Entrepreneurship and Small Business

ManagementDr. Rahul Pratap Singh Kaurav

Asst. Professor (Marketing)

Prestige Institute of Management, Gwalior

MAM 2nd T-204

Unit I

Entrepreneurs—Challenging the Unknown

• Entrepreneurs• Recognize opportunities

where others see chaos or confusion

• Are aggressive catalysts for change within the marketplace

• Challenge the unknown and continuously create the future

Entrepreneurs versus Small Business Owners: A Distinction

• Small Businesses Owners• Manage their businesses by expecting

stable sales, profits, and growth

• Entrepreneurs• Focus their efforts on innovation,

profitability and sustainable growth

Entrepreneurship: A Mindset

• Entrepreneurship is more than the mere creation of business: • Seeking opportunities

• Taking risks beyond security

• Having the tenacity to push an idea through to reality

• Entrepreneurship is an integrated concept that permeates an individual’s business in an innovative manner.

The Evolution of Entrepreneurship

• Entrepreneur is derived from the French entreprendre, meaning “to undertake.”

• First coined by Richard Cantillon (1755)• The entrepreneur is one who undertakes to

organize, manage, and assume the risks of a business.

• Although no single definition of entrepreneur exists and no one profile can represent today’s entrepreneur, research is providing an increasingly sharper focus on the subject.

In Malaysia, the term “usahawan” is used to mean entrepreneur.

A Summary Description of Entrepreneurship

• Entrepreneurship (Robert C. Ronstadt)• The dynamic process of creating incremental

wealth.• This wealth is created by individuals who assume

major risks in terms of equity, time, and/or career commitment of providing value for a product or service. • The product or service itself may or may not be

new or unique but the entrepreneur must somehow infuse value by securing and allocating the necessary skills and resources.

An Integrated Definition

• Entrepreneurship• A dynamic process of vision, change, and creation.• Requires an application of energy and passion towards the

creation and implementation of new ideas and creative solutions.

• Essential ingredients include:• The willingness to take calculated risks—in terms of time,

equity, or career.• The ability to formulate an effective venture team; the creative

skill to marshal needed resources.• The fundamental skills of building a solid business plan.• The vision to recognize opportunity where others see chaos,

contradiction, and confusion.

The Myths of Entrepreneurship

• Myth 1: Entrepreneurs Are Doers, Not Thinkers

• Myth 2: Entrepreneurs Are Born, Not Made

• Myth 3: Entrepreneurs Are Always Inventors

• Myth 4: Entrepreneurs Are Academic and Social Misfits

• Myth 5: Entrepreneurs Must Fit the “Profile”

• Myth 6: All Entrepreneurs Need Is Money

• Myth 7: All Entrepreneurs Need Is Luck

• Myth 8: Ignorance Is Bliss For Entrepreneurs

• Myth 9: Entrepreneurs Seek Success But Experience high Failure Rates

• Myth 10: Entrepreneurs Are Extreme Risk Takers (Gamblers)

Entrepreneurial Schools-of-thought Approach

Macro View: External Locus of Control

• The Environmental School of Thought• Considers the external factors that affect a potential

entrepreneur’s lifestyle.

• The Financial/Capital School of Thought• Based on the capital-seeking process—the search for

seed and growth capital.

• The Displacement School of Thought• Alienation drives entrepreneurial pursuits

• Political displacement (laws, policies, and regulations)• Cultural displacement (preclusion of social groups)• Economic displacement (economic variations)

Micro View: Internal Locus of Control (cont’d)

• The Entrepreneurial Trait School of Thought• Focuses on identifying traits common to successful

entrepreneurs.• Achievement, creativity, determination, and technical

knowledge

• The Venture Opportunity School of Thought• Focuses on the opportunity aspect of venture

development—the search for idea sources, the development of concepts, and the implementation of venture opportunities.• Corridor principle: New pathways or opportunities will arise

that lead entrepreneurs in different directions.

Micro View… (cont’d)

• The Strategic Formulation School of Thought• Emphasizes the planning process in successful venture

development.

• Ronstadt’s View• Strategic formulation is a leveraging of unique elements:

• Unique Markets—mountain gap strategies• Unique People—great chef strategies• Unique Products—better widget strategies• Unique Resources—water well strategies

Key Concepts

• Entrepreneurship• A process of innovation and new-venture creation

through four major dimensions—individual, organizational, environmental, process—that is aided by collaborative networks in government, education, and institutions.

• Entrepreneur• A catalyst for economic change who uses purposeful

searching, careful planning, and sound judgment when carrying out the entrepreneurial process.

Key Concepts

• Entrepreneurial Management• The discipline of entrepreneurial management:• Entrepreneurship is based upon the same principles.• It matters not who or what that the entrepreneur is—

an existing large institution or an individual, for-profit business or a public-service organization, a governmental or non-governmental institution.• The rules are much the same: things that work and

those that don’t are much the same, and so are innovations and where to look for them.

