Managerial vs. entrepreneurial approach and emergence of entrepreneurship Managerial vs.

entrepreneurial Decision Making: The difference between the entrepreneurial and managerial styles involves five business dimensions. 1. Strategic Orientation: The entrepreneurs strategic orientation depends on his or her perception of the opportunity. This orientation is most important when other opportunities have diminishing returns accompanied by rapid changes in technology, consumer economies, social values or political rules. When the use of planning systems is the strategic orientation, there is more pressure for the administrative domain to be operant. Commitment to Opportunity: The entrepreneurial domain is pressured by the need for action and has a short time span in terms of opportunity commitment. The administrative domain (the ways mangers make decisions) is not only slow to act on an opportunity, but the commitment is usually for a longer time span. Commitment of Resources: An entrepreneur is used to having resources committed at periodic intervals, often based on certain tasks or objectives being reached. In acquiring these resources the entrepreneur is forced to achieve significant milestones using very few resources. In the administrative domain, the commitment of resources is for the total amount needed. Administrative-oriented individuals receive personal rewards by effectively administering the resources under their control. Control of Resources: The administrator is rewarded by effective resource administration and has a drive to own or accumulate as many resources as possible. The entrepreneur, under pressure of limited resources, strives to rent resources on an as-needed basis. Managerial Structure: In the administrative domain, the organizational structure is formalized and hierarchical in nature. The entrepreneur employs a flat organizational structure with informal networks.

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CREATING AND STARTING THE VENTURE

PLANNING AS PART OF THE BUSINESS OPERATION Planning is a process that never ends. In the early stages, the entrepreneur should prepare a preliminary plan. The plan will be finalized as the enterprise develops. Many different types of plans may be part of any business operation-financial, marketing, production, and sales plans. Plans may be short term or long term, or they may be strategic or operational. All of these plans have one purpose: to provide guidance and structure to management in a rapidly changing market environment. WHAT IS THE BUSINESS PLAN A business plan is a written document prepared by the entrepreneur that describes all the relevant external and internal elements involved in starting a new venture. It addresses both short- and long-term decision making. The business plan is like a road map for the business' development. The Internet also provides outlines for business planning. Entrepreneurs can also hire or offer equity to another person to provide expertise in preparing the business plan. In developing the business plan the entrepreneur can determine how much money will be needed from new and existing sources.

WHO SHOULD WRITE THE PLAN The business plan should be prepared by the entrepreneur; however, he or she may consult many sources. Lawyers, accountants, marketing consultants, and engineers are useful supplemental sources. Other resources are the Small Business Administration, Service Core of Retired Executives, Small Business Development Centers, universities, friends, and relatives. To help determine whether to hire a consultant, the entrepreneur needs to make an objective assessment of his or her own skills. SCOPE AND VALUE OF THE BUSINESS PLAN WHO READS THE PLAN The business plan must be comprehensive enough to address the concerns of employees, investors, bankers, venture capitalists, suppliers, and customers. Three perspectives need to be considered: The entrepreneur understands the new venture better than anyone. The marketing perspective considers the venture through the eyes of the customer. The investor looks for sound financial projections. The depth of the business plan depends on the size and scope of the proposed venture. The business plan is valuable to the entrepreneur and investors because: 1. It helps determine the viability of the venture in a designated market. 2. It gives guidance in organizing planning activities. 3. It serves as an important tool in obtaining financing. Potential investors are very particular about what should be included in the plan. The process of developing a business plan also provides a self-assessment of the entrepreneur. This self-evaluation requires the entrepreneur to think through obstacles that might prevent the venture's success. It also allows the entrepreneur to plan ways to avoid such obstacles. HOW DO POTENTIAL LENDERS AND INVESTORS EVALUATE THE PLAN Because the business plan should address the needs of all the potential evaluators, software packages and Internet samples should be used only to assist in preparation. As the entrepreneur becomes aware of who will read the plan, changes will be necessary. Suppliers may want to see a business plan before signing a contract to supply products or services. Customers may also want to review the plan before buying the product. The business plan should consider the needs of these constituencies. Potential suppliers of capital will vary in their needs and requirements in the business plan. Lenders are primarily interested in the ability of the new venture to pay back the debt and focus on the four C's of credit: 1. The entrepreneur's credit history or character. 2. Their ability to meet debt and interest payments (cash flow.) 3. The collateral or tangible assets being secured.

4. Equity contribution or the amount of personal equity that has been invested by the entrepreneur. Investors provide large sums of capital for ownership (equity) and expect to cash out within 5 to 7 years. They will often place more emphasis on the entrepreneur's character than lenders. The venture capitalist will play an important role in management of the business and wants the entrepreneurs to be pliable and willing to accept this involvement. These investors will also demand high rates of return and will thus focus on the market and financial projections. If the entrepreneur does not consider the needs of these sources, the plan may be an internalized document without consideration of the feasibility of meeting market goals. Most external advisors and potential investors are bound by a professional code of ethics regarding disclosure. PRESENTING THE PLAN It is often necessary for an entrepreneur to orally present the business plan to investors. Typically the entrepreneur provides a short (20-30 minutes) presentation of the business plan. The entrepreneur must sell their business concept in a short time period. A venture capitalist or angel group may also ask the entrepreneur to present the plan to their partners before making a final decision. INFORMATION NEEDS Before preparing a business plan, the entrepreneur should do a quick feasibility study to see if there are possible barriers to success. The entrepreneur should clearly define the venture's goals, which provide a framework for the business plan. The business plan must reflect reasonable goals. Market Information It is important to know the market potential for the product or service. The first step is to define the market. A well-defined target market makes it easier to project market size and market goals. To assess the total market potential, the entrepreneur can use trade associations, government reports, and published studies. Operations Information Needs The entrepreneur may need information on: Location Manufacturing operations Raw materials Equipment Labor skills Space Overhead Each item may require some research but is needed by those who will assess the business plan.

Financial Information Needs Before preparing the plan, the entrepreneur must evaluate the profitability of the venture through the following: Expected sales and expense figures for the first three years Cash flow figures for the first three years Current balance sheets and pro forma balance sheets for the next three years Determination of expected sales and expenses is based on the market information gathered earlier. Estimates of cash flow will consider the ability of the new venture to meet expenses at designated times. Current balance sheet figures show the assets, liabilities, and investments made by the owner. USING THE INTERNET AS A RESOURCE TOOL Thanks to technology, entrepreneurs are able to access information efficiently, expediently, and at very little cost. The Internet can serve as an important source of information in preparing the business plan. Information on industry analysis, competitor analysis, and measurement of market potential can be located. In addition, the Internet also provides opportunities for actually marketing the new venture's products. A web site, or home page, typically describes a firm's history, existing products, background of the founders, and other information to create a favorable image. The web site can be a vehicle for advertising or for direct marketing. Many new ventures use web pages to increase sales contacts and reach potential customers. An entrepreneur can also access competitors' web sites to gain knowledge of their strategy in the marketplace. To gather information anonymously the entrepreneur can also investigate newsgroups. All that is needed to use these sources is a small investment in hardware and software. WRITING THE BUSINESS PLAN The business plan should be comprehensive enough to give a potential investor a complete understanding of the venture. Introductory Page The title page provides a brief summary of the business plan's contents, and should include: The name and address of the company The name of the entrepreneur and a telephone number A paragraph describing the company and the nature of the business The amount of financing needed

A statement of the confidentiality of the report It also sets out the basic concept that the entrepreneur is attempting to develop. Executive Summary This is prepared after the total plan is written. It should be three to four pages in length and should highlight the key points in the business plan. The summary should highlight in a concise manner the key points in the business plan. Issues that should be addressed include: Brief description of the business concept Any data that support the opportunity for the venture. Statement of you this opportunity will be pursued. Highlight some key financial results that can be achieved Because of the limited scope of the summary, the entrepreneur should ascertain what is important to the audience to whom the plan is directed. Environmental and Industry Analysis The entrepreneur should first conduct an environmental analysis to identify trends and changes occurring on a national and international level that may impact the new venture. Examples of environmental factors are: Economy Culture Technology Legal concerns All of the above external factors are generally uncontrollable Next the entrepreneur should conduct an industry analysis that focuses on specific industry trends Some examples of industry factors include: Industry demand Competition The last part of this section should focus on the specific market. This would include such information as who the customer is and what the business environment is like. The market should be segmented and the target market identified. Description of the Venture The description of the venture should be detailed in this section. This should begin with the mission statement or company mission, which describes the nature of the business and what the entrepreneur hopes to accomplish. The new venture should be described in detail, including the product, location, personnel, background of entrepreneur, and history of the venture. The emphasis placed on location is a function of the type of business. Maps that locate customers, competitors, and alternative locations can be helpful. If the building or site decision involves legal issues, the entrepreneur should hire a lawyer.

Production Plan or Operations Plan If a new venture is a manufacturing operation, a production plan is necessary. This plan should describe the complete manufacturing process, including whether or not the process is to be subcontracted. If the manufacturing is carried out by the entrepreneur, the plan should describe the physical plant layout and machinery and equipment needed. If the venture is not manufacturing, this section would be titled operational plan. The entrepreneur would need to describe the chronological steps in completing a business transaction. Marketing Plan The marketing plan describes how the products will be distributed, priced, and promoted. Potential investors regard the marketing plan as critical to the venture's success. Organizational Plan The organizational plan section should describe the venture's form of ownership. If the venture is a corporation, this should include the number of shares authorized, share options, and names and addresses of the directors and officers. It is helpful to provide an organization chart indicating the line of authority. This chart shows the investor who controls the organization and how members interact. Assessment of Risk It is important that the entrepreneur make an assessment of risk in the following manner: The entrepreneur should indicate the potential risks to the new venture. Next should be a discussion of what might happen if these risks become reality. Finally the entrepreneur should discuss the strategy to prevent, minimize, or respond to these risks. The entrepreneur should also provide alternative strategies should these risk factors occur. Financial Plan The financial plan determines the investment needed for the new venture and indicates whether the business plan is economically feasible. The entrepreneur should summarize the forecasted sales and expenses for the first three years. Cash flow figure for three years are needed, with the first year's projections provided monthly. The projected balance sheet shows the financial condition of the business at a specific time. Appendix The appendix contains any backup material not included in the text of the document. Other possible documents Letters from customers, distributors, or subcontractors Secondary or primary research data Leases and contracts Price lists from suppliers and competitors

USING AND IMPLEMENTING THE BUSINESS PLAN The business plan is designed to guide the entrepreneur through the first year of operations. It should contain control points to ascertain progress. Planning should be a part of any business operation. Without good planning the employees will not understand the company's goals and how they are expected to perform their jobs. Bankers say that most businesses fail because of the entrepreneur's inability to plan effectively. The entrepreneur can enhance efficient implementation of the plan by developing a schedule to measure programs and to institute contingency plans. Measuring Plan Progress Plan projections will typically be made on a 12-month schedule, but the entrepreneur should check key areas more frequently. 1. Inventory control- By controlling inventory, the firm can ensure maximum service to the customer. 2. Production control- Compare the cost figures against day-to-day operating costs. 3. Quality control- Quality control depends on the type of production system used. 4. Sales control- Information on units, dollars, and specific products sold should be collected. 5. Disbursements- The new venture should control the amount of money paid out Updating the Plan Environmental factors and internal factors can change the direction of the plan. It is important to be sensitive to changes in the company, industry, and market. WHY SOME BUSINESS PLANS FAIL A poorly prepared business plan can be blamed on: Goals set by the entrepreneurs that are unreasonable. Goals those are not measurable. To be successful Goals should be specific. They should also be measurable and should be monitored over time. The entrepreneur who has not made a total commitment to the business will not be able to meet the venture's demands of the venture. Investors will not be positive about a venture that does not have full- time commitment. Investors will typically expect the entrepreneur to make significant financial commitment to the business. Lack of experience will result in failure unless the entrepreneur can gain knowledge or team up with someone. The entrepreneur should also document customer needs before preparing the plan.

Legal Issues for the Entrepreneur

WHAT IS INTELLECTUAL PROPERTY? Intellectual property which includes patents, trademarks, copyrights, and trade secrets represent important assets of entrepreneur and should be understood even before engaging the services of an attorney. Because entrepreneurs often don't understand intellectual property, they can ignore steps that should be taken to protect these assets. Need for a Lawyer All business is regulated by law. The entrepreneur needs to be aware of regulations that affect the new venture. At different stages the entrepreneur will need legal advice. The legal expertise required will vary based on factors such as type of product and organizational status. The entrepreneur should carefully evaluate his or her needs before hiring a lawyer. How to Select a Lawyer Why hire a lawyer?- The entrepreneur does not usually have the expertise to handle possible risks associated with difficult laws. An attorney is in a better position to understand all outcomes related to any legal action. The lawyer may work on a retainer basis (stated amount per month,), which provides office and consulting time. This does not include court time or other legal fees. The lawyer may be hired for a onetime fee, i.e. filing for a patent. Choosing a lawyer is like hiring an employee-The lawyer you work with should be someone to whom you can relate personally. When resources are limited, the entrepreneur may offer the lawyer stock in exchange for his or her services Legal Issues in Setting up the Organization There are many options an entrepreneur can choose in setting up an organization. Legal advice is also needed to prepare the agreements necessary to begin a partnership, franchise, or corporation. PATENTS A patent is a contract between the government and an inventor. The government grants the inventor exclusivity for a specified amount of time. At the end, the government publishes the invention, and it becomes part of the public domain. The patent gives the owners a negative right, preventing anyone from making, using, or selling the invention. Types of Patents 1. Utility Patents A utility patent has a term of 17 years, beginning on the date the Patent and Trademark Office (PTO) issues it. Patents on any invention requiring Govt. approval are extended by the amount of time it takes the Govt. to review the invention. The

patent grants the owner protection from anyone making, using, and/or selling the invention. 2. Design Patents Covering new, original, ornamental, and unobvious designs for articles, a design patent reflects the appearance of an object. These are for a 14-year term and provide a negative right, excluding others from making an article having the same ornamental appearance. Filing fees are lower than for utility patents. 3. Plant patents Plant patents are issued for 17 years on new varieties of plants. Patents are issued by the Patent and Trademark Office (PTO.) This office also administers the Disclosure Document Program, in which the inventor files disclosure of the invention, giving recognition that he or she was the first to develop the idea. Another program is the Defensive Publication Program, which lets the inventor protect an idea by preventing anyone else from patenting this idea, but gives the public access to it. 4. International Patents With the new GATT (General Agreement on Tariffs and Trade) that took effect on January 1, 1996, any application by a foreign company will be treated equally to an American firm. Previously American firms were given priority. Now the decision is totally based on when the filing companies began work on the idea. The GATT pact has been signed by 124 countries. An additional 144 are due to be included by the end of the century. China is excluded because of issues related to piracy. The pact will mandate stronger protection for entrepreneurs by requiring protection for the following terms: Seven years for trademarks. Twenty years for patents. Fifty years for films, music, and software. There are still some problems with international patents, such as the attitudes in China and other Southeast Asian countries toward "knock-offs." The Disclosure Document The entrepreneur should first file a disclosure document to establish a date of conception. To file, the entrepreneur must prepare a clear description of the invention along with photos and a cover letter. Upon receipt, the PTO stamps and returns a duplicate copy establishing evidence of conception. Before actually applying for the patent, the entrepreneur should retain a patent attorney to conduct a patent search. The Patent Application The patent application must contain a complete history and description of the invention as well as claims for its usefulness. The application is divided into sections: The Introduction Section contains the background and advantages of the invention and the nature of problems it overcomes. The description of Invention Section, this section

contains a description of the drawings, which must comply with PTO requirements. A detailed description of the invention follows, including engineering specifications, materials, and components. In Claims Section, Claims are the criteria by which any infringements will be determined. Essential parts of the invention should be described in broad terms. The claims must not be so general that they hide the invention's uniqueness. The application should contain a declaration signed by the inventor. When the application is sent, the status of the invention becomes "patent pending," providing protection until the application is approved. A carefully written patent should provide protection, but is also an invitation to sue or be sued if there is any infringement. Patent Infringement Many inventions are the result of improvements in existing products. Copying and improving a product may be legal. If improvement is impossible, it may be possible to license the product from the patent holder. To ascertain the existence of a patent, the entrepreneur can now use the Internet. If there is an existing patent that might involve infringement, licensing may be considered. If there is any doubt on this issue, the entrepreneur should hire a patent attorney. ONLINE PATENT ISSUES The question of whether patents are applicable to e-commerce has been raised lately by stamp.com and Pitney Bowes. Large corporations, like Pitney Bowes, are suing start-up companies to get compensation for their intellectual property such as research and development and patents. TRADEMARKS A trademark may be a word, symbol, design, or some combination that identifies the source of certain goods. A trademark can last indefinitely, as long as it continues to perform its indicated function. The trademark is given a 20-year registration with 20year renewable terms. In the fifth to sixth year, you must file an affidavit with the PTO indicating that the patent is in commercial use. Today the law allows filing a trademark solely on the intent to use the trademark in interstate commerce. There are benefits to registering a mark that has already been in use. Categories of trademarks: Coined marks denote no relationship between the mark and the goods and afford the possibility of expansion. An arbitrary mark is one that has another meaning in our language. A suggestive mark is used to suggest certain features or characteristics of a product or service. A descriptive mark must have become distinctive and gained recognition before it can be registered. Registering a trademark can offer significant advantages to the entrepreneur.

Registering the Trademark The PTO is responsible for federal registration of trademarks. To file, the entrepreneur must complete the application form, which can be downloaded from the PTO website. Filing of the registration involves four requirements: a. Completion of the written form. b. A drawing of the mark. c. Five specimens showing actual use of the mark. d. The fee. An examining attorney at the PTO determines whether the mark is suitable for registration. Once accepted, the trademark is published in the Trademark Official Gazette to allow any party 30 days opposing. If no opposition is filed, the registration is issued. The entire process usually takes about 13 months. COPYRIGHT A copyright protects original works of authorship. The protection does not protect the idea itself. It allows someone else to use the idea in a different manner. In 1980 the Computer Software Copyright Act was added to provide explanation of the nature of software protection under copyright law. Authors of software are protected in a manner similar to authors of artistic works. The idea is not eligible for protection, but the actual software program is eligible. The PTO issues registration for software source codes and object codes programs. Protection of material on the Internet has become an important issue. The New York Time recently claimed that Amazon.com couldn't use its best-seller list without its permission. Ownership of stock quotes, judicial decision, and real estate postings is also being questioned. Copyrights are registered with the Library of Congress. All that is needed is the form, two copies of the work, and the appropriate fee sent to the Register of Copyrights. The term of the copyright is the life of the author plus 50 years. In some instances, several forms of protection may be available: trademark, patent, and copyright. TRADE SECRETS A trade secret is not covered by any federal law but is recognized under common laws in each state. Employees may be asked to sign a confidential information agreement. The holder of the trade secret has the right to sue any signee who breaks the agreement. Nonprotected ideas could become a serious problem in the future unless the entrepreneur takes precautions.

