/2019 Entrepreneurship-AIMA Hughes PPT 1

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Entrepreneurship

A N BhattacharyaProfessor & Chair,Marketing Leadership Program,

School ofInspired Leadership,Gurgaon

[email protected]


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Definitions

Entrepreneurship is the process of creating something new with value by

devoting the necessary time and effort, assuming the accompanyingfinancial, psychic, and social risks, and receiving the resulting rewards of

monetary and personal satisfaction of independence.Robert Hisrich


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Entrepreneurship vs Intrapreneurship

Intrapreneurship is entrepreneurship by employees inexisting organisations

Antoncic and Hirsh, 2003

Entrepreneurship is an act of initiative, drive,commitment, diligence, perseverance, organized effort,

and achievement outlook, to undertake some specific

functions of performing productive activities and the

capacity to bear and associated with the investment.

Economic Policy Paper on Entrepreneurship Development


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India is ninth in the Global Entrepreneurship Monitor (GEM) survey of

entrepreneurial countries

It is highest among 28 countries in Necessity based entrepreneurship,

while 5th from the lowest in opportunity based entrepreneurship.

Entrepreneurship in India is basically necessity based. Number of

individuals taking entrepreneurship as a career choice is much lower as

compared to forced entrepreneurs

Some Facts About India.

38.8% of the Indian labour force is illiterate, 24.9% of the labour force

has had schooling up to the primary level and the balance 36.3% has had

schooling up to the middle and higher level.

About 80% of the workforce in rural and urban areas does not possess

any identifiable marketable skills.

No Indian University in the top100 universities of the world.

US- 37, UK-17 and China-5 Universities in top 100 universities of the world

IIT- Delhi: 154th position. IIT-B: 174th, IIT-K: 242nd, Delhi University: 274


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ENTREPRENEURS VS MANAGERS

High

Inventor Entrepreneur

Promoter Manager,administrator

Low

Creativityand

Innovation

General management skills, business know-how, networksHighLow


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ENTREPRENEURIAL CAREER CHOICE: DETERMINANT FACTORS


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WHAT IS ENTREPRENEURSHIP?

Economists tend to agree that entrepreneurs, associated with innovation, are

the driving forces of economical development

Psychologists, sociologists and anthropologists underline the entrepreneurs

personal characteristics ofcreativity, risk-taking, need for achievement, internal

locus of control

Operations management specialists see entrepreneurs as good distributors and

coordinators of resources

Finance specialists define entrepreneurs as people able to evaluate and calculate

financial risks

Management specialists think that entrepreneurs develop visions to organize

their activities and excel at organizing people and using resources

Marketing specialists define entrepreneurs as people who identify opportunities,

differentiate themselves and adopt customer-oriented thinking.


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What are the qualities of an entrepreneur?

Capacity to assume

Dedication to work

Shrewdness and wide

knowledge

Motivating attribute

Vision and foresight

Imagination, initiative

Innovation and rational

judgment

Flexibility and sociability

Personal responsibility

Mobility and drive

Creative thinking Strong need for achievement

Capacity to marshal resource

Independence


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Functions of entrepreneur

Organization:

An organizer mentally first of all decides certain things like what, how, and

how much to produce. He estimates the demand for the commodity and

initiates the production. He decides the location of the industry, scale of

production and estimates the availability of raw materials, labor, capital etc.

Then he co-ordinates the other factors like land, labor and capital in proper

proportion, so that he can minimize the cost of production and reap more

and more profit by producing more and more quantity at a cheaper price.

He supervises the entire production activity. After production is over, he

finds proper market for his product and sells them.


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Functions of entrepreneur.contd.

Risk bearing:

An entrepreneur not only organizes the entire production process but also

undertakes risks and uncertainties. An organizer starts production with an

anticipation of demand for his product. But when he actually brings the

product to market, there may or may not be demand for his product. This

is a non-insurable risk he has to undertake. Thus a brave organizer has to

shoulder certain insurable and non-insurable risks also.

