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 (unexpected 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

Importance of Entrepreneurs

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.

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 1. planning 2. Organizing 3. Decision making Entrepreneur Function 1. Idea generation 2. Determination of objectives 3. Raising of funds Functions Important for Developing Countries 1. Management of share resource 2. Dealing with public 3. Acquiring and assembly of the factory 4. engineering 5. New product 6. Parallel opportunities 7. marketing Other Functions 1. Diversification of production 2. Expansion of the enterprise 3. Maintaining cordial employer and employee relations 4. Tackling labor problem 5. Coordination with outside agencies

4. managing 5. innovation 6. Risk bearing 7. Uncertainty bearing

4. Procurement of raw materials 5. Procurement of machinery 6. Market research 7. Determination of form of enterprise 8. Recruitment of manpower 9. Implementation of the project

8. management 9. Customer relation

Role of Entrepreneur
1. Initiator 2. innovator 3. coordinator 4. leader 5. Social worker 6. Welfare agent 7. employer 8. Development agent A key man who imagine new opportunities, techniques, new products/services Brings overall change by innovation and creativity Coordinate social and economic values of society act as a leader with outstanding leadership qualities He always works for the wellbeing of the society He will encompass/cover all sectors and fields welfare He will act as employer by in taking some unemployed 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 themselves Search for new ideas and innovation Openness to change Competitive by nature Risk taker Accepting of constructive criticism and rejection (ready to accepts mistakes) Time management Vision and leadership Ethics and morals Discipline 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 luck Only Rich people can become entrepreneurs Entrepreneurship 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 = (Process) Entrepreneur + (Person) Enterprise (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 1. Refers to a person 2. visualizer 3. creator 4. organizer 5. innovator 6. technician 7. initiator 8. Decision maker 9. planner 10.leader 11.motivator 12.programmer 13.Risk taker 14.communicator 15.Administrator ENTREPRENEURSHIP 1. Refers to a process 2. vision 3. creation 4. organization 5. innovation 6. technology 7. Initiative 8. decision 9. planning 10.leadership 11.motivation 12.action 13.Risk taking 14.communication 15.administration

Factors Affecting Entrepreneuship Internal Factors

Entrepreneur Oriented Factors
1. Low Risk Bearing capacity 2. Low motivation

Production Related Factors

1. Location Disadvantages

Finance Related Factors

1. Lack of access to noninstitutional finance 2. Excessive dependence on financial institutions 3. Inadequate working capital 4. non availability of credit at right time 5. Delay in payment of customers 6. Delay in loan sanction

Marketing Related Factors

1. Promotional plans

2. High cost of Inputs

2. Expansion plans

3. Lack of technical Knowledge 4. Lack of Training

3. Poor capacity utilization 4. Poor quality controls

3. New Product introductions 4. Product cancellations

5.Lack of proper Estimation

5. Inadequate inventory

5. Sales force changes 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 2. Life style 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

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

Scope of Entrepreneurship
Entrepreneurship Works in different ways in different economic systems, such as Capitalism Socialism Mixed Economy

Scope of Entrepreneurship
Capitalism(Private) 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 Socialism(Public) 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 Mixed Economy(Private+ Public) 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 service
1.Exploration 2.Screening 3.Business Analysis (risk/return/features/recommendations/creativity) 4.Development 5.Testing 6.Commercialization (full scale production )

Problems of Entrepreneurship Wrong surveys Lack of identification of projects Lack of infrastructure Lack of quality control Lack of market promotion Lack of technology Lack of finance Lack 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.

Societys 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.