To maintain secrecyTrain employees to refer sensitive questions to one person. Provide escorts for all office visitors. Avoid discussing business in public places. Control information that might be presented by employees at conferences or in journals. Use simple security such as locked file cabinets and shredders. Have employees and consultants sign non-disclosure agreements. Debrief departing employees. Avoid faxing any sensitive information. Mark documents "confidential" that need to be. Protection against the leaking of trade secrets is difficult to enforce, and legal action can be taken only after the secret has been revealed. LICENSING Licensing is an arrangement between two parties, where one party has proprietary rights protected by a patent, trademark, or copyright. This requires the licensee to pay a royalty to the holder of the proprietary rights in return for permission to copy the patent. Licensing has significant value as a marketing strategy to holders of patents. Procedure A patent license agreement specifies how the licensee would have access to the patent. Licensing a trademark usually involves an agreement where the entrepreneur operates a business using the trademark and agrees to specific requirements. The agreement must be carefully worded and should involve a lawyer. Licensing a trademark generally involves a franchising agreement. The entrepreneur operates a business using the trademark and agrees to pay a fixed sum for use of the trademark. The franchisee also pays a royalty based on sales volume, buys supplies from the franchiser, or some combination of these. Copyrights are also popular licensed property. They involve the right to use or copy books, software, music, photos, and plays. Celebrities will often license the right to use his or her name or image in a product. Hit movies can also result in new products. Licensing is also popular around special sports events. Licensing opportunities are plentiful but should be carefully considered and planned. A significant player in licensing is Walt Disney, which has been actively engaged in licensing for 65 years. Licensing can be valuable for a firm that lacks resources to conduct R&D to develop a product.

Technology licensing entails an agreement by which a firm (licensee) acquires rights to product technology from another firm (licensor.) Two reasons for licensing are to gain competitive advantage and to improve technical skills. Benefits Licensing can increase revenues, without the risk and costly start-up investment. Licensing can also be a way to start a new venture when the idea may infringe. PRODUCT SAFETY AND LIABILITY The Consumer Product Safety Act, passed in 1972, created a five-member commission that has the power to prescribe safety standards for products. The commission also has the power to identify what it considers to be substantial hazards and bar products it considers unsafe. The act was amended in 1990 to establish stricter guidelines for reporting product defects and resulting injuries and deaths. Manufacturers could be subject to fines of $1.25 million for not reporting product liability settlements or court awards. Any new product should be assessed as to whether it falls under the law. If it does, the entrepreneur has to follow appropriate procedures. Product liability problems are complex. Recent attempts to reform the legislation passed in Congress but were vetoed by the President. Claims regarding product safety and liability usually fall under one of these categories: 1. Negligence extends to all parts of the production and marketing process. 2. Warranty Consumers may sue when advertising overstates the benefits of a product or when the product does not perform as stated. 3. Strict Liability. A consumer can sue on the basis that the product was defective prior to its receipt. 4. Misrepresentation occurs when advertising or other information misrepresents material facts concerning the quality of the product. The best protection against product liability is to produce safe products and to warn consumers of any potential hazards. Four essential items in an agreement to provide the best legal protection: 1. All parties involved should be named and their roles specified. 2. The transaction should be described in detail. 3. The exact value of the transaction should be specified. 4. Obtain signatures of the persons involved in the deal

Generating the Business Ideas for starting a New Business

SOURCES OF NEW IDEAS A sound idea for a new product or service, properly evaluated, is essential to successfully launch a new venture. Some of the more frequently used ideas for new entrepreneur include consumers, existing companies, distribution channels, the federal government and research and development. Consumers- Potential entrepreneurs should pay close attention to the final focal point of a new product-the customer. This can be an informal or formal survey of consumers expressing their opinions. Care should be taken to ensure that the idea represents a large enough market. Existing Companies- Entrepreneurs should establish a formal method for monitoring and evaluating the products and services in the market. This may uncover ways to improve on present products, resulting in new product ideas. Distribution Channels- Because they are familiar with the needs of the market, channel members often have suggestions for new products. These channel members can also help in marketing the new product. Government Offices- The files of the Patent Office contain numerous new product possibilities. The patents can suggest other new product ideas. Several government agencies and publications are helpful in monitoring patent applications. New product ideas can also come in response to government regulations. Research and Development- The largest source for new ideas is the entrepreneur's own research and development. This can be a formal endeavor connected with one's current employment.
Important Weblink for Methods of Generating New Ideas

Methods of Generating New Ideas Product Planning and Development Process Once idea emerges from idea sources or creative problem solving, they need further development and refinement in to final product or service to be offered. This refining process- the product planning and development process is divided in to five major stages. Idea stage, concept stage, product development stage, test marketing stage and commercializing; it result in the product life cycle. Establishing evaluation criteria At each stage of product planning and development process, criteria for evaluation need to be established. These criteria should be broad, yet quantitative enough to screen the product carefully in the particular stage of development. Criteria should be developed to evaluate the new product in terms of market opportunity, competition the marketing system, financial factors and production factors. A market opportunity

and adequate market demand must exist. Current competing producers, prices, and policies should be evaluated in their impact on market share. The new product should be compatible with existing management capabilities. The product should be able to be supported by and contribute to the company's financial structure. The compatibility of new product's production requirements with existing plant, machinery, and personnel should be determined. Entrepreneurs should formally evaluate an idea throughout its evolution. Idea Stage Promising new product ideas should be identified and impractical ones eliminated in the idea stage allowing maximum use of company's resources. In the systematic market evaluation checklist method, each new product idea is expressed in terms of its chief values, merits, and benefits. This technique can be used to determine which new products should be pursued. The company should also determine the need for the new product and its value to the company. Need determination should focus on the type of need, its timing, the users involved, the importance of marketing variables, and the overall market structure and characteristics. In determining the product's value to the firm, financial scheduling should be evaluated. Concept Stage In the concept stage the refined idea is tested to determine consumer acceptance without manufacturing it. One method of testing is the conversational interview in which respondents are exposed to statements that reflect attributes of the product. Features, price, and promotion should be evaluated in comparison to major competitors to indicate deficiencies or benefits. The relative advantages of the new product versus competitors should be determined. Product Development Stage In this stage, consumer reaction is determined, often through a consumer panel. The panel can be given samples of the product and competitors' products to determine consumer preference. Participants keep the record of their use of product and comment on its virtues and deficiencies. The panel of consumers is also given a sample of product and one or more competitive product simultaneously. One test product may already be on the market, whereas the other test product is new. Test Marketing Stage Although the results of product development stage provide the basis of the final marketing plan, the market test can be done to increase the certainty of successful commercialization. The last step in the evaluation process, the test marketing stage, provides actual sales results which indicate the acceptance level of consumers. Positive test results indicate the degree of probability of a successful product launch and company formation. E-Commerce and Business Start-Up and Growth

The Internet The Internet started in the 1970s with a U.S. Defense Department program named ARPA. In the early 1990s the concept of World Wide Web pages was developed. The Internet is a channel for the creation of profitable companies. Electronic business (ebusiness) is any process that a business organization conducts over a computermediated network. Electronic commerce (e-commerce) is any transaction completed over a computermediated network that involves the transfer of ownership or rights to use goods or services. Factors that facilitate the growth of e- commerce are: The widespread use of personal computers. The adoption of intranets in companies. The acceptance of the Internet as a business communications platform. Starting an E-Commerce Company The Internet is especially important for small and medium-sized companies as it lets them minimize marketing costs while reaching broader markets. An entrepreneur starting an Internet commerce venture needs to address many of the same strategic and tactical questions as other companies plus some specific online issues. One decision is whether to run the Internet operations within the company or outsource these operations. If handled in-house, expensive equipment and software have to be maintained. There are numerous possibilities for outsourcing the Internet business. The two major components of Internet commerce are front-end and back-end operations. Front-end operations are encompassed in the website's functionality, such as search capabilities, shopping cart, and secure payment. Back-end operations involve integrating customer orders with distribution channels and manufacturing capabilities. Website A website is an online connection between the company and its customers and can be developed in-house or outsourced. There are several important features of every website. Each website should have search capabilities. Other functions include shopping cart, secure server connection, credit card payment, and customer feedback features. Orders and other sensitive customer information should be transferred only through secure servers. An Internet company should also obtain a merchant account, which will allow the acceptance of major credit cards. A successful website has three characteristics: speed, speed, and speed. Short download time should be the primary concern of website developers. A website should be easy to use, customized for specific market target groups, and compatible with different

browsers. If the company is targeting international markets, then translation and cultural adaptation need to be considered. Probably the most difficult aspect of setting up an online business is advertising and promoting the web pages. A company can advertise its website through search engines, banner ads, e-mail, and classifieds. Banner ads can be targeted to the exact audience of the firm. The entrepreneur should collect e-mail addresses from customers for targeted e-mail campaigns. The Internet offers many low-cost or free services for small businesses, including Internet access, unlimited e-mail accounts, online calendar, instant messaging, and online conference rooms. Tracking Customer Information Electronic databases support personal marketing targeted at individual clients. The online company can capture customers' information in many ways. The U.S. government has generally maintained a policy of noninvolvement with Internet regulation, but the Federal Trade Commission has also pressed for new laws to protect minors. Relationships and Endorsements by Other Companies The company needs to establish strong connections with other companies in the supply chain to create an end-to-end value stream. The entrepreneur should protect its innovations and its relationship with other companies. Another type of relationship is endorsements by prominent Internet companies and associations. Participation in merchant networks can bring needed credibility. Doing E-Commerce as an Entrepreneurial Company The decision to go online should be made on a case-by-case basis. The products should be able to be delivered economically and conveniently. The product has to be interesting for a large number of people. Online operations have to bring significant cost reductions compared with brick-andmortar operations. The company must have the ability to economically draw customers to its website. Conflict between traditional and online marketing channels can lead to a hostile, competing position of once partnering companies. KEY TERMS Product development stage- In this stage, the new product is further developed into a prototype and tested Product life cycle- This cycle is generally divided into four major stages: product introduction, market growth, market maturity, and sales decline Product planning and development process- Generally divided into five major stages: idea stage, concept stage, product development stage, test marketing stage, test marketing stage, and commercialization stage

Notes- Factors impacting emergence of entrepreneurship

Factors impacting emergence of entrepreneurship
Various researchers world over have identified the factors that contribute to the development of entrepreneurship. Economists agree that the lack of entrepreneurs is not caused by economic conditions alone as was the earlier feeling. It is also due to the whole set of socio-cultural and institutional environment prevailing in the less developed countries. Various environmental factors influencing the entrepreneurship are as follows: I. Economic Factors: Economic environment exercises the most direct and immediate influence on entrepreneurship. The economic factors that affect the growth of entrepreneurship are the following: 1. Capital: Capital is one of the most important perquisites to establish an enterprise. Availability of capital facilitates for the entrepreneur to bring together the land of one, machine of another and raw material of yet another to combine them to produce goods. Capital is therefore, regarded as lubricant to the process of production. Our accumulated experience suggests that with an increase in capital investment, capital-output ratio also tends to increase. This results in increase in profit which ultimately goes to capital formation. This suggests that as capital supply increases, entrepreneurship also increases. France and Russia exemplify how the lack of capital for industrial pursuits impeded the process of entrepreneurship and an adequate supply of capital promoted it. 2. Labour: The quality rather quantity of labour is another factor which influences the emergence of entrepreneurship. Most less developed countries are labour rich nations owing to a dense and even increasing population. But entrepreneurship is encouraged if there is a mobile and flexible labour force. And, the potential advantages of low-cost labour are regulated by the deleterious effects of labour immobility. The considerations of economic and emotional security inhibit labour mobility. Entrepreneurs, therefore, often find difficulty to secure sufficient labour. They are forced to make elaborate and costly, arrangements to recruit the necessary labour. The problem of low-cost immobile labour can be circumvented by plunging ahead with capital-intensive technologies, as Germany did. It can be dealt by utilizing labour-intensive methods like Japan. By contrast, the disadvantage of high-cost labour can be modified by introduction of labour-saving innovations as was done in US. Thus, it appears that labour problems can be solved more easily than capital can be created. 3. Raw Materials: The necessity of raw materials hardly needs any emphasis for establishing any industrial activity and its influence in the emergence of entrepreneurship. In the absence of raw materials, neither any enterprise can be established nor can an entrepreneur be emerged. Of course, in some cases, technological innovations can compensate for raw material inadequacies. The Japanese case, for example, witnesses that lack of raw material clearly does not prevent entrepreneurship from emerging but influenced the direction of entrepreneurship. In fact, the supply of raw materials is not influenced by them but becomes influential depending upon other opportunity conditions. The more favorable these conditions are, the more likely is the raw material to have its influence of entrepreneurial emergence. 4. Market: The fact remains that the potential of the market constitutes the major determinant of probable rewards from entrepreneurial function. Frankly speaking, if the proof of pudding lies in eating, the proof of all production lies in consumption, i.e., marketing. The size and composition of market both influence entrepreneurship in their own ways. Practically, monopoly in a particular product in a market becomes more influential for entrepreneurship than a competitive market. However, the disadvantage of a competitive market can be cancelled to some extent by

improvement in transportation system facilitating the movement of raw material and finished goods, and increasing the demand for producer goods. D.S. Landes holds the opinion that improvements in transportation are more beneficial to heavy industry than to light industry because of their effects on the movement of raw materials. Paul H. Wilken claims that instances of sudden rather than gradual improvement in market potential provide the clearest evidence of the influence of this factor. He refers to Germany and Japan as the prime examples where rapid improvement in- market was followed by rapid entrepreneurial appearance. Thus, it appears that whether or not the market is expanding and the rate at which it is expanding are the most significant characteristics of the market for entrepreneurial emergence. 5. Infrastructure: Expansion of entrepreneurship presupposes properly developed communication and transportation facilities. It not only helps to enlarge the market, but expand the horizons of business too. Take for instance, the establishment of post and telegraph system and construction of roads and highways in India. It helped considerable entrepreneurial activities which took place in the 1850s. Apart from the above factors, institutions like trade/ business associations, business schools, libraries, etc. also make valuable contribution towards promoting and sustaining entrepreneurship in the economy. You can gather all the information you want from these bodies. They also act as a forum for communication and joint action. Of late, the importance of business and industry associations has increased tremendously. In the fast changing world of business, entrepreneurs have to move-collectively in order to be more effective and more efficient. They need to constantly check and influence the Governments thinking and decision-making. II. Social Factors: Social factors can go a long way in encouraging entrepreneurship. In fact it was the highly helpful society that made the industrial revolution a glorious success in Europe. The main components of social environment are as follows: 1. Caste Factor: There are certain cultural practices and values in every society which influence the actions of individuals. These practices and value have evolved over hundred of years . For instance, consider the caste system (the varna system) among the Hindus in India. It has divided the population on the basis of caste into four divisions. The Brahmana (priest), the Kshatriya (warrior), the Vaishya (trade) and the Shudra (artisan): It has also defined limits to the social mobility of individuals. By social mobility we mean the freedom to move from one caste to another. The caste system does not permit an individual who is born a Shridra to move to a higher caste. Thus, commercial activities were the monopoly of the Vaishyas. Members of the three other Hindu Varnas did not become interested in trade and commence, even when India had extensive commercial inter-relations with many foreign countries. Dominance of certain ethnical groups in entrepreneurship is a global phenomenon. The protestant ethics in the west, the Sammurai in Japan, the trading classes in US and the family business concerns of France have distinguished themselves as entrepreneurs. 2. Family background: This factor includes size of family, type of family and economic status of family. In a study by Hadimani, it has been revealed that Zamindar family helped to gain access to political power and exhibit higher level of entrepreneurship. Background of a family in manufacturing provided a source of industrial entrepreneurship. Occupational and social status of the family influenced mobility. There are certain circumstances where very few people would have to be venturesome. For example in a society where the joint family system is in vogue, those members of joint family who gain wealth by their hard work denied the opportunity to enjoy the fruits of their labour because they have to share their wealth with the other members of the family.

3. Education: Education enables one to understand the outside world and equips him with the basic knowledge and skills to deal with day-to-day problems. In any society, the system of education has a significant role to play in inculcating entrepreneurial values. In India, the system of education prior to the 20th century was based on religion. In this rigid system, critical and questioning attitudes towards society were discouraged. The caste system and the resultant occupational structure were reinforced by such education. It promoted the idea that business is not a respectable occupation. Later, when the British came to our country, they introduced an education system, just to produce clerks and accountants for the East India Company, The base of such a system, as you can well see, is very anti-entrepreneurial. The unfortunate result of it is that young men and women in our country have developed a taste only for service. Their talents and capabilities have not been made much use of. Rather it has been wasted in performing routine conventional jobs. Our educational methods have not changed much even today. The emphasis is till on preparing students for standard jobs, rather than marking them capable enough to stand on their feet. 4. Attitude of the Society: A related aspect to these is the attitude of the society towards entrepreneurship. Certain societies encourage innovations and novelties, and thus approve entrepreneurs actions and rewards like profits. Certain others do not tolerate changes and in such circumstances, entrepreneurship cannot take root and grow. Similarly, some societies have an inherent dislike for any money-making activity. It is said, that in Russia, in the nineteenth century, the upper classes did not like entrepreneurs. For them, cultivating the land meant a good life. They believed that rand belongs to God and the produce of the land was nothing but gods blessing. Russian folk-tales, proverbs and songs during this period carried the message that making wealth through business was not right. 5. Cultural Value: Motives impel men to action. Entrepreneurial growth requires proper motives like profit-making, acquisition of prestige and attainment of social status. Ambitious and talented men would take risks and innovate if these motives are strong. The strength of these motives depends upon the culture of the society. If the culture is economically or monetarily oriented, entrepreneurship would be applauded and praised; wealth accumulation as a way of life would be appreciated. In the less developed countries, people are not economically motivated. Monetary incentives have relatively less attraction. People have ample opportunities of attaining social distinction by non-economic pursuits. Men with organizational abilities are, therefore, not c dragged into business. They use their talents for non-economic ends. The absence of proper economic motives is a general characteristic of agrarian societies in which people do not attach great value to business talents, industrial leadership etc. III. Psychological Factors: Many entrepreneurial theorists have propounded theories of entrepreneurship that concentrate especially upon psychological factors. These are as follows: 1. Need Achievement: The most important psychological theories of entrepreneurship was put forward in the early) 960s by David McClelland. According to McClelland need achievement is social motive to excel that tends to characterize successful entrepreneurs, especially when reinforced by cultural factors. He found that certain kinds of people, especially those who became entrepreneurs, had this characteristic. Moreover, some societies tend to reproduce a larger percentage of people with high need achievement than other societies. McClelland attributed this to sociological factors. Differences among societies and individuals accounted for need achievement being greater in some societies and less in certain others. Analyzing this phenomenon, Paul Wilken has said, entrepreneurship becomes the link between need achievement and economic growth, the latter being a specifically social factor.