Innovation:

An entrepreneur must be an innovator to survive in the market and to

retain the same position for his product. Innovation means introducing

new changes in production or technology or market for the product. Profitas a reward for innovation is not a stable one. It appears, disappears and

reappears. Only the imaginative skillful few will remain in the industry for

ever.


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Role of entrepreneur

An innovator who combines technical innovations and

financial finesses.

Important role in producing competitive products, processes,

and services.

Generation of new employments. Local and regional economic development.

Improved allocation of resources and transfer of technologies.


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Who is manager?

A manager is someone whose primary activities are a part of the

management process. In particular, a manager is someone who plans and

makes decisions, organizes, leads, and controls human, financial, physical,

and information resources.

Managers in any organization are responsible for the performance of one

or more of their subordinates. Managers must mobilize people and

resources to accomplish tasks within their department and are also held

accountable for the results of their department. Further,

their goal is to help the organization achieve a high level of performance

through management. Management involves the process of planning,

organizing, leading, and controlling the use of resources.


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Roles of a Manager

Interpersonal Role:

Figurehead-performs activities like greeting visitors, give awards to employees

etc

Leader- Lead and motivate subordinates

Liaison- He is a link between organisation and outsiders.

Informational Role:

Monitoring- Collects information. Disseminator- Distributes information.

Spokesperson- Represents his unit/organisation while interaction with

outsiders.

Decisional Role:

Entrepreneur- Assumes risk in terms of results, due to dynamic factors ofbusiness.

Disturbance Handler- Tries to control forces that tend to disturb smooth

functioning of the organisation.

Resource Allocator- Allocates human, financial and physical resources according to

needs.


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Motive:

The main motive of an entrepreneur is to start a venture by setting up an

enterprise for his personal gratification.The main motive of a manager is to render his services in an enterprise already

set up by someone else.

Status:

An entrepreneur is the owner of the enterprise.

A manager is the servant in the enterprise owned by the entrepreneur.Risk-bearing:

An entrepreneur assumes all risks and uncertainty involved in running the

enterprise.

A manager as a servant does not bear any risk involved in the enterprise.

Objectives:Entrepreneurs objective is to innovate and create and he acts as a change agent.

A managers objective is to supervise and create routines. He implements the

entrepreneurs plans and ideas.

Difference between Entrepreneur and Manager


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Rewards:

The rewards an entrepreneur gets for bearing risks involved in the enterprise is

profit which is highly uncertain.

A manager gets salary as rewards for the services rendered by him in the

enterprise. Salary of a manager is certain and fixed.

Fraudulent behavior:

An entrepreneur is not induced to involve in fraudulent behavior where as a

manger does.

A manager may cheat by not working hard because his income is not tied up tothe performance of the organization

Innovation:

Entrepreneur himself thinks over what and how to produce goods to meet the

changing demands of the customers. He acts as an innovative changeagent.

Manager simply executes the plans prepared by the entrepreneur. Thus, amanager simply translates the entrepreneurs ideas into practice.

Qualification:

An entrepreneur possesses qualities and qualifications like high achievement

motive, originality in thinking, risk-bearing ability and so on.

A manager possesses distinct qualifications in terms of sound knowledge inmanagement theory and practice.

Difference between Entrepreneur and Manager....contd.


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An entrepreneur could be a manager but a manager cannot be an

entrepreneur. An entrepreneur is intensely dedicated to develop

business through constant innovation. He may employ a manager in

order to perform some of his functions such as setting objectives,

policies, rules etc. A manager cannot replace an entrepreneur in spite of

performing the allotted duties because a manager has to work as per the

guidelines laid down by the entrepreneur.

On the downside, typical manager brings professionalism into working of

an organization. They bring fresh perspectives, ideas and approach to

trouble shooting which can be invaluable.