Evolutionary Definitions

Period and Personality

Opinion on Entrepreneur

17th Century-General Concept

Person bearing risks of profits (loss) in a fixed price contract with Govt.

1725: Richard Cantillon

Person bearing risks is different from one supplying capital.

1797: Beaudeau Person bearing risk, planning, supervising, organising and owning.

1803: Jean Baptiste Say

Separate profile of entrepreneur from profits of capital.

1934: Joseph Schumpeter

An entrepreneur is an innovator and develops untried technology.

Evolutionary Definitions

Period and Personality

Opinion on Entrepreneur

1964: Peter Drucker

Entrepreneur maximizes opportunities through systematic innovations.

1975: Albert Sharpero

Entrepreneur takes initiatives, organizes some socio-economic mechanism, and accepts risk of failure.

1980: Karl Vesper Entrepreneur seen differently by economist, psychologist, businesspersons, and politicians.

1985: Robert Hisrich

Entrepreneurship is the process of creating something different with value by devoting the necessary time and effort, assuming the social risks and receiving the results-rewards of monetary and personal satisfaction.

Entrepreneurship in India

• Pre-independence period

• Post-independence period

Founder Year

Shiv Narayan Birla 1863

Nusserwanji Tata 1868

Ramdutt Goenka 1863

Lakshmanrao Kashipath Kirloskar

1902

Gaganbhai Mafatlal 1905

Karamchand Thapar 1922

Jamnalal Bajaj 1932

Gujarmal Modi 1939

Founder Year

KC Mahindra 1956

Dhirubhai Ambani 1958

Nemnath Jain ****

Importance and Contribution of Entrepreneur

• Develop new markets• Discover new sources of material• Mobilize capital resources• Introduce• New technologies,• New industries, and• New product.

• Create employment

Need of entrepreneurship development?

Advantages of being entrepreneur

• Your are your own boss and have control over your future.

• Feel of decision maker not follower.

• Opportunities to fully utilize your talents, skills, knowledge, and creativity

• Financial rewards (profit).

• Job security (own employment).

• Self-satisfaction, personal achievement, and recognition.

Disadvantages of being entrepreneur

• Chance of business failure.

• Time-consuming (need more hours).

• Not secured and stable income

• Pressure to succeed.

• Financial risk and stress.

• Responsibilities and sacrifices.

Characteristics of successful entrepreneur

• An especially skillful person.• An innovator,• Providing completeness to

the factor of production,• Decision-making person,• A man of creative

personality,• A basic-plan maker,• Dynamic leader,

• Creator of wealth,• Self-confident and

ambitious,• Risk-bearer• Adventurer

Innovation

• “Innovation is the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth”

• - Peter F. Drucker

• Process of doing something new.

Process of Innovation

Commercial

Application

Implementation

Resource Planning

Analytical Planning

Transformation of creative ideas into useful application

Invention

• Some new creations, which did not have any existence before.• Creation of new product,• Technology,• Theory,• Formula etc.

Invention Development of new ideasResults in new knowledge

creation

InnovationThe conversion of an idea or

resources into real life application

Results in new product, process or services

Creativity

• Any form of any thing which has not been seen or thought

Creating the

Future

Creativity

Entrepreneurship

Invention

Innovation

Opportunity through change

• The potential for change, improvement or advantage arising from our action in the circumstances may defined as opportunity.

• Here are few types of opportunity:• gap in the market• a mismatch between supply and demand• a future possibility which can be recognised or created• a more effective or efficient business process, system or model• a new or existing technology or approach which has not yet been applied• a commodity or experience people would desire or find useful if they

knew about it.

Opportunity centered entrepreneurship

What are the Lessons?

1.Who sells the largest number of cameras in India?

2. Who has the biggest revenue from music business in India?

3. Who gained the most when business of British Airways was affected due to the 2008 recession?

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Answers to the Lessons?

Ans 1: Samsung (whose main line of business is NOT cameras but cell phones)

Ans 2: Airtel (which is not in music business)- by selling caller tunes makes more money than HMV etc

Ans 3: videoconferencing and telepresence services of HP and Cisco.

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What are the Lessons?

• Nokia missed the Smartphone bus. Apple's I phone and Google's Android are making life difficult for Nokia.

• But Google is not a mobile company

• Nokia is a global behemoth, with 35% of the world’s handset market.

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What are the Lessons?

• Products have vanished from the market in the past 20 years:

• Black & white TVs• Fountain pens• Type writers• Alarm Clocks• Audio cassettes • And many others…

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What are the Lessons?

• Lessons by the Managerial economist:

• Today's competitor is obvious. Tomorrow's is not- Think beyond conventional framework; think beyond the obvious

• Need to identify competition (present)

• Need to foresee competition (Future)

• Need to beat competition (Strategies)

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