The theory states that people with high need-achievement are distinctive in several ways. They like to take risks and these risks stimulate them to greater effort. The theory identifies the factors that produce such people. Initially McClelland attributed the role of parents, specially the mother, in mustering her son or daughter to be masterful and self-reliant. Later he put less emphasis on the parent-child relationship and gave more importance to social and cultural factors. He concluded that the need achievement is conditioned more by social and cultural reinforcement rather than by parental influence and such related factors. 2. Withdrawal of Status Respect: There are several other researchers who have tried to understand the psychological roots of entrepreneurship. One such individual is Everett Hagen who stresses the-psychological consequences of social change. Hagen says, at some point many social groups experience a radical loss of status. Hagen attributed the withdrawal of status respect of a group to the genesis of entrepreneurship. Giving a brief sketch of history of Japan, he concludes that it developed sooner than any non-western society except Russia due to two historical differences. First, Japan had been free from colonial disruption and secondly, the repeated long continued withdrawal of expected status from important groups (smaurai) in its society drove them to retreatism which caused them to emerge alienated from traditional values with increased creativity. This very fact led them to the technological progress through entrepreneurial roles. Hage believs that the initial condition leading to eventual entrepreneurial behavior is the loss of status by a group. He postulates that four types of events can produce status withdrawal: (a) (b) (c) (d) The group may be displaced by force; It may have its valued symbols denigrated; It may drift into a situation of status inconsistency; and It may not be accepted the expected status on migration in a new society.

He further postulates that withdrawal of status respect would give rise to four possible reactions and create four difference personality types : (a) Retreatist: He who continues to work in a society but remains different to his work and position; (b) Ritualist : He who adopts a kind of defensive behavior and acts in the way accepted and approved in his society but no hopes of improving his position; (c) and (d) Reformist: He is a person who foments a rebellion and attempts to establish a new society; Innovator: He is a creative individual and is likely to be an entrepreneur.

Hagen maintains that once status withdrawal has occurred, the sequence of change in personality formation is set in motion. He refers that status withdrawal takes a long period of time - as much as five or more generations - to result in the emergence of entrepreneurship. 3. Motives: Other psychological theories of entrepreneurship stress the motives or goals of the entrepreneur. Cole is of the opinion that besides wealth, entrepreneurs seek power, prestige, security and service to society. Stepanek points particularly to non-monetary aspects such as independence, persons self-esteem, power and regard of the society.

On the same subject, Evans distinguishes motive by three kinds of entrepreneurs: (a) (b) (c) Managing entrepreneurs whose chief motive is security. Innovating entrepreneurs, who are interested only in excitement. Controlling entrepreneurs, who above all other motives- want power and authority.

Finally, Rostow has examined intergradational changes in the families of entrepreneurs. He believes that the first generation seeks wealth, the second prestige and the third art and beauty. 4. Others: Thomas Begley and David P. Boyd studied in detail the psychological roots of entrepreneurship in the mid 1980s. They came to the conclusion that entrepreneurial attitudes based on psychological considerations have five dimensions: First came need-achievement as described by McClelland. In all studies of successful entrepreneurs a high achievement-orientation is invariably present. The second dimension that Begley and Boyd call locus of control This means that the entrepreneur follows the idea that he can control his own life and is not influenced by factors like luck, fate and so on. Need-achievement logically implies that people can control their own lives and are not influenced by external forces. The third dimension is the willingness to take risks. These two researchers have come to the conclusion that entrepreneurs who take moderate risks earn higher returns on their assets than those who take no risks at all or who take extravagant risks. Tolerance is the next dimension of this study. Very few decisions are made with complete information. So all business executives must, have a certain amount of tolerance for ambiguity. Finally, here is what psychologists call Type A behavior. This is nothing but a chronic, incessant struggle to achieve more and more in less and less of time Entrepreneurs are ch aracterize by the presence of Type A behavior in all their endeavors. IV. Political Factors: A football player might possess exceptional talent. But, his contribution to the nation and the world of sports would remain negligible, if his performance is restricted to the courtyard of his own house. He needs a football ground to practice on and resources to buy the accessories. He also requires encouragement and support from those in authority so that he could freely play with others and prove his talent. In the same way, an entrepreneur, however creative he/she may be, cannot function without the supportive actions of the Government. It is for the government/society to ensure the availability of required resources for the entrepreneurs and also the accessibility to them. This is because the successful entrepreneur contributes to the well being of the society. Policies relating to various-economic aspects like prices, availability of capital, labour and other inputs, demand structure, taxation, income distribution, etc. affect growth of entrepreneurship to a large extent. Promotive government activities such as incentives and subsidies contribute substantially to entrepreneurial performance. At the same time, Government policies like licenses, regulations, favouritism, government monopolies, etc. are undesirable for the growth of business enterprises. Above all, a Government that is politically stable and united can affect entrepreneurial activities in a significant manner. Is there a business entrepreneur in your neighborhoods? Try to gather information on his/her views on various government policies, for example, on taxation, finance, labour etc. Also ask him/her about the opportunities and growth prospects of a business unit. Write down your observations. India, all the above mentioned environmental forces have turned in favor of enterprising men and women. There is a visible change for the better in the highly inactive entrepreneurial field in the

country. The tight grip of religious and traditional, ideas and practices have begun to loosen. Dogmas (settled opinions) and superstitions have lost the hold they earlier had. It is encouraging the non-commercial classes to consider economic opportunities more sympathetically. As a result, occupational division based on caste system has undergone tremendous traditional activities, social approval etc. have become less important. More important now, are the economic factors such as access to capital and possession of entrepreneurial attitudes and business I knowledge. Development of infrastructure, changes in government policies in favor of business and industry and of course, rise in demand for products manufactured are some of the other factors that have led the Indian entrepreneurs to look for new business opportunities.

Notes- Entrepreneurship Process

Entrepreneurship Process:
The process of pursuing a new venture is embodied in the entrepreneurial process, which involves more than just problem solving in a typical management position. An entrepreneur must find, evaluate, and develop an opportunity by overcoming the forces that resist the creation of something new. Entrepreneurial process can be defined as the process through which a new venture is created by an entrepreneur. This process involves finding, evaluating, and developing an opportunity by overcoming the strong forces that resist the creation of something new. Steps in entrepreneurial process The process has four distinct phases: (1) Identification and evaluation of the opportunity, (2) Development of the business plan, (3) Determination of the required resources, and (4) Management of the resulting enterprise. Although these phases proceed progressively, no one stage is dealt with in isolation or is totally completed before work on other phases occurs. For example, to successfully identify and evaluate an opportunity (phase 1), an entrepreneur must have in mind the type of business desired (phase 4). Phase-1: Identify and evaluate opportunity: opportunity identification is the process by which an entrepreneur comes up with the opportunity for a new venture. Opportunity identification and evaluation is a very difficult task. Most good business opportunities do not suddenly appear, but rather result from an entrepreneurs alertness to possibili ties or, in some cases, the establishment of mechanisms that identify potential opportunities. Different Aspects of this step relates to Creativity and Business Idea generation Recognition of entrepreneurial opportunity Assessment of entrepreneurial opportunity (in terms of real and perceived value, risk and return Evaluating entrepreneurial opportunity (in terms of personal & entrepreneurial skills and competencies, prevailing and future circumstances and competitive environment) Opportunity Evaluation Process Most good business opportunities result from an entrepreneur being alert to possibilities. Some sources are often fruitful, including consumers and business associates. Channel members of the distribution system-retailers, wholesalers or manufacturers reps -are also helpful. Technically-oriented individuals often identify business opportunities when working on other projects. Whether the opportunity is identified by using input from consumers, business associates, channel members, or technical people, each opportunity must be carefully screened and evaluated. This evaluation of the opportunity is perhaps the most critical element of the

entrepreneurial process, as it allows the entrepreneur to assess whether the specific product or service has the returns needed compared to the resources required. This evaluation process involves looking atThe creation and length of the opportunity, Its real and perceived value, Its risks and returns, Its fit with the personal skills and goals of the entrepreneur, and Its uniqueness or differential advantage in its competitive environment. It is important to understand the cause of the opportunity, as the resulting opportunity may have a different market size and time dimension. The market size and the length of the window of opportunity are the primarily bases for determining risks and rewards. The risks reflect the market, competition, technology, and amount of capital involved. The amount of capital forms the basis for the return and rewards. The return and reward of the present opportunity needs to be viewed in light of any possible subsequent opportunities as well. The opportunity must fit the personal skills and goals of the entrepreneur. The entrepreneur must be able to put forth the necessary time and effort required for the venture to succeed. One must believe in the opportunity enough to make the necessary sacrifices. The methodology for evaluating risks and rewards, frequently indicates that an opportunity offers neither a financial nor a personal reward commensurate with the risks involved. Opportunity assessment plan Opportunity analysis, or what is frequently called an opportunity assessment plan, is one method for evaluating an opportunity. It is not a business plan. Compared to a business plan, it should be shorter; focus on the opportunity, not the entire venture; and provide the basis for making the decision of whether or not to act on the opportunity. An opportunity assessment plan includes the following: a description of the product or service, an assessment of the opportunity, an assessment of the entrepreneur and the team, specifications of all the activities and resources needed to translate the opportunity into a viable business venture, and the source of capital to finance the initial venture as well as its growth. The assessment of the opportunity requires answering the following questions: What market need does it fill? What personal observations have you experienced or recorded with regard to that market need? What social condition underlies this market need? What market research data can be marshaled to describe this market need? What patents might be available to fulfill this need? What competition exists in this market? How would you describe the behavior of this competition? What does the international market look like? What does the international competition look like? Where is the money to be made in this activity? Phase-2: Develop Business Plan: A business plan is the written description of the future direction of the business. It helps entrepreneur in Putting Ideas together and Preparing B-Plan Draft. A good business plan must be developed in order to exploit the defined opportunity. This is a very time-consuming phase of the entrepreneurial process. An entrepreneur usually has not prepared a business plan before and does not have the resources available to do a good job. A good business plan is essential to developing the opportunity and determining the resources required, obtaining those resources, and successfully managing the resulting venture.

B-plan Format (a) Title Page (b) Table of Contents (c) Introductory Page (Name and address of business, and promoters, Nature of Business, Statement of financing needs) (d) Executive summary (e) Description of Industry- Industry Analysis ( Future outlook and trends, Competitors analysis, Market segmentation, Industry and market forecast) (f) Description of Business (Product(s), Service(s), Size of business, Office equipments and personnel, Background of entrepreneurs) (g) Functional/Operational Plans Production plan (Manufacturing Process, Physical Plant (Layout and Location), Machinery and Equipments, Production inputs and output specification (Raw material, tools and consumables, suppliers) Operational Plan (Descriptions of new business operations, Flow of orders for goods/services, Technology utilization) Marketing Plan(4-P Description (Product, Pricing, Place and Promotion elements), Product Forecasting, Controls) Organizational Plan (Form of ownership, Organizational structure Design, Job Design & Descriptions (Roles & responsibilities of members of organization), Manpower plan, Management-Team background) Financial Plan (Statement of financing needs & Capital structuring, Source of financing details, Statement of application of funds, Statement of financing working capital needs, Cash Budget, Proforma Income statement and Balance Sheet, Cash & funds flow projections, Break-even analysis) (h) Assessment of Risk and Uncertainty Identification of Risk-aspects Evaluate weakness of business SWOT analysis Contingency Plan (i) Appendix (Backup material) Letters Market research Data Leases or contracts Price lists from suppliers 3. Determination of Resource Requirement Determine existing resources Identify Resource Gaps and available Suppliers Develop access to and procure needed resources 4. Manage the enterprise Develop Management Style Understand key variables for success Identify problems and Potential problems Implement control systems Develop growth strategy Phase 3: Determine the Resources Required. Assessing the resources needed starts with an appraisal of the entrepreneurs present resources. Any resources that are critical must be distinguished from those that are just helpful. Care must be taken not to underestimate the amount and variety of resources needed. The entrepreneur should also assess the downside risks associated with insufficient or inappropriate resources.

The next step in the entrepreneurial process is acquiring the needed resources in a timely manner while giving up as little control as possible. An entrepreneur should strive to maintain as large an ownership position as possible, particularly in the start-up stage. As the business develops, more funds will probably be needed to finance the growth of the venture, requiring more ownership to be relinquished. The entrepreneur also needs to identify alternative suppliers of these resources along with their needs and desires. By understanding resource supplier needs, the entrepreneur can structure a deal that enables the resources to be acquired at the lowest possible cost and with the least loss of control. Phase 4: Manage the Enterprise. After resources are acquired, the entrepreneur must use them to implement the business plan. The operational problems of the growing enterprise must also be examined. This involves implementing a management style and structure, as well as determining the key variables for success. A control system must be established, so that any problem areas can be quickly identified and resolved. Some entrepreneurs have difficulty managing and growing the venture they created.

Notes- Knowledge and Skills Requirement

Knowledge and skills requirement:
Entrepreneurship is a young or immature science. In order to build the body of knowledge that underlies the art of entrepreneurship we must create academic models that can successfully be applied in industry. The art and science of entrepreneurship are complementary to each other and, therefore, require simultaneous advances in both theory as well as practice. 1. Knowledge Requirement: In simple terms, knowledge means collection and retention of information in ones mind. Knowledge is necessary for performing a task but not sufficient. For example, a person having the knowledge of cricket playing could be in a position to describe how to play. But, mere description wil1 not enable the listener to play cricket unless something more than knowledge is there. We see in real life that people possessing mere knowledge have miserably failed while actually performing the task. What this implies is that one also needs to have skills to translate the knowledge into action/practice. One should have a certain command of knowledge in business, law, finance, as an entrepreneur, accounting, tax, etc. as an entrepreneur. It is not necessarily to experts in each area, but it is required to understand and grasp knowledge of his program and relevant programs, and comprehend by analogy. Knowledge of Academic Technical- The characteristic of modern economy requires an entrepreneur to have a deep command of the academic knowledge in the career he is embarking on, or he will not be able to analyze the situation correctly, which is the most prominent in high-tech walks. The entrepreneurs who holding a deep command of academic technical knowledge always can grasp the developing trend of the things with their sharp eyes, raising unique opinions and strategies, and work out the corresponding strategies to achieve the success of the enterprises. Knowledge of Financial Management- The main content of financial management knowledge is the running and operating of the capital. Simply speaking, financial management is how to manage your money, that is, how to reasonably and effectively run and distribute your capital to gain more profit. In the modern enterprises, financial management goes through the whole process of economic activities. It not only reflects the achievements of the economic activities, playing the role of predicating and deciding, but also exerts the function of controlling and examining.

Knowledge of Operation Management- Against the market economy situation, the success and lose of the companies lies in operation. In the gradually complicated and fierce marketing competition, entrepreneurs can not just run the enterprise with experience and intuition, but to arm them with effective operation management knowledge and direct the operation activities. Knowledge of Law- We are living in a society under the rule of law, marketing economy itself is economy under law. An entrepreneur without any knowledge of law is like a driver who does not know the rule of traffic. Should luckily there was no accident, the driver will at last be fined or confiscated of the driving license. Meanwhile, as a legal entrepreneur, when his rights are infringed, he should be good at safeguarding his right with the arm of law. Knowledge of Finance- Finance is the allocating of the capital, involving the problems about how to gain the fund needed in development. No matter how capable the entrepreneur is in running, if there is no capital, nothing will be achieved. So no matter when it is at the beginning or during the process of the business establishment, collecting funds that is needed is of great importance. 2. Skills Requirement: Skill is the ability to demonstrate a system and sequence of behavior which results in something observable, something that one can see. A person with playing ability, i.e., skill can properly identify the sequence of action to be performed to win the cricket match. Remember, while knowledge of playing cricket could be acquired by reading, talking or so on, skill to actually play cricket can be acquired by practice i.e., playing on a number of occasions. This means both knowledge and skill are required to perform a task. The skills required by entrepreneurs can be classified in to three main areas: 1. Technical skills involve such things as writing, listening, oral presentations, coaching, and technical know-how. 2. Business management skills include those areas involved in starting, developing and managing any enterprise. 3. Personal entrepreneurial skills differentiate an entrepreneur from a manager and include inner control (discipline), risk taking, innovativeness, persistence, visionary leadership, and being change oriented. These skills and objectives form the basis of the modular approach to an entrepreneurship curriculum. Today entrepreneurs are recognizing the need to learn some of the science of management in an MBA program in order to grow their businesses effectively in the global environment.

Entrepreneurial Competencies
(i) Initiative- acting out of choice rather than compulsion, taking the lead rather than waiting for others to start. (ii) Sees and Acts on Opportunities- A mindset where one is trained to look for business opportunities from everyday experiences. Recall oranges example. (iii) Persistence- A never say die attitude, not giving up easily, striving In formation seeking continuously until success is achieved. (iv) Knowing- Knowing who knows, consulting experts, reading relevant material and an overall openness to ideas and information. (v) Concern for High Quality of Work- Attention to details and observance of established standards and norms. (vi) Commitment to Work Contract- Taking personal pains to complete a task as scheduled. (vii) Efficiency Orientation- Concern for conservation of time, money and effort. (viii) Systematic Planning- Breaking up the complex whole into parts, close examination of the parts and inferring about the whole; e.g. simultaneously attending to production, marketing and financial aspects (parts) of the overall business strategy (the whole). (ix) Problem solving-Observing the symptoms, diagnosing and curing.

