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Academic Session 2019

Course: Research Methods, Statistics and Ethics


Credits: 3; Course Code: RM 42301
Topic:

Introduction to
Entrepreneurship
Dr. Subhash J. Bhore
AIMST University
Learning Objectives
This lecture’s objective is that you should be able to:
1. Explain the economic importance of entrepreneurship.
2. Identify the key characteristics and skills
of entrepreneurs.
3. Recognize the basic ingredients needed to effectively
start and manage an entrepreneurial venture.
4. Differentiate among the legal forms of organizing an
entrepreneurial venture.
5. Identify alternative forms of entrepreneurship.
6. Describe innovation and demonstrate why it is important
for business success.
7. Apply the “Five C” management tactics to
maximize innovation.
Introduction
You should have a regular income
Active Income Passive Income
Introduction
• Creating a new enterprise
is one of the most exciting
management challenges.

• Entrepreneurs have built


successful companies by
being able to exploit
unmet needs in the
market.
What is Entrepreneurship?
• The process of creating a
business enterprise capable of
entering new or established
markets.
• It involves deploying
resources & people in a
unique way to develop a new
organization.
• An entrepreneur is an
individual who creates an
enterprise that becomes a
new entry to a market.
Entrepreneurship Myths
Vs
Entrepreneurship Myths
• Myth 1: Entrepreneurs are born, not made.
• Myth 2: It is necessary to have access to
money to become an entrepreneur.
• Myth 3: An entrepreneur takes a large or
irrational risk in starting a business.
• Myth 4: Most successful entrepreneurs start with a
breakthrough invention.
• Myth 5: Entrepreneurs become successful on their
first venture.
EV vs. SB Management
# Small Business Entrepreneurial Venture
1 Preferred funding source Owners owncapital Other people’s capital
investment investments
2 Whenthe business is in Cut costs Sell more
trouble
3 What’s more important Sales Marketing
4 Personal controlpreference Retainautonomy Involveother keypersonnel
5 Focus Efficiency Efffectiveness
6 Meta-strategy Imitation Novelty
7 External controlpreference Controlbusiness Controlmarket
8 Grow When necessary When possible
9 Human resources(HR) Personalise Professionalise
10 What limits growth Fear of loss of Market response
control
11 Delegationorientation Delegation isdifficult Delegation isessential
EV vs. SB Management
# Small Business Entrepreneurial Venture
12 Employees# Has less than 100 1. The goal is to become a
employees medium-sized firmof
100-499 employees;or
2. A large firm with 500 or
more employees
13 Dominancein markets Does not dominate Can dominate its markets
its markets
14 Ownership & Operations Independently Most of the time Jointly (in
owned and operated some casesindependently)
owned and operated
Importance of Entrepreneurship
• Job Creation
➢ Entrepreneurship accounts for most
new jobs in the U.S. economy.
• Innovation
➢ Entrepreneurships are responsible for
introducing a major proportion of new and
innovative products & services
into market.

• Opportunities for Diverse People


➢ People of diverse background can
improve their economic status
by becoming entrepreneurs.
Key Characteristics of
Entrepreneurs

1. A desire for high


achievement
2. Internal locus of control

3. Willingness to take risks

4. Self-confidence
Entrepreneurial Skills (→3)
• Negotiation skills
➢ Ability to obtain resources that are
controlled by other individuals.

• Networking skills
➢ Gather information and build alliances
✓ Personal network
✓ Business network

• Leadership skills
➢ Provide a shared vision
Starting & Managing an
Entrepreneurship
New Ideas come from:
• newspapers, magazines, & or
trade journals
• inventions or discoveries
• trade shows and exhibitions
• hobbies
• family members
• business school classes
Why Entrepreneurships Fail?

1. Lack of capital

2. Poor knowledge of the market

3. Faulty product design

4. Human resource (HR) problems

5. Poor understanding of the

competition
Business Plan
• Once an entrepreneur conceives a good
idea for a new venture, next critical step
is to prepare a business plan.

• It is a blueprint that maps out the


business strategy for entering markets.

• It explains the business to potential


investors.
• It develops strategies and tactics to
minimize risk of failure.
Key Components of the
Business Plan
1. Description of the product or service
2. Analysis of market trends and potential competitors
3. Estimate for pricing the product or service

4. Estimate for the time it will take to generate profits


5. Plan for manufacturing the product
6. Plan for growth and expansion of the business
7. Sources of funding
8. Plan for obtaining financing

9. Organizational and management plan


Legal Forms of Entrepreneurship

• Proprietorship – business owned


by an individual

• Partnership – association of two or


more persons acting as co-owners of a
business

• Corporation – legal entity separate


from the individuals who own it
Proprietorship

Advantages Disadvantages
• Easy to create • Unlimited liability
• Harder to obtain
• Owner keeps all
credit &
profits capital
• Owner makes all
decisions
Partnership
Advantages Disadvantages
1.Ease of formation 1. Unlimited liability for
2.Direct share of profits firm’s debt
3. Division of labor and 2.Limited continuity of life
management of enterprise
responsibility
3. Difficulty in obtaining
4. More capital
available than in a sole capital
proprietorship 4.Partners share
5. Less governmental other
responsibility for
control and regulation
partners’ actions.
Corporation
Advantages Disadvantages
1. Owners’ liability for the 1.Extensive government
firm’s debt limited to regulation of activities
their investment
2. High corporation fees
2. Ease of raising
3.Corporate capital,
large amounts of
profits, dividends, and
capital salaries double-taxed
3. Ease of transfer of
4. Activities limited to
ownership through sale those stated in
of stock
charter.
4. Life of enterprise
Sources of Financial Resources

• Debt Financing – obtaining a


commercial loan setting up a plan to
repay the principal and interest
• Equity Financing – raising money
by selling part ownership of the
business to investors
▪ Private investors
▪ Venture capitalists
▪ Public offerings of
stock
Managing Growth
• Entrepreneurs need to manage business
growth by establishing benchmarks
based on:
➢ Market data
➢ A thorough analysis of the firm’s abilityto
handle increased demand without
sacrificing quality
• The business plan is a way for planning
growth targets and managing to them.
• Too much growth can strain operations.
Problems of Growing Too Quickly

1. Cash flow crisis as a result of spending most


available cash on expansion and not meeting
obligations to creditors.

2. Employees are likely to experience stress from


rapid changes and growth.

3. Accounting & information systems are


not adequate for the larger business.

4. Growing so quickly that control is lost


Alternative Forms of
Entrepreneurship

Intrapreneurship

Spin-Offs

Franchises
Approach
do matter
Innovation Requires

New Idea/s Business Results

INNOVATION
Innovation: Five C’s
1. Capability
2. Culture
3. Cash and Recognition
4. Customer Orientation
5. Cut Losses
Summarize
You should have income

Active Income Passive Income


Thank you!