Difference between Entrepreneur and Manager....contd.


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CATEGORIES OF ENTREPRENEURS


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Why People Become Entrepreneurs


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Potential drawbacks of entrepreneurship

Uncertain income

Risk of losing entire invested capital

Long hours hard work

Low quality of life until business gets established

High levels of stress

Complete responsibility discouragement


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THE ENVIRONMENT FOR ENTREPRENEURS:Factors Supporting & Expanding Opportunities for Entrepreneurs


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CHARACTERISTICS OF ENTREPRENEURS


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Observed characteristics of entrepreneurs:

The 10 Is model

Independence

Interest

Insight Ideas

Invention

Inspiration

Involvement

Instigation Insistence

I - will


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Mapping the ten I characteristicsPlotting overall average scores for a sample of 20 successful

entrepreneurs. Indicated by

1 Independence

2 Interest

3 Insight

4 Ideas5 Invention

6 Inspiration

7 Involvement

8 Instigation

9 Insistence

10 I will

10

9

8

76

5

4

3

2

1

0


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Teaching, Learning & Assessment (TLA) framework 1

Context & GroupFormation

Self Awareness

Idea/ConceptGeneration

Idea/Concept

Selection

ProjectManagement

Proposal

Business plan andpresentation


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Businessplanning

IntellectualPropertyRights

Businessstrategy and

risk

Market and

competitoranalysis

Marketingstrategy

The managementteam

Operations and

commercialstrategy

Financialforecasting

The pitch

Teaching, Learning & Assessment (TLA) framework 2


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Businesses as legal entities A classification

Unlimited liability

Sole traders/Propreitors

Partnerships (can also have Ltd. status)

Limited liability (Incorporated)

Private: Shares not traded in public. Have company name and suffix PvtLtd

Public: Shares traded in public have company name and suffix Ltd

Co-operative

Owned and controlled by members, incorporated under theCooperatives/Societies Act


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What is a business plan?

A document that explains and justifies the business concept.

It attempts to answer three questions:

Where are we now? Where do we intend going?

How do we get there?


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Three basic objectives of business plans

To identify the nature and the context of the business

opportunity why does the opportunity exist?

To present the approach the entrepreneur will take to exploit

the opportunity

To recognise the factors that will determine whether the

venture will be successful


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Role of business planning in business success

1. It enables the entrepreneur to understand an opportunity

and what it will take to exploit

2. It provides a framework for managing the business in the

future

3. It will help recruit partners and management team

4. It should be capable of attracting new capital to the venture

5. It can refocus and rejuvenate a business after start up


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Typical requirements of business plans :1

To clearly identify product, service and unique selling point(USP)

Justify its competitive advantage through patent search dataand competitor analysis

Determine market attractiveness i.e. size and potential growththrough identification of potential customers, market trends

Determine route to commercialisation including technicaldevelopment, patenting, licensing and marketing


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Typical requirements of business plans: 2

Justify potential income and expenditure for products, IPR,

licenses, human resources, patenting, equipment and running

costs

Demonstrate credibility of management team

Demonstrate financial rewards and loan requirements for

potential investors


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Making a Business Plan


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"In preparing for battle I have always found that plansare useless, but planning is indispensable."

-Dwight Eisenhower

Those who fail to plan, plan to fail.

-George Hewell


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The Basic Steps of a Business Plan

Executive Summary

Company Overview

Market Environment

Marketing and Sales Strategy

Operations

Financial Plan


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What does your Business Plan say...

Discuss a particular market opportunity.

Examine the markets that you will compete in, and explain

who your customers will be.

Describe the products or services that your company will

provide.

Your competition, and how you will defend against it.

The operation that you will put in place in your company.

The management team that will implement the plan.

The size and profitability of your company.


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Executive Summary

The written version of the 60 second pitch.

Many people who read your plan, will only read your

Executive Summary...

...and then they mayread your financials.