(x) on (xi) (xii) (xiii) (xiv) (xv) to

Self-confidence- Not being afraid of the risks associated with business and relying ones capabilities to successfully manage these. Assertiveness- Conveying emphatically ones vision and convincing others of its value. Persuasion- Eliciting support of others in the venture. Use of Influence Strategies- Providing leadership. Monitoring- Ensuring the progress of the venture as planned. Concern for Employee Welfare- Believing in employee well being as the key competitiveness and success and initiating programmes of employee welfare.

Creativity and the Business Idea

1. SOURCES OF NEW IDEAS A. A sound unique idea for a new product or service, properly evaluated, is essential to successfully launch a new venture. B. Consumers. 1. Potential entrepreneurs should continually pay close attention potential customers. 2. This can be an informal or formal survey of consumers expressing their opinions. 3. Be sure that the idea represents a large enough market. C. Existing Products and Services. 1. Potential entrepreneurs should establish a formal method for monitoring and evaluating the products and services in the market. 2. This may uncover ways to improve on present products, resulting in new product or service ideas. D. Distribution Channels. 1. Because they are familiar with the needs of the market, channel members often have suggestions for new products. 2. These channel members can also help in marketing the new product. E. Federal Government. 1. The files of the Patent Office contain numerous new product possibilities. a. The patents can suggest other new product ideas. b. Several government agencies and publications, such as the Official Gazette, monitor patent applications. 2. New product ideas can also come in response to government regulations. F. Research and Development. 1. The largest source for new ideas is the entrepreneurs own research and development.

2. This can be a formal endeavor connected with ones current employment or an informal lab in the garage. II. METHODS FOR GENERATING IDEAS A. There are several methods to help generate and test new ideas as a basis for the new venture. B. Focus Groups. 1. Focus group interviews involve a moderator leading a group through an open in-depth discussion rather than simply asking questions. 2. The moderator focuses the discussion on the new product area in either a directive or nondirective manner. 3. The participants are stimulated by comments from other group members in developing a new product idea. 4. The focus group is also an excellent method for initial screening of ideas and concepts. C. Brainstorming. 1. Brainstorming allows people to be stimulated to greater creativity by participating in organized group exercises. 2. When using brainstorming four rules are followed: a. No criticism is allowed by anyone in the group. b. Freewheeling is encouraged. c. Quantity of ideas is desired. d. Combinations and improvements of ideas are encouraged. 3. Brainstorming sessions should be fun with no one dominating or inhibiting the discussion. D. Problem Inventory Analysis. 1. Problem inventory analysis uses individuals in a manner similar to focus groups, but instead of generating new ideas, consumers are given a list of problems for a general product category. 2. They are then asked to identify products in this category that have those problems. 3. It is often easier to relate known products to suggested problems in the creation of new product ideas. 4. Problem inventory analysis should be used primarily to identify product ideas for further development. 5. Results from product inventory analysis must be carefully evaluated as they may not actually reflect a new business opportunity.

III. CREATIVE PROBLEM SOLVING A. Creative problem solving is important in identifying a new product, but personal creativity declines with age, education, lack of use, and bureaucracy. 1. Creativity generally declines in stages. 2. Latent creative potential can be stifled by perceptual, cultural, emotional, and organizational factors. B. Brainstorming, the most widely used technique, can generate possible ideas about a problem in a limited time through spontaneous contributions of participants. 1. Once the problem statement is prepared, 6 to 12 individuals are selected, with no group member being an expert in the field of the problem. 2. All ideas are recorded, with no criticism allowed. C. Reverse Brainstorming. 1. Reverse brainstorming is similar to brainstorming, except that criticism is allowed. 2. Since the focus is on the negative aspects of a product or service, care must be taken to preserve group morale. 3. The process usually involves identifying everything wrong with an idea, then a discussion of ways to overcome the problems. D. Brain writing. 1. Brain writing is a form of written brainstorming. 2. It is silent, written generation of ideas by a group of people. 3. Participants write their ideas on special forms that circulate within the group. E. Gordon Method begins with group members not knowing the exact nature of the problem. 1. The entrepreneur starts by mentioning a general concept associated with the problem and the group responds with ideas. 2. The actual problem is then revealed, enabling the group to make suggestions for implementation. F. Checklist Method. 1. A new idea is developed through a list of related issues. 2. The entrepreneur can use the list of questions to guide the development of an idea. G. Free Association. 1. One of the simplest methods to generate new ideas is free association. 2. A word related to the problem is written down, then another, with each word adding something to the thought process.

H. Forced Relationships. 1. Forced relationships try to force relationships among some product combinations. 2. The steps in the process: a. Isolate the elements of the problem. b. Find the relationships between these elements. c. Record the relationship in an orderly form. d. Analyze the relationships to find ideas. e. Develop new ideas from these patterns. I. Collective Notebook Method. 1. A small notebook is prepared including a statement of the problem, blank pages, and background data. 2. Participants consider the problem and its solution, recording ideas several times a day. 3. A list or summary of the best ideas becomes the topic of a final creative focus group. J. Attribute Listing. 1. Attribute listing is an idea-finding technique requiring the entrepreneur to list the attributes of a problem and look at each from a variety of viewpoints. 2. Unrelated objects can be brought together to form new combinations and possible uses. K. Big-Dream Approach. 1. The big-dream approach requires the entrepreneur to dream about the problem and its solution, thinking big. 2. Ideas should be conceptualized without any constraints. L. Parameter Analysis. 1. Parameter analysis involves parameter identification and creative synthesis. 2. Parameter identification analyzes variables in the situation to determine their relative importance. 3. The relationship between parameters that describe the underlying issues is examined and a solution developed (creative synthesis.) M. Opportunity Recognition. 1. Some entrepreneurs have the ability to recognize a business opportunity which is fundamental to the entrepreneurial process.

2. The keys to recognizing an opportunity lies in the knowledge and experience of the individual entrepreneur. 3. Other important factors are entrepreneurial alertness and entrepreneurial networks. IV. PRODUCT PLANNING AND DEVELOPMENT PROCESS A. Once ideas emerge they need further development and refinement. 1. The production planning and development process is divided into five major stages. 2. This process results in the start of the product life cycle. Stage 1: Establishing Evaluation Criteria. 1. Criteria for evaluation should be all-inclusive and quantitative enough to screen the product carefully. 2. A market opportunity and adequate market demand must exist. 3. Current competing producers, prices, and policies should be evaluated in their impact on market share. 4. The new product should have synergy with existing management capabilities. 5. The proposed product should be supported by and contribute to the companys financial well-being. 6. The compatibility of new products production requirements with existing plant, machinery, and personnel should be evaluated. 7. Entrepreneurs should formally evaluate an idea throughout its evolution. Stage 2: Idea Stage 1. Promising new product ideas should be identified and impractical ones eliminated. 2. In the systematic market evaluation checklist method, each new product idea is expressed in terms of its chief values, merits, and benefits. 3. This technique can be used to determine which new product alternatives should be pursued and which should be discarded. 4. The company should also determine the need for the product and its value to the company. 5. Need determination should focus on the type of need, its timing, the users involved, the importance of marketing variables, and the overall market structure and characteristics. 6. In determining the products value to the firm, financial scheduling should be evaluated. Stage 3: Concept Stage 1. In the concept stage the refined idea is tested to determine consumer acceptance. 2. One method of testing is the conversational interview in which respondents are exposed to statements that reflect attributes of the product idea.

3. Features, price, and promotion should be evaluated in comparison to major competitors. Stage 4: Product Development Stage. 1. In this stage, consumer reaction to the physical product is determined, often through a consumer panel. 2. The panel can be given samples of the product and competitors products to determine consumer preference. Stage 5: Test Marketing Stage. 1. A market test can be done to increase the certainty of successful commercialization. 2. The test marketing stage provides actual sales results, which indicate the acceptance level of consumers.

Functions of an Entrepreneur
An entrepreneur frequently has to wear many hats. He has to perceive opportunity, plan, organize resources, and oversee production, marketing, and liaison with officials. Most importantly he has to innovate and bear risk. The main functions of an entrepreneur are as follows: 1. Innovation: Innovation is one of the most important functions of an entrepreneur according to Schumpeter. An entrepreneur uses information, knowledge and intuition to come up with new products, new methods of reducing costs of a product, improvement in design or function of a product, discovering new markets or new ways of organization of industry. Through innovation, an entrepreneur converts a material into a resource or combines existing resources into new and more productive configurations. It is the creativity of an entrepreneur that results in invention [creation of new knowledge] and innovation [application of knowledge to create new products, services or processes.] Systematic innovation means monitoring the following for innovative opportunity: i. The unexpected success or failure or any unexpected outside event, (e.g. when the IT bubble burst the ITES sector started growing.) ii. Innovation based on process need [e.g. plate based cameras, film based cameras, digital cameras] iii. Changes in industry and market structure [e.g. video cassette VCD, DVD, Blue ray disc] iv. Demographics changes (e.g. increasing number of working women and nuclear families in most metropolitan cities) v. New knowledge (e.g. Pentium chip) 2. Risk and uncertainty bearing: According to Hoze list an entrepreneur performs the function of risk and uncertainty bearing. Every decision pertaining to development of new products, adapting new technologies, opening up new markets involves risk. Decision-making in an environment of uncertainty requires anticipation of risk. Profit is said to be the reward for anticipating and taking such risks. However it is pertinent to mention that the entrepreneur is not

a gambler, he only takes calculated risks. An entrepreneur develops the art of decision-making under conditions of uncertainty as a matter of survival. 3. Organization building: An entrepreneur has to organize men, material and other resources. He has to perform the functions of planning, co-ordination and control. He has to use his leadership qualities to build a team, generate resources and solve problems. With his organizational skills an entrepreneur builds an enterprise from scratch, nurtures it and makes it grow. His vision sows the seeds for a sound and vibrant organization and synergies are built in the enterprise. According to Kilby in a developing country even the imitator entrepreneurs are very important and the entrepreneurial role encompasses the following: i. Perception of market opportunities ii. Gaining command over scarce resources iii. Purchasing inputs iv. Marketing the products v. Dealing with bureaucrats vi. Managing human relations within the firm vii. Managing customer and supplier relations viii. Managing finance ix. Managing production x. Acquiring and overseeing assembly of the factory xi. Industrial engineering xii. Upgrading process and product xiii. Introducing new production techniques and products

What It Takes To Start a Business - Starting a New Business

--> Many people may enjoy the notion of starting their own business because of the lure of generating immediate profits for their innovative inventions and ideas. However, it takes more than just having an idea of a establishing a startup that will lead to a companys success. There is a considerable amount of planning that needs to take place prior to the launch of a company in addition to personal and financial dedication. Despite the fact that the majority of startups will eventually fail in their first year, many of these failures can be prevented if entrepreneurs simply took the needed time to properly assess if they have what it takes to run their own company. Industry experience

One question forthcoming enterprise founders should ask themselves is whether or not they are fully capable of starting their own business. The idea of a startup may seem like an alluring prospect, but without familiarity and understanding of the industry, entrepreneurs may experience a difficult time in sustaining their companys success. The imperative qualification of industry experience should not be overlooked because it may mean potential failure in the end. Lack of experience does not necessarily mean that entrepreneurs should not start a business; however, they should wait until they have developed considerable knowledge in the field. They can accomplish this by talking to other business owners within the same industry who can give practical advice about startup costs, revenue projections, expertise in running a company, and other additional company expenses. A prospective entrepreneur should also conduct independent research regarding competitors as well as find out which sorts of businesses are needed within their community. Risky business Many entrepreneurs will agree that starting a small business is a risky endeavor. Not only should ample time and energy be invested during a companys preliminary stages but company founders should also be aware that their reputation may be jeopardized if their business fails. In addition, if a company is not successful as anticipated, there may be a strong possibility that business owners may have to resort to closing or bankruptcy and lose much of their invested wealth. The first few years of a company is considered to be a very crucial time for entrepreneurs since their startups fate is unexpected. It is important that an individual evaluate the different risks involved when considering entrepreneurship. If they do not feel comfortable with taking these risks, then perhaps they may need to reconsider whether starting a small enterprise is suitable for them. For more information about the Pros and Cons of Angel Investing, please refer to our related articles section of Angel Investing. Be ready to be the boss Many first-time entrepreneurs will agree that the reality of running a small business is very different than what they had initially expected. Some business owners may have the misconception that once they launch their businesses, they will be able to finally have more available free time and can live a comfortable, stress-free lifestyle; however, this is not completely true. A significant part of owning a company and becoming your own boss includes an undeniable amount of sacrifice, where much arduous effort and comprehensive hours of labor is required. Many business owners may not be prepared for these daily challenges and may lack the necessary personal drive and motivation to manage their employees, deal with customers, or even run a whole company. Forthcoming entrepreneurs are encouraged to actively solicit the opinions of others to find out if they are completely capable of being their own boss and running a company. The pooled opinions may vary, and at times, be painful to accept; however, it is always a good practice to obtain constructive criticism from others before making the crucial decision to start a business. Family support Starting a small enterprise and managing family life are considered to be both demanding, full-time responsibilities. Both commitments encompass the sacrifice of time, effort, and finances to properly sustain. These can be quite difficult tasks for the entrepreneur to properly balance and for their family members to fully accept. Family members of business owners should be prepared for all the daunting challenges associated with a startup, including the demanding schedule of their loved one. It is a proven fact that entrepreneurship can be mentally, physically, and financially draining. Family members should

offer their loved ones understanding and emotional support, especially during the preliminary years of the company launch. Genuine enthusiasm and creativity Many people become inclined to start a business simply for the financial return. On the other hand, there are entrepreneurs who have the tendency to see beyond this monetary gain, are clearly very enthusiastic about entrepreneurship, and confident that their products and services are what people want. In addition, this latter group of entrepreneurs tends to have a relentless inherent sentiment that once their unique ideas are marketed, these innovations can clearly improve ones quality of life. This unwavering optimism and passion for their company is the driving force behind their solid success. For more information about Winning Entrepreneur Characteristics, please refer to our related articles section. Once an entrepreneur has evaluated they have what it takes to start a company, they can now follow a few steps to launch a successful business.

1.

Visualization and research of product, service, and market

The initial step to a successful business involves the company owners work in preparing and improving the products and services that will be offered to paid customers. Prospective entrepreneurs must first decide on the type of business they are interested in starting. They must then use those ideas along with their personal and professional experiences into envisioning and creating goods that will greatly attract a consumer base. The design and innovation of such products often entails extensive research of competitors and prospective consumers in the targeted markets. Once the products/services are determined, a product prospectus should be written, documenting how each of the products/services are prepared, used, and its competitive edge.

2.

Preparation of a marketing strategy and well-written business plan

Once entrepreneurs establish enough knowledge about their target markets and have implemented their active concepts into reality, they are now ready to market their goods and ideas. This often entails devising a marketing strategy which is successfully accomplished by paid professional assistance and/or experimental presentations to attract a consumer base. A detailed business plan is also needed for any business, regardless of the size of the company, which documents the companys objectives, their goods/services offered, startup costs, and the targeted market and customers. Every business plan varies, and the Small Business Administration (along with other private companies) may be able to offer paid technical and practical advice in creating a business plan tailored to a companys needs.

3.

Seeking professional assistance

Government agencies can offer company owners much needed expert and friendly advice on starting a business. In addition, lawyers and accountants can provide entrepreneurs with valuable information concerning government rules, regulations, zoning, and other legal issues. Many of these professionals can also critique proposed business plans and assist in determining which legal form is most suitable for their company (i.e. partnership, proprietorship, corporation, etc.).

4.

Sources of capital

The final step in starting a business entails obtaining the necessary funding to sustain a companys survival. Some sources include the use of personal savings, angel, (for more information about angel investors, please refer to our related articles section) and venture capitalist financing, borrowed money from business associates, private loans, and family and friends. The process of obtaining funding may be time consuming and frustrating; however, it is important to stay motivated until the desired capital is raised.

While many people can envision the idea of owning their own business, some do not have what it takes to start and successfully sustain a company. Most small enterprise failures can easily be avoided if business owners would simply be aware of the challenges that lie ahead and evaluate within themselves if they are fully prepared to start their own business. Once they are able to determine that they are capable, they can then take the necessary steps needed for startup success.

Unit-IV Functional Plans: The Organizational Plan

THE ORGANIZATIONAL PLAN Developing the Management Team Potential investors are interested in the management team and its ability and commitment to the new venture. Investors usually demand that the management team not operate the business part-time while employed full time elsewhere. It is also unacceptable for the entrepreneurs to draw a large salary. The entrepreneur should consider the role of the board of directors and/or a board of advisors in supporting the management of the new venture. LEGAL FORMS OF BUSINESS There are three basic legal forms and one new form of businesses. The three basic forms are: a. Proprietorship. b. Partnership. c. Corporation A new form is the limited liability company, which is now possible in most states. The entrepreneur should evaluate the pros and cons of each of the legal forms prior to submitting a business plan. He should determine the priority of several factors discussed below. It is also necessary to consider intangibles such as image to suppliers, existing clients, and prospective customers. Ownership In the proprietorship, the owner has full responsibility for operations. In a partnership, there may be owners with general or with limited ownership. In the corporation, ownership is reflected by ownership of shares of stock.

Liability of Owners The proprietor and general partners are liable for all aspects of the business. Since the corporation is a legal entity that is taxable and absorbs liability, the owners are liable only for the amount of their investment. To satisfy any outstanding debts of the business, creditors may seize personal assets of the owners in proprietorships or regular partnerships. In a partnership the general partners share the amount of personal liability equally, regardless of their capital contribution. In a limited partnership, the limited partners are liable only for their capital contributions. Costs of Starting a Business The more complex the organization, the more expensive it is to start. The least expensive is the proprietorship, where the only costs may be for filing for a business name. In a partnership a partnership agreement is needed, in addition this requires legal advice and should explicitly convey all parties' responsibilities, rights and duties. A limited partnership may be more complex to form because it must comply strictly with statutory requirements. The corporation can be created only by statute. The owners are required to register the name and articles of incorporation and meet state statutory requirements. Filing fees and an organization tax may be incurred. Legal advice is necessary to meet the statutory requirements. Continuity of Business In a sole proprietorship, the death of the owner results in the termination of the business. In a limited partnership, the death of a limited partner has no effect on the existence of the partnership. o A limited partner may be replaced, depending on the partnership agreement.

o If a general partner in a limited partnership dies or withdraws, the limited partnership is terminated unless the partnership agreement specifies otherwise. In a partnership, the death or withdrawal of one of the partners results in termination of the partnership, but this can be overcome by the partnership agreement. o Usually the partnership will buy out the withdrawn partner's share at a predetermined price. o Another option is to have a member of the withdrawn partner's family take over as partner. The corporation has the most continuity, as the owner's death or withdrawal has no impact on continuity of the business, unless it is a closely held corporation. Transferability of Interest Each of the forms of business offers different advantages as to the transferability of interest. In a proprietorship, the entrepreneur has the right to sell any assets. In the limited partnership, the limited partners can sell their interests at any time without consent of the general partners. A general partner cannot sell any interest unless specified in the partnership agreement. In a corporation shareholders may transfer their shares at any time. In the S Corporation, the transfer of interest can occur only as long as the buyer is an individual. Capital Requirements The need for capital during the early months can become one of the most critical factors in keeping a new venture alive. For a proprietorship, any new capital can only come from loans or by additional personal contributions. Often an entrepreneur will take a second mortgage as a source of capital. Any borrowing from an outside investor may require giving up some equity. Failure to make payments can result in foreclosure and liquidation of the business. In the partnership, loans may be obtained from banks or additional funds may be contributed by each partner, but both methods require change in the partnership agreement. In the corporation, new capital can be raised by:

a. Stock may be sold as either voting or nonvoting. b. Bonds may be sold. c. Money may also be borrowed in the name of the corporation. Management Control The entrepreneur will want to retain as much control as possible over the business. In the proprietorship, the entrepreneur has the most control and flexibility in making business decisions. In a partnership the majority usually rules unless the partnership agreement states otherwise. In a limited partnership the limited partners have no control over business decision. Control of day-to-day business is in the hands of management. Major long-term decisions may require a vote of the major stockholders.

As the corporation increases in size, the separation of management and control is probable. Stockholders can indirectly affect the operation by electing someone to the board of directors. Distribution of Profits and Losses Proprietors receive all profits from the business. In the partnership, the distribution of profits and losses depends on the partnership agreement. Corporations distribute profits through dividends to stockholders. Attractiveness for Raising Capital In both the proprietorship and partnership, the ability to raise capital depends on the success of the business and personal capability of the entrepreneur. Because of its limitations on personal liability, the corporation is the most attractive form for raising capital. TAX ATTRIBUTES OF FORMS OF BUSINESS A. Tax Issues for Proprietorship- For the proprietorship the IRS treats the business as the individual owner. All income is personal income and the business is not taxed as a separate entity. The proprietorship has some tax advantages compared to the corporation.

a. There is no double tax on profits. b. There is no capital stock tax or penalty for retained earnings. B. Tax Issues for Partnership- The partnership's tax advantages and disadvantages are similar to the proprietorship. Limited partnerships can provide unique tax advantages. Both the partnership and proprietorship have a legal identity distinct from the partners, but this identity is only for accounting purposes. The income is distributed based on the partnership agreement, and the owners then report their share as personal income. C. Tax Issues for Corporation- the Corporation has the advantage of being able to take many deductions not otherwise available. The disadvantage is that dividends are taxed twice. This double taxation can be avoided if the income is distributed as salary. The corporation tax may also be lower than the individual rate. THE LIMITED LIABILITY COMPANY A popular new entity is the limited liability company (LLC), which offers similar advantages as the S Corporation but with more liberal tax rules under subchapter K. This form is a partnership-corporation hybrid with the following characteristics: 1. Where the corporation has shareholders, the LLC has members. 2. No shares are issued, and each member owns an interest in the business. 3. Liability does not extend beyond the member's capital contribution. 4. Members may transfer their interest only with the unanimous written consent of the remaining members. 5. The standard acceptable term of an LLC is 30 years. 6. The laws governing formation of the LLCs differ from state to state. The LLC is similar to an S corporation, but is more flexible. A major concern with LLCs is in international business, where the context of unlimited liability is still unclear. The primary differences between the limited partnership and the LLC are that the limited partnership must have at least one general partner with unlimited liability for partnership debts. The acceptability of the LLC should grow as state statutes are clarified and international rules established. With the assistance of a tax attorney, owners should compare alternative forms of ownership.

DESIGNING THE ORGANIZATION The design of the initial organization will be simple. The entrepreneur may perform all of the functions alone. He or she sometimes is unwilling to give up responsibility to others. The entrepreneur may have difficulty making the transition from a start-up to a growing wellmanaged business that maintains its success over a long period of time. As the workload increases the organizational structure will need to expand to include additional employees with defined roles. Interviewing and hiring procedures will need to be implemented. For many new ventures, part-time employees may be hired, raising commitment and loyalty issues. The organization must identify the major activities required to operate effectively. The design of the organization will indicate to employees what is expected of them in five areas: Organizational structure, which defines members' jobs and the relationship these jobs have to one another. Rewards are in the form of bonuses, promotion, and praise. A selection criterion is the set of guidelines for selecting individuals for each position. The organization's design can be simple or complex. There are two stages of development in an organization Stage 1: The new venture is operated by one person, the entrepreneur, with no need for sub managers. Stage 2: As the business expands, the organization may be described as Stage 2. a. Sub managers are hired to coordinate, organize, and control aspects of the business b. .Measurement, evaluation, rewards, selection, and training become necessary. Stage 3 may exist when the firm is large enough that a third level of managers is added. As the organization evolves, the manager's decision roles become more critical. The primary concern is to adapt to changes in the environment and seek new ideas. The manager will also need to respond to unexpected pressures, referred to as "putting out fires." Another role is that of allocator of resources, delegating budgets and responsibility. The final role is that of negotiator, as the entrepreneur can be the only person with the appropriate authority. BUILDING THE SUCCESSFUL ORGANIZATION Before writing the organization plan, it is helpful to prepare a job analysis. The job analysis serves as a guide in determining hiring procedures and job descriptions and specifications. As the size of the venture changes, the process becomes more complex. The place to start is with the tasks that need to be performed to make the venture viable. After this list is made, then

determine how many positions and what types of persons will be needed. Other decisions to be made early in planning process: a. Where to advertise for employees. b. How they will be trained. c. How they will be compensated. Searching for senior talent requires a different strategy. Usually networking provides the best source of candidates. Some recruiting firms are also specializing in placing senior people in start-ups. The most important issues in the business plan are the job descriptions and specifications.

Unit-IV Functional Plans: Marketing Plan

MARKETING PLAN Purpose and Timing of the Marketing Plan- The marketing plan establishes how the entrepreneur will effectively compete and operate in the marketplace. Marketing planning should be an annual activity focusing on decisions related to the marketing mix variables. The marketing plan section should focus on strategies for the first three years of the venture. For the first year, goals and strategies should be projected monthly. For years two and three, market results should be projected based on longer-term goals. Preparing an annual marketing plan becomes the basis for planning other aspects of the business. Understanding the marketing plan The marketing plan should answer three basic questions: Where have we been? -The history of the marketplace, marketing strengths and weaknesses, and market opportunities. Where do we want to go (short term)? - Marketing objectives and goals in the next twelve months. How do we get there? -Specific marketing strategy that will be implemented. The marketing plan should be a guide for implementing marketing decision-making and not a superficial document. The mere organization of the thinking process involved in preparing a marketing plan can be helpful in understanding and recognizing critical issues.

MARKET RESEARCH FOR THE NEW VENTURE Information for developing the marketing plan may require some marketing research. Marketing research involves the gathering of data in order to determine such information as who will buy the product, what price should be charged, and what is the most effective promotion strategy. Marketing research may be conducted by the entrepreneur or by an external supplier or consultant. Market research begins with definition of objectives. Many entrepreneurs don't know what they want to accomplish from a research study. Defining the Purpose or Objectives One effective way to begin the marketing plan is to make a list of the information that will be needed to prepare the marketing plan. Possible objectives: Determine what people think of the product or service and if they would buy it. Determine how much customers would be willing to pay for the product. Determine where the customer would prefer to purchase the product. Determine where the customer would expect to hear about such a product or service. Gathering Data from Secondary Sources An obvious source is data that already exists, or secondary data, found in trade magazines, libraries, government agencies, and the Internet. The Internet can provide information on competitors and the industry, plus can be used for primary research. Commercial data may also be available, but the cost may be prohibitive. Free secondary information is available through: Bureau of Census and the Department of Commerce. State departments of commerce, chambers of commerce, and local banks. Private sources of data, such as Predicasts, the Business Index, and the Directory of Business Development Publications, can be found in a good business library. A local business library can also provide access to reference sources and articles about competitors and the industry. The entrepreneur should exhaust all possible secondary data sources, observation, and networking before beginning costly primary data research. Gathering Information from Primary Sources

Information that is new is primary data. Observation is the simplest approach. Networking is an informal method to gather primary data from experts in the field, can be a valuable lowcost research method. A recent study found that the most successful ventures were focused on information about competitors, the customer, and the industry. Less successful ventures were more focused on gathering information on general economic and demographic trends. Interviewing or surveying is the most common approach, but is more expensive. The questionnaire used by the entrepreneur should include questions designed to fulfill one or more of the objectives. Questions should be designed so they are clear and concise, without bias, and easy to answer. If the entrepreneur lacks experience, he or she should seek help in developing the questionnaire through Small Business Development Centers or a local education institution. Focus groups A focus group is a sample of 10 or 12 potential customers who participate in a discussion. Groups discuss issues in an informal, open format. These groups should be led by an experienced monitor. Experimentation involves control over specific variables in the research process. Analyzing and Interpreting the Results The entrepreneur can enter the results on a computer or hand-tabulate the results. Summarizing the answers to questions will give preliminary insights. Data can then be crosstabulated to provide more focused results. CHARACTERISTICS OF A MARKETING PLAN An effective marketing plan should: 1. Provide a strategy to accomplish the company mission. 2. Be based on facts and valid assumptions. 3. Provide for the use of existing resources. 4. Describe an organization to implement the plan. 5. Provide for continuity. 6. Be simple and short.

7. Be flexible. 8. Specify performance criteria that can be monitored and controlled

The marketing system identifies the major interacting components, both internal and external, that enable the firm to provide products to the marketplace. Environment factors, although largely uncontrollable, should be studied. Internal environmental factors are more controllable by the entrepreneur: Financial resources: The financial plan should outline the financial needs for the venture. Management team: An effective management team responsibilities assigned is needed for implementing the marketing plan. Suppliers: Suppliers used are generally based on a number of factors, such as price, delivery time, and quality. Company mission: Every new venture should define the nature of its business and what it hopes to accomplish THE MARKETING MIX The actual short-term marketing decisions in the marketing plan will consist of four important marketing variables, called the marketing mix: 1. Product or service. 2. Pricing. 3. Distribution. 4. Promotion. Each variable should be described in detail in the strategy section of the marketing plan. STEPS IN PREPARING THE MARKETING PLAN Step 1: Defining the Business Situation- The situation analysis is a review of where the company has been and considers many of the environmental factors. The entrepreneur should provide a review of past performance of the product and the company. Industry analysis should include information on market size, growth rate, suppliers, new entries, and economic conditions.

Step 2: Defining Target Market/Opportunities and Threats- The entrepreneur should have a good idea of who the customer or target market will be. The defined target market will usually represent one or more segments of the entire market. Market segmentation is the process of dividing the market into smaller homogeneous groups.. The process of segmenting is: a. Decide what general market or industry you wish to pursue. b. Divide the market into smaller groups based on characteristics of the customer. c. Select segment or segments to target. d. Develop marketing plan integrating the parts of the marketing mix. Step 3: Considering Strengths and Weaknesses- It is important for the entrepreneur to consider its strengths and weaknesses. Step 4: Establishing Goals and Objectives- Before strategy decisions can be outlined, the entrepreneur must establish realistic marketing goals and objectives. These answer the question "Where do we want to go?" These goals should specify such things as market share, profit, sales, market penetration, pricing policy, and advertising support. Not all goals and objectives must be quantified. It is a good idea to limit the number of goals to between six and eight. Step 5: Defining Marketing Strategy and Action Programs- Strategy and action decisions respond to the question "How do we get there?" It incorporates: 1. Product or Service- This includes a description of the product and may include more than the physical characteristics. It involves packaging, brand name, price, warranty, image, service, features, and style. 2. Customer Service- Meeting customer needs and creating loyalty involves a number of lowcost steps: In writing develop a statement of customer service principles. Train those employees who have direct contact with customers. Establish a process for evaluating customer service. Reward employees who are most effective in providing quality customer service. Make regular contact with customers. Invest in quality telephone equipment. Meet customer expectations.

Customer service is especially important for e-businesses. 3. Pricing- One of the difficult decisions is determining the appropriate price for the product. Factors such as costs, discounts, freight, and markups must be considered. Marketing research can help determine a reasonable price that consumers are willing to pay. 4. Distribution- This factor provides utility or makes the product convenient to purchase when it is needed. This variable must be consistent with other marketing mix variables. Type of channel, number of intermediaries and location of members should be described. Regardless of the type of business, it is usually necessary for the new venture to have a website. The Internet will become an increasingly important medium for information and distribution. Direct mail or telemarketing may be considered. Direct mail marketing is one of the simplest and lowest in entry costs. But the direct- marketing or Internet strategies are not a guarantee for success. The entrepreneur should evaluate all possible options for distribution. 5. Promotion- The entrepreneur needs to inform customers as to the product's availability using advertising media such as print, radio, or television. Usually television is too expensive unless cable television is a viable option. Larger markets can be reached using direct mail, trade magazines, or newspapers. A website may also create awareness and promote the product and services of the venture. It is possible to make use of publicity as a means of introduction. It is important that the marketing strategy and action programs be specific and detailed enough to guide the entrepreneur through the first year. Step 6: Coordination of the Planning Process- The management team must coordinate the planning process. The entrepreneur may be the only person involved but may lack experience in preparing the plan. Assistance is available from many sources, such as the SBA. Step 7: Designing Responsibility for Implementation- The plan must be implemented effectively to meet all of the desired goals and objectives. Someone must take the responsibility for implementing each decision made in the marketing plan. Step 8: Budgeting the Marketing Strategy- Planning decisions must also consider the costs involved in the implementation of these decisions. This budgeting will be useful in preparing the financial plan. Step 9: Implementation of the Marketing Plan- The marketing plan is meant to be a commitment to a specific strategy. A commitment to make adjustments as needed by market conditions is also valuable. Step 10: Monitoring Progress of Marketing Actions- Monitoring of the plan involves tracking specific results of the marketing effort. What is monitored is dependent on the specific goals and objectives outlined.

Performing a Feasibility Study

Can You Make Money with Your Business Idea This guide is a checklist for the owner/manager of a business enterprise or for one contemplating going into business for the first time. The questions concentrate on areas you must consider seriously to determine if your idea represents a real business opportunity and if you can really know what you are getting into. You can use it to evaluate a completely new venture proposal or an apparent opportunity in your existing business. Perhaps the most crucial problem you will face after expressing an interest in starting a new business or capitalizing on an apparent opportunity in your existing business will be determining the feasibility of your idea. Getting into the right business at the right time is simple advice, but advice that is extremely difficult to implement. The high failure rate of new businesses and products indicates that very few ideas result in successful business ventures, even when introduced by well established firm. Too many entrepreneurs strike out on a business venture so convinced of its merits that they fail to thoroughly evaluate its potential. This checklist should be useful to you in evaluating a business idea. It is designed to help you screen out ideas that are likely to fail before you invest extensive time, money, and effort in them. Preliminary Analysis A feasibility study involves gathering, analyzing and evaluating information with the purpose of answering the question: "Should I go into this business?" Answering this question involves first a preliminary assessment of both personal and project considerations. General Personal Considerations The first seven questions ask you to do a little introspection. Are your personality characteristics such that you can both adapt to and enjoy business ownership/management?

Do you like to make your own decisions? Do you enjoy competition? Do you have will power and self-discipline? Do you plan ahead? Do you get things done on time? Can you take advice from others? Are you adaptable to changing conditions? The next series of questions stress the physical, emotional, and financial strains of a new business.

Do you understand that owning your own business may entail working 12 to 16 hours a day, probably six days a week, and maybe on holidays? Do you have the physical stamina to handle a business?

Do you have the emotional strength to withstand the strain? Are you prepared to lower your standard of living for several months or years? Are you prepared to loose your savings? Specific Personal Considerations

Do you know which skills and areas of expertise are critical to the success of your project? Do you have these skills? Does your idea effectively utilize your own skills and abilities? Can you find personnel that have the expertise you lack? Do you know why you are considering this project? Will your project effectively meet your career aspirations The next three questions emphasize the point that very few people can claim expertise in all phases of a feasibility study. You should realize your personal limitations and seek appropriate assistance where necessary (i.e. marketing, legal, and financial).

Do you have the ability to perform the feasibility study? Do you have the time to perform the feasibility study? Do you have the money to pay for the feasibility study done? General Project Description

Briefly describe the business you want to enter. List the products and/or services you want to sell Describe who will use your products/services Why would someone buy your product/service? What kind of location do you need in terms of type of neighborhood, traffic count, nearby firms, etc.? List your product/services suppliers. List your major competitors - those who sell or provide like products/services. List the labor and staff you require to provide your products/services. Requirements for Success To determine whether your idea meets the basic requirements for a successful new project, you must be able to answer at least one of the following questions with a "yes".

Does the product/service/business serve a presently unserved need? Does the product/service/business serve an existing market in which demand exceeds supply? Can the product/service/business successfully compete with an existing competition because of an "advantageous situation," such as better price, location, etc.? Major Flaws

A "Yes" response to questions such as the following would indicate that the idea has little chance for success.

Are there any causes (i.e., restrictions, monopolies, shortages) that make any of the required factors of production unavailable (i.e., unreasonable cost, scare skills, energy, material, equipment, processes, technology, or personnel)? Are capital requirements for entry or continuing operations excessive? Is adequate financing hard to obtain? Are there potential detrimental environmental effects? Are there factors that prevent effective marketing? Desired Income The following questions should remind you that you must seek both a return on your investment in your own business as well as a reasonable salary for the time you spend in operating that business.