NOT an introduction, but a short version of the wholeplan.


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Company Overview Explanation of history, structure, and organization

of your company.

Strategic direction

Mission statement. Goals and objectives.

Values and vision.

People

Relevant skills and expertise of management team. Directors.

Relationships with experts in the field.


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Market Environment All factors of the market that are outside your direct control:

Market structure

Market trends Competition

Opportunities/Threats


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Marketing and Sales Strategy Products or services offered.

Follow-on products.

Intellectual property or other defendable positions.

Market research. Marketing plan.

Product strategy.

Brand strategy.

Distribution strategy.

Pricing strategy.

Promotion.


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Operations Practical details required to meet the plan.

Facilities.

Manufacturing or out-sourcing. Personnel.

Varies widely depending on type of business.


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Financial Plan Three key reports, in a five-year plan:

Income statement.

Balance sheet.

Statement of cash flows.


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Entrepreneurial Goals & Choice of Ventures


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Entrepreneurial motivations, goals, expectationsand capabilities vary across individuals

Likewise, opportunities also vary in their

characteristics and critical success factors

Opportunities are to be screened for both

viability and fit with the entrepreneurs before

they are pursued


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Entrepreneurial Strategy

HeuristicsHeuristics

Heuristics

Venture

Characteristics

*Typology of

Ventures

Entrepreneurial Fit*Personal goals

*Entrepreneurial

Capacity

Strategy to Exploit

*Research & Analysis*Process

*Resources

*Growth

Iterative

Contributed by:K. Kumar, Faculty & Chair Person NSRCEL -IIM B, India


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Types of New Ventures

Revolutionary ventures

Niche ventures

Ventures that are propagators ofnew technology orinnovations

Hustle ventures

Speculative (deal) ventures

Revolutionary Ventures


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Revolutionary Ventures

A revolutionary idea, innovation or concept A new process or manufacturing technique

Can shake up/create a matured/new industry

Characteristics

Large investments spread over time with uncertain outcomes

Building organizational capabilities and sustainability

Requires a lot of creativity and exceptional managerial capabilities to

execute

Suits those who want to win or lose on a grand scale

New entrepreneurs can attempt but should be clear about their role in

the future growth of the venture

Entrepreneurs should have extraordinary organizing capabilities

Critical Success Factors

Entrepreneurial Fit

Niche Ventures


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Niche Ventures

Need not be a radical concept or idea Serve segments with a unique need not served by mainstream

offerings

Characteristics

Existence of a niche that can be economically serviced Simple and easy to use product or service

Modest managerial and leadership skills


Ideal for entrepreneurs with insightful knowledge of the larger market

and the niche in particular

Suits entrepreneurs with moderate growth/wealth ambitions and

limited resources

Entrepreneurial Fit

Propagatory Ventures


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Propagatory Ventures

Propagate an emerging technology or a product

Characteristics

Superior execution speed and efficiency

Nimbleness rather than a great strategy

Investment and Managerial capacity to attempt market dominance


Ideal for entrepreneurs with proven superior capability to execute

Suits entrepreneurs with competence in deal making and fundraising to support growth

Entrepreneurs should want be excited by high growth

Entrepreneurial Fit

Hustle Ventures


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Hustle Ventures

Extraordinary ability to execute

Meticulous selection and grooming of resources

Vision and values of the organization


Suits entrepreneurs with limited resources and modest growth ambitions Fits those who value professional satisfaction and do not seek high growth

Ideal for entrepreneurs who seek a lifestyle business and satisfactory cash

flow as against high growth and wealth creation

Entrepreneurial Fit

Does not need an innovative approach

No avenues to build proprietary assets

Low capital requirements

Limited exit options

Characteristics

Speculative Ventures


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Speculative Ventures

Risk Taking Ability Insight and Timing Speculative Instinct


Suits those who want quick profits Those who are willing to take commensurate risks

Those who have the financial strength and staying power to go through

the deal

Entrepreneurial Fit

An opportunity to buy low and sell high Financial risks depend on the terms of the deal No staged commitments- fully exposed once the deal is made

Characteristics


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Acquiring Resources

Acquiring resources for a new venture is a

task of enlisting stakeholders

Customers Financiers

Employees

Suppliers


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What Are the Challenges?