How much income do you desire? Are you prepared to earn less income in the first 1-3 years? What minimum income do you require? What financial investment will be required for your business? How much could you earn by investing this money? How much could you earn by working for someone else? Add the amounts in 5 and 6. If this income is greater that what you can realistically expect from your business, are you prepared to forego this additional income just to be your own boss with the only prospects of more substantial profit/income in future years? What is the average return on investment for a business of your type? Preliminary Income Statement Besides return on investment, you need to know the income and expenses for your business. You show profit or loss and derive operating ratios on the income statement. Dollars are the (actual, estimated, or industry average) amounts for income and expense categories. Operating ratios are expressed as percentages of net sales and show relationships of expenses and net sales. For instance 50,000 in net sales equals 100% of sales income (revenue). Net profit after taxes equals 3.14% of net sales. The hypothetical "X" industry average after tax net profit might be 5% in a given year for firms with 50,000 in net sales. First you estimate or forecast income (revenue) and expense dollars and ratios for your business. Then compare your estimated or actual performance with your industry average. Analyze differences to see why you are doing better or worse than the competition or why your venture does or doesn't look like it will float. These basic financial statistics are generally available for most businesses from trade and industry associations, government agencies, universities and private companies and banks. Forecast your own income statement. Do not be influenced by industry figures. Your estimates must be as accurate as possible or else you will have a false impression.

What is the normal markup in this line of business? i.e., the dollar difference between the cost of goods sold and sales, expressed as a percentage of sales? What is the average cost of goods sold percentage of sales? What is the average inventory turnover, i.e., the number of times the average inventory is sold each year? What is the average gross profit as a percentage of sales? What are the average expenses as a percentage of sales? What is the average net profit as a percent of sales? Take the preceding figures and work backwards using a standard income statement format and determine the level of sales necessary to support your desired income level. From an objective, practical standpoint, is this level of sales, expenses and profit attainable? Market Analysis The primary objective of a market analysis is to arrive at a realistic projection of sales. After answering the following questions you will be in a better position to answer question eight immediately above. Population

Define the geographical areas from which you can realistically expect to draw customers. What is the population of these areas? What do you know about the population growth trend in these areas? What is the average family size? What is the age distribution? What is the per capita income? What are the consumers' attitudes toward business like yours? What do you know about consumer shopping and spending patterns relative to your type of business? Is the price of your product/service especially important to your target market? Can you appeal to the entire market? If you appeal to only a market segment, is it large enough to be profitable? Competition

Who are your major competitors? What are the major strengths of each? What are the major weaknesses of each? Are you familiar with the following factors concerning your competitors: Price structure? Product lines (quality, breadth, width)? Location? Promotional activities? Sources of supply?

Image from a consumer's viewpoint? Do you know of any new competitors? Do you know of any competitor's plans for expansion? Have any firms of your type gone out of business lately? If so, why? Do you know the sales and market share of each competitor? Do you know whether the sales and market share of each competitor are increasing, decreasing, or stable? Do you know the profit levels of each competitor? Are your competitors' profits increasing, decreasing, or stable? Can you compete with your competition? Sales

Determine the total sales volume in your market area. How accurate do you think your forecast of total sales is? Did you base your forecast on concrete data? Is the estimated sales figure "normal" for your market area? Is the sale per square foot for your competitors above the normal average? Are there conditions, or trends, that could change your forecast of total sales? Do you expect to carry items in inventory from season to season, or do you plan to mark down products occasionally to eliminate inventories? If you do not carry over inventory, have you adequately considered the effect of mark-down in your pricing? (Your gross profits margin may be too low.) How do you plan to advertise and promote your product/service/business? Forecast the share of the total market that you can realistically expect - as a dollar amount and as a percentage of your market. Are you sure that you can create enough competitive advantages to achieve the market share in your forecast of the previous question? Is your forecast of dollar sales greater than the sales amount needed to guarantee your desired or minimum income? Have you been optimistic or pessimistic in your forecast of sales? Do you need to hire an expert to refine the sales forecast? Are you willing to hire an expert to refine the sales forecast? Supply

Can you make a list of every item of inventory and operating supplies needed? Do you know the quantity, quality, technical specifications, and price ranges desired? Do you know the name and location of each potential source of supply? Do you know the price ranges available for each product from each supplier? Do you know about the delivery schedules for each supplier? Do you know the sales terms of each supplier?

Do you know the credit terms of each supplier? Do you know the financial condition of each supplier? Is there a risk of shortage for any critical materials or merchandise? Are you aware of which supplies have an advantage relative to transportation costs? Will the price available allow you to achieve an adequate markup? Can you obtain the additional data needed? Are you aware that there is less than a 50-50 chance that you will be in business two years from now?

TYPES OF START-UPS
TYPES OF START-UPS A. A lifestyle firm is privately held and usually achieves only limited growth. 1. This type of firm may grow after several years to 30 or 40 employees. 2. A lifestyle firm exists primarily to support the owners and usually has little growth opportunity. B. Foundation Companies. 1. A foundation company is a type of company formed from research and development and lays the foundation for a new business area. 2. This firm can grow in five to ten years from 40 to 400 employees. 3. This type of start-up rarely goes public and draws little outside investor interest. C. High-Potential Venture. 1. This type of venture receives the most investor interest. 2. The company may start out like a foundation company, but its growth is far more rapid. 3. After five to ten years the company could employ around 500 employees, with $20-30 million in revenues. 4. These firms are also called gazelles and are most important for the economic development of an area.

Identifying and Evaluating the Opportunity for Creating New Venture

Most good business opportunities result from an entrepreneur being alert to possibilities. Some sources are often fruitful, including consumers and business associates. Channel members of the distribution system-retailers, wholesalers or manufacturer's reps-are also helpful. Technically-oriented individuals often identify business opportunities when working on other projects. Each opportunity must be carefully screened and evaluated-this is the most critical element of the entrepreneurial process.

The evaluation process involves looking ata. The creation and length of the opportunity b. Its real and perceived value c. Its risks and return. d. It's fit with the skills and goals of the entrepreneur e. Its differential advantage in its competitive environment f. It is important to understand the cause of the opportunity, as the resulting opportunity may have a different market size and time dimension.

The market size and the length of the window of opportunity are the primarily bases for determining risks and rewards. The risks reflect the market, competition, technology, and amount of capital involved. The amount of capital forms the basis for the return and rewards. The return and reward of the present opportunity needs to be viewed in light of any possible subsequent opportunities as well. The opportunity must fit the personal skills and goals of the entrepreneur. The entrepreneur must be able to put forth the necessary time and effort required for the venture to succeed. One must believe in the opportunity enough to make the necessary sacrifices. Opportunity analysis, or an opportunity assessment plan, should focus on the opportunity and provide the basis to make the decision, including: a. A description of the product or service b. An assessment of the opportunity c. Assessment of the entrepreneur and the team d. Specifications of all the activities and resources needed e. The source of capital to finance the initial venture

The most difficult aspect of opportunity analysis is the assessment of the opportunity.

Features, functions and qualities of an entrepreneur

An entrepreneur is regarded as an agent who buys factors of production at certain price in order to combine them into a product with a view to sell at an uncertain price in future. He is the person who takes decision in a state of uncertainty and he does things in a new and better way. He always dreams of innovation through various opportunities in the environment.

Features:
A close analysis of various definitions on entrepreneur reveals the following essential characteristics: 1. Calculated risk taker 2. Emphasis on innovation where new products, new methods of production is decided. 3. Organizing skill 4. Creative thinking and decision making 5. A man of self-confidence 6. He must have human relation ability 7. Desire for high achievement 8. Enough courage to face adversities in future.

Functions:
Entrepreneur discharges a number of functions which are primarily discussed on the basis of the following headings. i. Entrepreneurial functions consisting of organization building, risk taking and innovation. ii. Promotional functions consisting of discovery of idea, detailed investigation; assembling of requirements and financing the proposition. iii. Managerial functions consisting of planning, organizing staffing, directing, coordinating and controlling. iv. Commercial functions representing production, finance marketing, accounting and personnel.

Qualities of Successful Entrepreneur:

All entrepreneurs are not successful in undertaking an assignment. Only a few of them becomes successful entrepreneur. A successful entrepreneur is one who possesses the following characteristics i. He must have sound knowledge on the organization. ii. He should be a man with administrative ability. iii. He should be a man with administrative ability. iv. Ability to secure operation and judge people v. Ability to listen and social sensibility

Entrepreneurial Competencies
Entrepreneurial Competencies
1. What are entrepreneurial competencies? Name any three. Entrepreneurial competencies are the skills necessary for an entrepreneur to venture into an enterprise organize and manage an enterprise ably and competently realize the goal for which the enterprise is established

These competencies help and entrepreneur to successfully venture into an enterprise. These can be broadly classified under the following categories. (Choose any three of the following competencies) Behavioral competencies i.Initiative ii.Systematic planning iii.Creativity and innovation iv.Risk taking and Risk Management v.Problem solving vi.Persistence vii.Quality performance viii.Information management ix.Persuation and influencing abilities Enterprise launching competencies Enterprise managing competencies. 2. What do you understand from the term Behavioral Competencies? 1. Behavioral competencies are certain basic competencies to be acquired by the entrepreneur. 2. The behavioral competencies acquired will determine the type of behavior exhibited by the entrepreneur in performing various tasks in the discharge of his functions. 3. Some of these competencies are latent in the entrepreneur, which ned to be identified, nurse and nurtured. 4. Others are acquired through training and practice. 5. These are basic competencies that need to be acquired by all the entrepreneurs irrespective of the size, location, economic and social dimension. The behavioral competencies include the following. i.Initiative ii.Systematic planning iii.Creativity and innovation iv.Risk taking and Risk Management v.Problem solving vi.Persistence vii.Quality performance viii.Information management ix.Persuation and influencing abilities 3. Why are behavioral competencies important for an entrepreneur Behavioral competencies are important for an entrepreneur because of the following reasons. Theyre the basic competencies required by an entrepreneur o To venture into an enterprise. o To organize an enterprise o To manage an enterprise o Run the enterprise competitively o Realize the goals for which the enterprise is established Take the enterprise to the success levels 4. What are entrepreneurial competencies? Name any three. The following are the various behavioral competencies required by an entrepreneur. 1. Initiative

2. Systematic planning 3. Creativity and innovation 4. Risk taking and Risk Management 5. Problem solving 6. Persistence 7. Quality performance 8. Information management 9. Persuation and influencing abilities 5. Why is speed of performance required on the part of an entrepreneur? The entrepreneur puts lot of effort and in making a decision to take an initiative. Once he is decided to take an initiative he has to take the initiative ahead of others. Speed is an important factor in the success of the enterprise because if the entrepreneur is slow in implementing the initiative, chances are there that someone else will move forward and implement it. This calls for Alertness Agility and dynamism on the part of the entrepreneur. Due to these reasons speed of performance is required on the part of the entrepreneur. 6. What is the difference between creativity and innovation?

Creativity 1. Creativity is the ability to bring something new into existence.

Innovation 1. Innovation is the process of doing new things or bring new new ideas or new process or new products or new services into reality. 2. Innovation is a process that transforms creative ideass into useful realities. 3. An innovator may have the right ability to transform the ideas into products and services, but may suffer from shortage of creative thoughts and ideas.

2. Creativity is pre-requisite for innovation. 3. A creative individual may just have a vision but may not have the necessary resources or the drive to convert the idea into action.

7. A good entrepreneur combines the quality of a creative individual and an innovator Justify the statement. In many cases, a good entrepreneur adopts new ideas or services so that he will be the first to implement them. The entrepreneur may not have new and creative ideas. He might only use the creative ideas and innovative products and services to meet the challenges of a situation. He might take advantage of the utility of an idea or a product to create wealth. He uses the ideas and services only to solve the problems on the hand to achieve the objective. Competency in creativity and innovation are sometimes basic traits of certain individuals and help in achieving the goals. Thus we can say that a good entrepreneur combines the quality of a good entrepreneur and an innovator. 8. What are the areas involving risk in creating and managing an enterprise? The following are the areas involving risk in creating and managing an enterprise.

The design of the product or service and its acceptability. The resources availability. The availability of market. The variance in consumer expectations. The speed of change in the types and patterns of the products and services. The demand-supply situation. The finance flow in the market. The performance of tools and equipment.

The social and political climate for sustainability of the products. 9. In taking and managing a risk, the entrepreneur does not behave like a gambler Do you agree? While venturing into new ideas and services, the entrepreneur treads into areas of uncertainty. Thus the entrepreneur is exposed to risk. Hence risk taking and risk management are important aspects of entrepreneurial competencies. There are several areas and elements which throw potential challenge to the entrepreneur. Therefore, he has to take crucial risk-prone decisions in the process of discharging his responsibilities. However, unlike gamblers, an entrepreneur takes a calculated and perceived decision in the light of the facts and circumstances available at his disposal. So, we can say that, in taking and managing a risk, the entrepreneur does not behave like a gambler. 10. What are the general practices an entrepreneur should adopt to acquire the skills of risk management? The following are the general practices an entrepreneur should adopt to acquire the skills of risk management. 1. Analysis of various policies, programs and situations 2. Identification of roadblocks in the road map of the enterprise 3. Consideration of alternatives 4. Plan of action for alternatives 5. Crisis management 6. Possibility of the new ideas or services being hijacked by other powerful individuals or systems. 11. What are the standard problem solving competencies required for an enterprise? The following are the standard problem solving competencies required for an enterprise. a. Acquiring the necessary mindset which will help to understand that the problems are part of the process and start working on the problems in the context of the process to which the problems belong to. b. Basic understanding of the phenomenon that normally problems are always caused. c. Clear understanding of the fact that every problem has a solution and one must seek for the solution. d. Decision making capability to choose the relevant, contextual and pragmatic solution, among the available multiple solutions for a problem. e. Explore the alternate strategies till the solutions for the imminent problems are found. f. Find or look for resources that would help to solve the problems in an amiable way. g. Generating new ideas, products, services, visions so that the problems of the similar type do not occur in future. 12. Dicision-making skills are crucial for a successful entrepreneur What are those skills? The following are the decision-making skills that are crucial for a successful entrepreneur. a. Absolutely complete knowledge of the entire system of the enterprise. b. Broad understanding of the software, hardware and human-ware of the sytem. c. Complete knowledge of the types of resources involved and their flow and mobility. d. Different types of speed breakers in the flow of the operations, their magnitude and direction. e. Expert leve understanding of the urgency, the time and the impact of the decisions. f. Futuristics of the decision.

g. General impact of the decisions taken on the clients and the society in which the enterprise servives. 13. Why is persistence important for an entrepreneur? In general, entrepreneur pursuits are new and need very close attention. So, it calls for appropriate climate building and acceptability and required intense perseverance on the part of the entrepreneur. The entrepreneurship is a complex activity covering various parameters of the society. So, it is very difficult for any enterprise to be successful in the first attempt. Therefore, the failures or roadblocks to success and achievement should not deter the entrepreneur. He needs to have the quality of perseverance. Behavioral skills to persist even when the failure is visible are one of the qualities of a successful entrepreneur. The ability of persistence is indicative of the confidence of the entrepreneur in his system, tools and techniques. Thus we can say that persistence is important for an entrepreneur. 14. What is the persistence of an entrepreneur indicative of? The persistence of an entrepreneur is an indicative of the following. The faith of the entrepreneur in the system. The exactitude of the tools used in the system. The confidence in the quality of the product or the service. The understanding of the entrepreneur about the market. The conviction of the entrepreneur to succed.

The Financial Plan Of an Entrepreneur

Learning Objectives To understand why positive profits can still result in a negative cash flow. To understand the role of budgets in preparing pro forma statements. To learn how to prepare monthly pro forma cash flow, income, balance sheet, and sources and uses of funds statements for the first year of operation. To explain the application and calculation of the break-even point for the new venture. To illustrate the alternative software packages that can be used for preparing financial statements. The Financial Plan I. The financial plan provides a complete picture of: 1. How much and when the funds are coming into the organization. 2. Where the funds are going. 3. How much cash is available? 4. The projected financial position of the firm.

II.

The financial plan provides the short-term basis for budgeting and helps prevent a common problem-lack of cash. The financial plan must explain how the entrepreneur will meet all financial obligations and maintain its liquidity. In general, the financial plan will need three years of projected financial data for outside investors.

III.

IV.

Operating and Capital Budget

A. Before developing the pro forma income statement, the entrepreneur should prepare Operating and capital budgets. If the entrepreneur is a sole proprietor, he or she will be responsible for the Budgeting decisions. In a partnership, or where employees exist, the initial budgeting process may Begin with one of these individuals. Final determination of budgets will ultimately rest with the owners or entrepreneurs.

B. In the preparation of the pro forma income statement, the entrepreneur must first develop a sales budget, an estimate of the expected volume of sales by month. From sales forecasts, the entrepreneur will determine the cost of these sales. Estimated ending inventory will also be included.

C. Coproduction or Manufacturing Budget. This budget provides a basis for projecting cash flows for the cost of goods produced. The important information in this budget is the actual production required each month and the needed inventory to allow for changes in demand. This budget reflects seasonal demand or marketing programs, which can increase demand and inventory. The operating budget is an important document, as the pro forma income statement will only reflect the actual costs of goods.

D. Operating Budget. Next the entrepreneur can focus on operating costs. Fixed expenses (incurred regardless of sales volume) include rent, utilities, salaries, interest, depreciation, and insurance. The entrepreneur will need to calculate variable expenses, which may change from month to month depending on sales volume, such as advertising and selling expenses.

E. Capital budgets are intended to provide a basis for evaluating expenditures that will impact the business for more than one year. A capital budget may project expenditures for new equipment, vehicles, or new facilities. These decisions can include the computation of the cost of capital and the anticipated return on investment using present value methods. The entrepreneur should enlist the assistance of an accountant.

10 most essential managerial duties of an Entrepreneur

Managerial fictions denote a type of functions associated with managerial activities. As he acts as an organizer, he performs a number of managerial functions like planning organizing, staffing, directing, communicating, co-coordinating and controlling. 1. Planning: Planning is a basic managerial function of entrepreneur. Planning helps in determining the course of action to be followed for achieving various entrepreneurial objectives. It is decision in advance, what to do, when to do, how to do and who will do a particular task. Planning is process which involves thinking before doing. Planning is concerned with the metal state of entrepreneur. He thinks before undertaking a work. Other managerial functions of entrepreneurs such as organizing, staffing, directing, co-ordination and controlling are also undertaken after planning. Hart defines planning as the determination in advance of a line of action by which certain results are to be achieved. According to Terry, Planning is the selecting and relating of facts and the making and using of assumptions regarding the future in the visualization and formulations of proposed activities believed necessary to achieve desired results.

Planning is a process of looking ahead. The primary object of planning is to achieve better results. It involves the selection of entrepreneur objectives and developing policies, procedures, programmers, budgets, and strategies. Planning is a continuous process. A detailed planning is done in the beginning but the actual performance is reviewed and suitable changes are made in plans when actual execution is done. Plans may be of many kinds, such as short range plans, medium range plan, long range plans, standing plans, single use plans, strategic plan, administrative plans and operational plans. The process of Planning involves a number of steps: i) Gathering information, ii) Laying down objectives, iii) Developing planning premises, iv) Examining alternative courses of action, v) Evaluation of action patterns, vi) Reviewing limitations, vii) Implementation of plans. 2. Organizing: Every business enterprise needs the service of a number of persons to look after its different aspects. The entrepreneur sets up the objectives or goals to be achieved by its personnel. The energy of every individual is channelized to achieve the enterprise objectives. The function of organizing is to arrange, guide, co-ordinate, direct and control the activities of other factors of production, viz., men, material, money and machines so as to accomplish the objectives for the enterprise. In the words of Kountze and ODonnell, Organizing is that part for managing that involves establishing and intentional structure for roles for people in an enterprise to fill. Organization provides the necessary framework within which people association for the attainment of business objectives. Louis A. Allen describes organization as, the process identifying and grouping work to be performed, defining and delegating responsibility and authority and establishing relationships for the purpose of enabling people to work most effectively together in accomplishing objectives. The process organization involves the following steps: (i) To identifying the work to be performed; (ii) To classify or group the work;

(iii) To assign these groups of activities or work to individuals; (iv) To delegate authority and fix responsibility and (v) To co-ordinate these authority-responsibility relationship of various activities. The character and type of organization depends upon the size and nature of the enterprise. Though there are many types of organization but generally three types of organizations are in vogue: (i) Line organization (ii) Functional organization and (iii) Line and staff organization In line organization authority flows vertically from the top of the hierarchy to the bottom. Under functional organization, the work is divided into different departments. Each department deals in one type of work and it specializes in one work only. A workman has a work under many superiors who specialize in different functions. Line and staff organization provides for specialists with line executives. It is a combination of line and functional form of organization. A sound organization contributes greatly to the continuity and success of the enterprise. However, an organization is not an end in itself. The organization structure should be flexible. 3. Staffing. The function involves manning the positions created by organization process. It is concerned with human resources of an enterprise. Staffing is filling, and keeping filled, positions in the organization structure through defining work force requirements, appraising, selecting, compensating and training. Thus, staffing consists of the following: (i) Manpower planning, i.e., assessing manpower requirements in terms of quantity and quality; (ii) Recruitment, selection and training; (iii) Placement of man power; (iv) Development, promotion, transfer and appraisal; (v) Determination of employees remuneration. Every entrepreneur has to perform the staffing function in one form or the other, in order to get things done through others.

But, it is decidedly a difficult managerial function of entrepreneur as it concerns human beings whose behavior and actions cannot be predicted, and that is why it has become a distinct and specialized branch of management. 4. Directing: Directing is concerned with carrying out the desired plans. It initiates organized and planned action and ensures effective performance by subordinate towards the accomplishment of group activities. In the words of George R. Terry, Direction is moving to action and supplying simulative power to the group. After planning, organizing and staffing, the entrepreneurship has to guide and supervise his subordinates. It is the final action of an entrepreneur in getting others to act after all preparations have been completed. 5. Leadership. An entrepreneur has to issue orders and instructions and guide and counsel his subordinates in their work with a view to improve their performance and achieve enterprise objectives. Leadership is the process by which an entrepreneur imaginatively directs/ guides and influences the work of others in choosing and attaining specified goals by mediating between the individual and organization in such a manner that both will get maximum satisfaction. Leadership is the ability to build up confidence and zeal among people and to create an urge in them, to be led. To be a successful leader, an entrepreneur must possess the qualities of foresight, drive, initiative, self-confidence and personal integrity. Different situations may demand different types of leadership, i.e. autocratic leadership, democratic leadership and free rein leadership. 6. Communication. Communication constitutes a very important function of entrepreneur. It is said to be the number one problem of entrepreneur today. It is established fact that entrepreneur spend 75 to 90 percent of their working time in communicating with others. Communication is the means by which the behavior of the subordinate is modified and change is effected in their actions. The word communication has been derived from the Latin word communes which means common. The essence of communication is getting the receiver and the sender tanned together for a particular message. It refers to the exchange of ideas, feelings, emotions and knowledge and informations between two or more persons. Nothing happens in management till communication takes place.

Communication is a two-way process as it involves both information and understanding. It may be written, oral and gestural. Communication is said to be formal when it follows the formal channels provided in the organization structure. It is informal communication when it does not follow the formal channels. Communication flows downward from a superior to subordinates and upward from subordinates to a superior. It also flows between two or more persons operating at the same level of authority. Communication is essential for decision making and planning. It increase managerial capacity and facilitates control. It has been rightly said that good entrepreneur are good communicators and poor entrepreneur are poor communicators. 7. Motivations. The term motivation is derived from the word motive which means a need or an emotion that prompts an individual into action. Motivation is the psychological process of creating urge among the subordinates to do certain things or behave in the desired manner. It is a very important function of entrepreneur. The importance of motivation can be realized from the fact that performance of a worker depends upon his ability and the motivation. There are many strategies adopted by entrepreneur for increasing the motivation of subordinates. According to Michel Julius. Motivation means the act of stimulating someone or oneself to get a desired course of acti on to push the right button to get a desired reaction, a compliment, dollar raise, a smile, a promise of a rise, a new typewriter, a preferred location or a new desk. Thus, entrepreneur has to provide some personal incentive to the subordinates to motivate, perused and inspire them for contributing their best towards the achievement of enterprise objectives. The incentives to be provided may be financial, such as increase in wages, or non-financial, like better working conditions, job security, recognition, etc a sound motivational system must be productive, competitive, comprehensive and flexible, and it must consider the psychological, social, safety, ego and economic needs of the worker. 8. Supervision. Supervision is another important managerial function of entrepreneur. After issuing instructions, the entrepreneur has to see that the given instructions are carried out. This is the aim of supervision. Supervision refers to the job of overseeing subordinates at work to ensure maximum utilization of resources, to get the required and directed work done and to correct the subordinates whenever they go wrong.

Sound organizational set up, effective delegation, human approach, effective communication and management by exception make supervision effective. 9. Co-ordination. Co-ordination is one of the most important functions of entrepreneur. It is essential to channelize the activities of various individuals in the organization for the achievement of common goals. Every department or section is given a target to be achieved and they should concert rate only their work and should not bother about the work of other organs. It is left to the entrepreneur to see that the work of different segments is going according to predetermined targets and corrective measures have to be taken if there is any deviation. Co-ordination creates a team spirit and helps in achieving goals through collective efforts. It is the orderly arrangement of group effort to provide unity of action in the pursuit of common objectives. Dalton McFarland defines co-ordinates as the process whereby an executive develops an orderly pattern of group effort among his subordinates and secures unity of action in the pursuit of common purposes. Co-ordination can be classified under two categories: (i) vertical and horizontal co-ordination, and (ii) internal and external co-ordination. Whereas vertical co-ordination is the co-ordination between different levels of management, the term horizontal co-ordination is used when co-ordination has to be achieved between departments of the same level of authority. Co-ordination is internal when it is between different sections of the same concern and external when it is required with persons outside the organization. Co-ordination is regarded as the very essence of entrepreneurship as in order to co-ordinate the activities of his subordinates, entrepreneur has to perform all the other functions of entrepreneur via, planning organizing, staffing, directing and controlling. It must also be noted by the readers the coordination and co-operation do not mean the same thing. 10. Controlling. Controlling can be defined as determining what is being accomplished, that is evaluating the performances, if necessary, applying corrective measures so that the performance take place according to plans. Control is essential for achieving objectives of an entrepreneur. The planning of various activities does not ensure automatic implementation of policies. Control is the process which enables entrepreneur to get its policies implemented and take corrective actions if performance is not according to the pre-determined standards.

If planning is the beginning of the entrepreneur process, controlling may be said to be the final stage, if planning is looking ahead, controlling is looking back. Control is not possible without planning is meaningless without control. Control is a line function and entrepreneur assesses the per5formance of their subordinates. The main purpose of control is to see that the activity is achieving the desired results. A control system, to be effective, must conform to the nature of activity, report deviations promptly, reflect organization structu5re, assure corrective action and be economical. The process of controlling involves the following steps: (i) Establishing standards of performance; (ii) Measuring actual performance; (iii) Comparing the actual performance with the standard; (iv) Finding variance or deviations, if any and (v) Taking corrective action or measures.

METHODS OF GENERATING NEW IDEAS

METHODS OF GENERATING NEW IDEAS Even with the wide variety of sources available, coming up with an idea to serve as the basis for the new venture can still be a difficult problem. The entrepreneur can use several methods to help generate and test new ideas, including focus groups, brain storming and problem inventory analysis.

Focus groups Group of individuals providing information in a structured format is called a focus group. The group of 8 to 14 participants is simulated by comments form other group members in creatively conceptualizing and developing new product idea to fulfill a market need.

Brainstorming A group method of obtaining new ideas and solutions is called brainstorming. The brainstorming method for generating new ideas is based on the fact that people can be stimulated to greater creativity by meeting with others an d participating with organized group experiences. Although

most of the ideas generated from the group have no basis for further development, often a good idea emerges.

Problem inventory analysis Problem inventory analysis uses individuals in a manner that is analogous to focus groups to generate new product ideas. However instead of generating new ideas themselves, consumers are provided with a list of problems in a general product category. They are then asked to identify and discuss products in this category that have the particular problem. This method is often effective since it is easier to relate known products to suggested problems and arrive at a new product idea then to generate an entirely new idea by itself.

CREATIVE PROBLEM SOLVING Creative problem solving is a method for obtaining new ideas focusing on the parameters. Brainstorming The first technique, brainstorming, is probably the most well known and widely used for both creative problem solving and idea generation. It is an unstructured process for generating all possible ideas about a problem within a limited time frame through the spontaneous contribution of participants. All ideas, no matter how illogical, must be recorded, with participants prohibited from criticizing or evaluating during the brainstorming session. Reverse brainstorming Similar to brainstorming, but criticism is allowed and encouraged as a way to bring out possible problems with the ideas. Synectics Synectics is a creative process that forces individuals to solve problems through one of four analogy mechanisms: personal, direct, symbolic and fantasy. This forces participants to consciously apply preconscious mechanisms through the use of analogies in order to solve problems. Gordon method Gordon method is a method of developing new ideas when the individuals are unaware of the problem. In this method the entrepreneur starts by mentioning a general concept associated with the problem. The group responds with expressing a number of ideas. Checklist method Developing a new idea through a list of related issues is checklist method of problem solving.

Free association method Developing a new idea through a chain of word association is free association method of problem. Forced relationship Forced relationship is the process of forcing relationship among some product combination. It is technique that asks questions about objects or ideas in an effort to develop a new idea. Collective notebook method It is method in which ideas are generated by group members regularly recording ideas. Heuristics It is method of developing a new idea through a thought process progression. Scientific method This is a more structured method of problem solving, including principles and rules for concept formation, making observations and experiments, and finally validating the hypothesis. Value analysis Value analysis is developing a new idea by evaluating the worth of aspects of ideas. Attribute listing This is an idea finding technique that requires the entrepreneur to list the attributes of an item or problem and then look at each from a variety of viewpoints. Matrix charting Matrix charting is a systematic method of searching for new opportunities by listing important elements for the product area along two axis of chart and then asking questions regarding each of these elements. Big dream approach Developing a new idea by thinking about constraints is big-dream approach of problem solving. Parameter analysis Parameter analysis is developing a new idea by focusing on parameter identification and creative synthesis.

The Business Plan: creating and starting the venture

PLANNING AS PART OF THE BUSINESS OPERATION A. Planning is a process that never ends. 1. In the early stages, the entrepreneur should prepare a preliminary business plan. 2. The plan will be finalized as the enterprise develops. B. Many different types of plans may be part of any business operationfinancial, marketing, human resource, production, and sales plans. 1. Plans may be short term or long term, or they may be strategic or operational. 2. All of these plans have one purpose: to provide guidance and structure to management in a rapidly changing market environment. II. WHAT IS THE BUSINESS PLAN? A. A business plan is a written document prepared by the entrepreneur that describes all the relevant external and internal elements involved in starting a new venture. 1. It addresses both short- and long-term decision making for the first three years of operation. 2. The business plan is like a road map for the business development. B. In developing the business plan the entrepreneur can determine how much money will be needed from new and existing sources. III. WHO SHOULD WRITE THE PLAN? A. The business plan should be prepared by the entrepreneur; however, he or she may consult many sources. 1. Lawyers, accountants, marketing consultants, and engineers are useful supplemental sources. 2. Other resources are the Small Business Administration, Service Core of Retired Executives, Small Business Development Centers, universities, friends, and relatives. 3. The Internet also provides outlines for business planning. 4. Entrepreneurs can also hire or offer equity to another person to provide expertise in preparing the business plan. B. To help determine whether to hire a consultant, the entrepreneur needs to make an objective assessment of his or her own skills. C. Through this self-assessment, the entrepreneur can identify what skills are needed and where to obtain them. IV. SCOPE AND VALUE OF THE BUSINESS PLANCWHO READS THE PLAN?

A. The business plan must be comprehensive enough to address the concerns of employees, investors, bankers, venture capitalists, suppliers, customers, advisors, and consultants. B. Three perspectives need to be considered: 1. The perspective of the entrepreneurthe entrepreneur understands the new venture better than anyone. 2. The marketing perspective considers the venture through the eyes of the customer. 3. The eye of the investorthe investor looks for sound financial projections. C. The depth and detail of the business plan depends on the size and scope of the proposed venture. D. The business plan is valuable to the entrepreneur and investors because: 1. It helps determine the viability of the venture in a designated market. 2. It gives guidance to the entrepreneur in organizing planning activities. 3. It serves as an important tool in obtaining financing. E. Potential investors are very particular about what should be included in the plan. F. The process of developing a business plan also provides a self-assessment of the entrepreneur. 1. This self-evaluation is similar to role-playing, requiring the entrepreneur to think through obstacles that might prevent the ventures success. 2. It also allows the entrepreneur to plan ways to avoid such obstacles. V. HOW DO POTENTIAL LENDERS AND INVESTORS EVALUATE THE PLAN? A. Because the business plan should address the needs of all the potential evaluators, software packages and Internet samples should be used only to assist in preparation. B. As the entrepreneur becomes aware of who will read the plan, changes will be necessary. 1. Suppliers may want to see a business plan before signing a contract to supply products or services. 2. Customers may also want to review the plan before buying the product. 3. The business plan should consider the needs of these constituencies. C. Potential suppliers of capital will vary in their needs and requirements in the business plan. 1. Lenders are primarily interested in the ability of the new venture to pay back the debt including interest within a designated period of time. 2. Lenders focus on the four Cs of credit: a. The entrepreneurs credit history, or character b. Their ability to meet debt and interest payments (cash flow.)

c. The collateral or tangible assets being secured. d. Equity contribution, or the amount of personal equity that has been invested by the entrepreneur. 3. It is also important for the entrepreneur to develop a strong personal relationship with the loan officer of the bank. 4. Investors provide large sums of capital for ownership (equity) and expect to cash out within 5 to 7 years. a. They will often place more emphasis on the entrepreneurs character than lenders. b. The venture capitalist will play an important role in management of the business and wants the entrepreneurs to be compliant and willing to accept this involvement. c. These investors will also demand high rates of return and will thus focus on the market and financial projections. D. If the entrepreneur does not consider the needs of these sources, the plan may be an internalized document without consideration of the feasibility of meeting market goals. E. Most external advisors and potential investors are bound by a professional code of ethics regarding disclosure. VI. PRESENTING THE PLAN A. It is often necessary for an entrepreneur to orally present the business plan to investors. 1. Typically the entrepreneur provides a short (20-30 minutes) presentation of the business plan. 2. The entrepreneur must sell their business concept in a short time period. B. A venture capitalist or angel group may also ask the entrepreneur to present the plan to their partners before making a final decision. VII. INFORMATION NEEDS A. Before preparing a business plan, the entrepreneur should do a quick feasibility study to see if there are possible barriers to success. 1. The entrepreneur should clearly define the ventures goals, which also provide a framework for the business plan. 2. Goals that are too general or that are not feasible make the business plan difficult to control and implement. 3. The business plan must reflect reasonable goals. B. Market Information. 1. It is important to know the market potential for the product or service. a. The first step is to define the market.

b. A well defined target market makes it easier to project market size and market goals. 2. In order to build a strong marketing plan, the entrepreneur will need to gather information on the industry and market. a. This process can be visualized as an inverted pyramid, starting with very broad based data and information. b. This information can then be used in the industry analysis and marketing planning sections of the business plan. 3. The information gathering process. a. General environmental trends should be evaluated, including household income trends, population shifts, and employment trends. b. The next step is the assessment of trends in the national industry. c. The next two stages consider trends in the local market. d. General local economic trends should be considered. e. The final step is an analysis of the local competitive environment. f. After all of this analysis has been completed the entrepreneur is ready to clarify the product or service offering, actual market positioning, and market objectives. 4. To assess the total market potential, the entrepreneur can use trade associations, government reports, and published studies. C. Operations Information Needs. 1. The entrepreneur may need information on: a. Location. b. Manufacturing operations. c. Raw materials. d. Equipment. e. Labor skills. f. Space. g. Overhead. 2. Each item may require some research but is needed by those who will assess the business plan. D. Financial Information Needs. 1. Before preparing the financial plan section of the business plan, the entrepreneur should prepare a budget, including possible expenditures and revenue sources for the first year.

a. Revenues from sales must be forecast from market data. b. The entrepreneur will need to identify benchmarks in the industry that can be used in preparing the formal pro-forma statements. 2. The entrepreneur can use secondary sources that provide percentage norms for such costs in projecting operating costs. 3. Sources for benchmarks include: a. Publications such as Financial Studies for the Small Business. b. 10K reports for similar public competitors. c. Trade associations and trade magazines. 4. Some investors require five-year projections. VIII. USING THE INTERNET AS A RESOURCE TOOL A. Thanks to technology, entrepreneurs are able to access information efficiently, expediently, and at very little cost. 1. The Internet can serve as an important source of information in preparing the business plan. 2. Information on industry analysis, competitor analysis, and measurement of market potential can be located. B. In addition, the Internet also provides opportunities for marketing strategy through its website. 1. Online sales increased 52% in 2002. 2. The online audience has increased and represents a much broader cross section of consumers. C. An entrepreneur can also access competitors web sites to gain knowledge of their strategy in the marketplace. D. The entrepreneur can also investigate newsgroups. 1. There are newsgroups of customers having the same interest in a topic. 2. The entrepreneur can use Usenet to identify the most appropriate newsgroups. 3. Members of the newsgroup can be asked specific questions about their needs, competitive products, and potential interest in the new ventures products and services. E. All that is needed to use these sources is a small investment in hardware and software. IX. WRITING THE BUSINESS PLAN A. The business plan should be comprehensive enough to give a potential investor a complete understanding of the venture and will help the entrepreneur clarify his or her thinking about the business.