Uncertainty surrounding the venture

Downside risk perceived by the stakeholder

(resource provider)


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Desirable Attributes in Stakeholders

Well diversified

Experienced and specialized

Has excess capacity

Demonstrated risk seeking disposition

Customers Financiers Employees Suppliers


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Sources of Finance

Own funds

Outside equity

Debt

Internal generation


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Marketing Plan


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SWOT Analysis

A basic marketing plan begins with SWOT

analysis about your company and the SWOT

should be :

A summary of the key elements in your business

Brief, concise and interesting, without being too

abbreviated

Focused on the real issues facing your company

Action-oriented, so that positive proposals can be

envisaged


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Strengths- You can bank upon these.

Weaknesses- Definitely need to becorrected

Opportunities- Help you in settingthe target where you want to reach.

Threats- Make necessarycontingency plan to combat threatswhich would automatically becomea part of the marketing plan.


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Marketing Research


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Marketing Research

Analyse Complexity of Buying Behaviour

CULTURALBELIEFS &

VALUES, LIFE

STYLES

SOCIOLOGICAL

SOCIAL CLASS,STRUCTURE

FAMILY/GROUP

INFLUENCE,LIFE

CYCLE, OPINION

LEADERSHIP

ECONOMICPRICE, DELIVERY,

PAYMENT TERMS,

SALES SERVICE

INDIVIDUAL PSYCHOLOGICAL FACTORSCOGNITION, LEARNING PROCESSES,

INTERPERSONAL RESPONSE, ATTITUDES

MOTIVATION, PERSONALITY THEORIES

BUYING PROPOSITION PRODUCT OR SERVICE


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Marketing Strategy to be Based on

WHO MAKES THE BUYING DECISIONS

DECIDER

INFLUENCER

BUYER

USER

U d t di C Ch t i ti


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Understanding Consumer Characteristics

CHARACTERISTICS Innovators

2-3%

EarlyAdopters

12-15%

EarlyMajority

33%

LateMajority

34%

Laggards

12-15%

PERSONAL

Social,

Income, Occupation,

Education,

Housing,

Family Influence,

Time orientation

PSYCHOLOGICAL

Nature of needs,Perceptions,

Self-concept,Aspiration Groups,Reference Groups

h i i i i


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Changing Priorities

Stage Priorities Major Purchases

Fledging : Teens & early 20s Self,Socialising, Education Appearance Products,Clothing, Automobiles,Recreation, Hobbies, Travel

Courting :20s Self & Other, Pairbonding,Career

Furniture & Furnishing,Entertainment, Savings

Nest Building:20s &early 30s Babies & Career Home, Garden,,Baby Careproducts, insurnce

Full Nest 30-50s Children, Career, Midlife crisis Children Food, clothing,education, transportation, lifecounseling

Empty Nest 50-70 Self & others, relaxation Furniture, Entertainment,Travel, Hobbies, LuxuryAutomobiles, Investments

Sole survivor 70-90 Self, health,loneliness Health care , Diet, Security,Comfort, TV, Books, Longdistance telephone services

h l f il ?


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Why some Plans fail ?

Lack of a real plan (particularly regarding goals & objectives)

Inadequate situational analysis There is no point in deciding

where you want to go if you do not know where you are?

and where you have been?

Lack of Goal Clarity and Unrealistic Goals This generallyhappens due to lack of understanding of the situation.

Unexpected competitive moves, product deficiencies, Delay in

Getting Finance, and acts of God.

entrepreneurship-aima hughes ppt 1

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