1. The business plan can take hundreds of hours to prepare. 2. Many entrepreneurs incorrectly estimate the length of time writing a business plan takes. B. Introductory Page. 1. The title page provides a brief summary of the business plans contents, and should include: a. The name and address of the company. b. The name of the entrepreneur(s), a telephone number, fax number, e-mail address, and website. c. A paragraph describing the company and the nature of the business. d. The amount of financing needed. e. A statement of the confidentiality of the report. 2. It also sets out the basic concept that the entrepreneur is attempting to develop. C. Executive Summary. 1. This section is prepared after the total plan is written. 2. It should be two to three pages in length. 3. The summary should concisely the key points in the business plan. 4. Questions that should be addressed include: a. What is the business concept or model? b. How is this business concept or model unique? c. Who are the individuals starting this business? d. How will they make money and how much? 5. If strong growth is expected, the executive summary should also include an exit strategy such as an IPO. 6. Any supportive evidence that might strengthen the case should be included. 7. Remember that this section is only meant to highlight key factors and provide a strong motivation to the potential investor to read it in its entirety. D. Environmental and Industry Analysis. 1. The entrepreneur should first conduct an environmental analysis to identify trends and changes occurring on a national and international level that may impact the new venture. 2. Examples of environmental factors are: a. Economy.

b. Culture. c. Technology. d. Legal concerns. e. All of the above external factors are generally uncontrollable. 3. Next the entrepreneur should conduct an industry analysis that focuses on specific industry trends such as: a. Industry demand. b. Competition. 4. The last part of this section should focus on the specific market. a. This would include such information as who the customer is and what the business environment is like. b. This information is significant to the preparation of the marketing plan section. C. Description of the Venture. 1. The description of the venture should be detailed in this section. 2. This should begin with the mission statement or company mission, which describes the nature of the business and what the entrepreneur hopes to accomplish with that business. 3. Key elements should be described in detail, including the product or service, location, personnel, background of entrepreneur, and history of the venture. 4. The emphasis placed on location is a function of the type of business. a. In assessing the space the business will occupy, the entrepreneur should consider parking, access from the roadway, access to customers and suppliers, and zoning laws. b. An enlarged local map is helpful. 5. Maps that locate customers, competitors, and alternative locations can be helpful. 6. If the building or site decision involves legal issues, the entrepreneur should hire a lawyer. E. Production Plan. 1. If a new venture is a manufacturing operation, a production plan is necessary. 2. This plan should describe the complete manufacturing process, including whether or not the process is to be subcontracted. 3. If the manufacturing is carried out by the entrepreneur, the plan should describe the physical plant layout and machinery and equipment needed. 4. If the new venture does not include any manufacturing functions, this section would be eliminated.

F. Operations Plan. 1. All businessesmanufacturing or non-manufacturingshould include an operations plan as part of the business plan. 2. This section goes beyond the manufacturing process and describes the flow of goods and services from production to the customer. 3. This would be a convenient place to discuss the role of technology in the business transaction process. 4. If the venture is not manufacturing, this section would be titled operational plan. 5. The entrepreneur would need to describe the chronological steps in completing a business transaction. G. Marketing Plan. 1. The marketing plan describes how the products will be distributed, priced, and promoted. 2. Potential investors regard the marketing plan as critical to the ventures success. H. Organizational Plan. 1. The organizational plan section is the part of the business plan that describes the ventures form of ownership. 2. If the venture is a partnership, the terms of the partnership should be included. 3. If the venture is a corporation, this should include the number of shares authorized, share options, and names and addresses of the directors and officers. 4. It is helpful to provide an organization chart indicating the lines of authority. 5. This chart shows the investor who controls the organization and how members interact. I. It is important that the entrepreneur make an assessment of risk in the following manner: 1. The entrepreneur should indicate the potential risks to the new venture. 2. Next should be a discussion of what might happen if these risks become reality. 3. Finally the entrepreneur should discuss the strategy to prevent, minimize, or respond to these risks. J. Financial Plan. 1. The financial plan determines the investment needed for the new venture and indicates whether the business plan is economically feasible. 2. Three financial areas are discussed: a. The entrepreneur should summarize the forecasted sales and expenses for the first three years. b. Cash flow figures for three years are needed, with the first years projections provided monthly.

c. The projected balance sheet shows the financial condition of the business at a specific time. K. Appendix. 1. The appendix contains any backup material not included in the text of the document. 2. Possible documents: a. Letters from customers, distributors, or subcontractors. b. Secondary or primary research data. c. Leases, contracts, and other agreements. d. Price lists from suppliers and competitors. X. USING AND IMPLEMENTING THE BUSINESS PLAN A. The business plan is designed to guide the entrepreneur through the first year of operations. 1. It should contain control points to ascertain progress. 2. There is a tendency among entrepreneurs to avoid planning. 3. Planning should be a part of any business operation. 4. Without good planning the employees will not understand the companys goals and how they are expected to perform their jobs. 5. Bankers say that most businesses fail because of the entrepreneurs inability to plan effectively. 6. The entrepreneur can enhance efficient implementation of the plan by developing a schedule to measure programs and to institute contingency plans. B. Measuring Plan Progress. 1. Plan projections will typically be made on a 12-month schedule, but the entrepreneur should check key areas more frequently. 2. Inventory control. By controlling inventory, the firm can ensure maximum service to the customer. 3. Production control. Compare the cost figures against day-to-day operating costs. 4. Quality control depends on the type of production system used. 5. Sales control. Information on units, dollars, and specific products sold should be collected. 6. Disbursements. The new venture should control the amount of money paid out. C. Updating the Plan. 1. Environmental factorssuch as the economy, customers, or competitorsand internal factorssuch as loss of key employeescan change the direction of the plan.

2. It is important to be sensitive to changes in the company, industry, and market. XI. WHY SOME BUSINESS PLANS FAIL A. A poorly prepared business plan can be blamed on: 1. Goals set by the entrepreneurs that are unreasonable. 2. Goals that is not measurable. 3. An entrepreneur who has not made a total commitment to the business. 4. An entrepreneur who has no experience in the planned business. 5. An entrepreneur who has no sense of potential threats to the business. 6. No customer need was established for the proposed product. B. Setting goals requires the entrepreneur to be well informed about the type of business and the competitive environment. 1. Goals should be specific. 2. They should also be measurable and should be monitored over time. C. The entrepreneur who has not made a total commitment to the business will not be able to meet the ventures demands of the venture. 1. Investors will not be positive about a venture that does not have full-time commitment. 2. Investors will typically expect the entrepreneur to make significant financial commitment to the business. D. Lack of experience will result in failure unless the entrepreneur can gain the needed knowledge or team up with someone. E. The entrepreneur should also document customer needs before preparing the plan.

Entrepreneurship Growth and Development

Entrepreneurship Growth and Development
1. How does entrepreneurship differ from self-employment? The following are the major differences between entrepreneurship and self-employment with respect to Innovation Scope and Stage.

BASIC Innovation

ENTREPRENEURSHIP

SELF-EMPLOYMENT

Entrepreneurship necessarily involves the Self-employment refers to full time task of sensing opportunities and innovating involvement in own occupation in which one

BASIC

ENTREPRENEURSHIP products and services.

SELF-EMPLOYMENT may or may not innovate a product or services. All self-employed persons may not necessarily be entrepreneurs. Self-employment is the middle stage of entrepeneurial growth. Only self-employment, additional employment may or may not exist. It is a matter of habbit.

Scope

All entrepreneurs are self-employed. Entrepreneurship is the terminal stage of entrepreneurial growth.

Stage

Employment A lot of employment is generated. It is a matter of attitude.

2. Why is income generation rated as only the initial level of entrepreneurial activity? Income-generation refers to activities which are often taken up on part time or casual basis and are practiced for the purpose of raising additional-income.

The scope of income generation is very narrow. All income generating persons may or may not be entrepreneurs. However, income-generation will become the initial-stage of entrepreneurial growth when it acts as an encouragement for the person to become self-employed and there by ultimately leading them to entrepreneurship. Thus we can say rate "income generation" as only the initial level of entrepreneurial activity. 3. Why are entrepreneurs called creative destroyers of tradition? Entrepreneurs are called creative destroyers of tradition due to the following factors: Entrepreneurship is inextricably linked to innovation and growth. And entrepreneurs are agents of change and they use innovation as a tool. They are always looking for an opportunity to offer a better product, a better service, a better process and a better programme. Once they accomplish this the existing product or service or process or programme becomes obsolete. Thus they act as creative destroyers of tradition . 4. How can we say that every individual is a potential entrepreneur?

Entrepreneurship is defined as the process of using human resource to innovate ideas, products and services and putting them to social use. Since every individual is endowed with a certain resource, we can say that every individual is a potential entrepreneur. However, due to the fact that not every individual gets an opportunity to fully develop their human resource to realize their potential, we see that there are fewer entrepreneurs in the society than non-entrepreneurs. 5. What steps should the entrepreneur take before launching a venture? The entrepreneur should take the following steps before launching a venture. a. Acquire indepth economic insight. b. Build the capacity to scan the environment. c. Clearly sense the opportunity. d. Decide to select a venture suitable to the individual entrepreneur. e. Establishing a plan to execute the project. f. Facilitate the assessement and mobilization of the resources. g. Go for the final launch of the entrepreneur 6. How can an entrepreneur raise the expectancy of his success? Entrepreneurs can raise the expectancy of their success by acquiring the following abilities. Irrespective of the size of the venture, big or small, they should acquire efficient management of Men Money Material

Market Efficiency of these resources is a key factor for the success. However, the required level of expertize in managerial ability in production, marketing, finance and personnel vary as per the size and nature of the enterprise. It also calls for managerial growth and sustenance. By acquiring these abilities, prospective entrepreneurs can raise the expectancy of their success. 7. How does entrepreneurship development contribute to wealth generation? Entrepreneurship involves innovating a better product or a better service or a better process or a better programme. This involves efficient mobilization of Men, Material, Money and Market. Thus the resources which were lying unutilized will be brought into efficient usage there by contributing to the flow of cash, by opening new markets or increasing the demand in the existing markets. This drive to be innovative contributes to the wealth generation process. 8. What factors were responsible for explosion of enterprise activities in India? The following are the four major factors responsible for enterprise activities in India. Globalization : This opened up global markets for both goods and services. Availability and fast flow of fund : The availability and accessibility of funds is increased enormously with more and more new financial markets, both indeginously and globally. Technology breakthrough : The growth and acceptance of new technology created unlimited entrepreneurial opportunities to meet global demands of goods and sercices. Revolution in information technology : Revolution in IT brought in unimaginable speed, low cost, easy access to information. This as opened up various opportunities in IT, telecommunications, entertainment, pharma, healthcare and mindware. 9. Explain the process of entrepreneurship development. The process of entrepreneurial development consists of creating an entrepreneurial person by i.Imbibing entrepreneurial quality and motivation. ii.Developing capacity of sensing, selecting, planning and establishing an enterprise. iii.Acquiring ability to successfully manage the set enterprise.

The main methodology can be best classified into simulatory, support services and sustaining. This is best explained through the following diagram.

10. Name the stimulatory activities in the entrepreneurship development cycle. The following are the simulatory activities in the entrepreneurship development cycle. 1. Training and education in entrepreneurship. 2. Publicising entrepreneurial opportunities. 3. Making available techno-economic information. 4. Offering incentives and recognition. 5. Creation of forum for entrepreneurs. 6. Easy availability of information. 11. Explain the factors that contribute to the creation of an environment conducive to entrepreneurship development Four major factors that contributed to creation of an environment conducive to entrepreneurship development are. Globalization : This opened up global markets for both goods and services. Availability and fast flow of fund : The availability and accessibility of funds is increased enormously with more and more new financial markets, both indeginously and globally. Technology breakthrough : The growth and acceptance of new technology created unlimited entrepreneurial opportunities to meet global demands of goods and sercices. Revolution in information technology : Revolution in IT brought in unimaginable speed, low cost, easy access to information. This as opened up various opportunities in IT, telecommunications, entertainment, pharma, healthcare and mindware. 12. Identify the support services in entrepreneurship development cycle.? The following are the support services in entrepreneurship development cycle. a. Obtaining funds. b. Getting land, shed and other utilities. c. Acquiring machine and equipment. d. Facilities procuring raw materials.

e. Marketing linkages f. Management consultancy g. Providing common facilities h. Technology flow and adoption. i. Availing information. 13. Entrepreneurs should have the ability to scan the environment. Why? The entrepreneurs should have the ability to scan the environment because of the following reasons. They should be able to sense the opportunities that could be turned into potential ventures. This requires a careful observation of their surroundings. This gives them the ability to put their efforts in venture into only those innovations which have good marketability. This gives them the capability to identify the availability of the resources required to proceed with the venture. Scanning the environment helps them to identify the strategies required to efficiently utilize the available resources.

Entrepreneurial Motivation
Entrepreneurial Motivation
1. State a few social motives the human beings possess Definition: Motivation is regarded "as the inner state that energizes activities and directs or channels behavior towards the goal". It can also be seen as a process that arouses action, sustains the activity in progress and that regulates the pattern of activity. The motives can be categorizes as social and psychological motives. Few of the social motives are Self esteem Social acceptability Competence building Wealth generation

Self actualization Motives are not necessarily the gifts of heredity but are the outcome of the individuals interactions with others or the society. 2. Illustrate with an example how the environment can act as a motivator for action. Environment acts as a primary motivating factor for the individuals, as every person is in constant interaction with other persons or with the society. So, they are reminded of their goals continuously. This motivates individuals to take appropriate action to pursue their careers and emerge as leaders or entrepreneurs or choose any other careers. For instance, the denial of entry into a luxury hotel in Mumbai motivated the found of TATA group, Jamsetji Nusserwanji Tata, to swear and build a bigger and better hotel in India and with that motivation he built the Taj Mahal Palace & Tower, the first luxury hotel in India. 3. Why do we say that motivation is an inner state that energizes action? Motivation is regarded as the inner state that energizes activities or action and directs or channels behavior towards the goal. I can also be seen as a process that arouses action, sustains the activity in progress and that regulates the pattern of activity. We can see the motivation not only in humans but also in animals and plants, for the sake of survival. We see that

animals fighting each other for food, shelter etc. This kind of behavior is observed in plants too. In humans, the kind of motivation energizes them to take appropriate action to emerge themselves as leader or managers or executives or entrepreneurs. Thus we can say that motivation is an inner state that energizes action. 4. Give an example to show that motivation is the source for initiation of action. Motivation is always the source of initiation of the action towards the achievement of the goals. Therere numerous examples of achievers who took action towards their goal, through the motivation. Example 1: The denial of entry into a luxury hotel in Mumbai motivated the found of TATA group, Jamsetji Nusserwanji Tata, to swear and build a bigger and better hotel in India and with that motivation he built the Taj Mahal Palace & Tower, the first luxury hotel in India Example 1: Govind Jaiswal was son of a common Rickshaw puller. The insults and taunts that he received from the rich, in his surroundings, motivated him to take a decision to achieve IAS, the most prestigious position India. Failure to achieve IAS rank in his first position didnt discourage him. The high cost of living in Delhi didnt stop him. He spent around 18 hours a day to achieve his dream of becoming an IAS officer and made it. 5. What are the important features of a motivational process? Motivation is essentially a process. It can be well expressed in the form of a model. The important features of the model are Needs or expectations. Behaviour Goal

Feedback 6. Why do we say that motivation is a process that reduces the disequilibria in the mind? Motivation is essentially a process. It can be well expressed in the form of a model. The important features of the model are Needs or expectations. Behaviour Goal

Feedback Thus we can say that every individual possesses an urge or a need, or multitude of needs, desires or expectations which act as activators for the motivation. These activators are characterized by the following two factors: Emergence of need, desire or expectation The anticipation of action. In the first instant, the emergence of a need or a desire creates disequilibria in the individual. Then it develops a strung urge for the reduction of the equilibrium and return to normalcy. Thus we can can say that motivation is a process that reduces disequilibria in the mind. 7. What is the link between motivation and action? There are many individuals who have a dream, a vision and an idea. But they are not able to translate them into action, because they lack the necessary motivation for taking the first step towards realizing their goals or dreams. However, people who have acquired the necessary motivation will be able to take the necessary steps towards the action and pave the path to achieve their goal or dream. The occurrence of certain incidents like getting inspired, the insulting words but some one or the encouragement from someone will motivate a person to take an action. Certain motivating events will bring in sudden action, even in persons, who have not taken any action towards their goals until that moment. Thus we can say that both motivation and action have a strong link where in motivation acts as a process that arouses action. 8. What is meant by Achievement Syndrome? Achievement syndrome can be defined as the pre-disposition or inclination of an individual to accomplish

something important and unique in a competitive situation.

It comprises understanding and appreciation of the following elements and can be best described through the following diagram. Clarity of goal Visualizing the need Taking action towards the goal Anticipation of success or failure Perceiving and seeking help to overcome the roadblocks

Accepting the positive or the negative feelings arising out of success or failure 9. What are the characteristics of the persons with a High Need Achievement? The following are the characteristics of a person with a High Need Achievement. a. Accepting to shoulder the responsibility of the task and ready to take ownership of end result, whether it is success or failure. b. Bears moderate risk, which can be overcome by his efforts, of the challenging task. c. Clarity of the goal to assess various alternatives available and take the path of moderate risk. d. Delve for improvement of his efforts, by seeking continuous feedback of how he is doing. e. Ensures that they persist on a given task until it is completed, despite failures or obstacles. f. Failures will motivate them to innovate alternative approaches to achieve their goals g. Gives greater importance to interpersonal-relations, especially with acknowledged persons in their fields, to achieve their goals. h. High importance is given to the accomplishment of even a small task and believes that it is going to help them in achieving their long-term goal. i. Individuals with high-end achievement live more In process and shows tolerance to ambiguity. j. Jumps readily into action, are restless and like to take initiative. Theyre pioneers and adventurers. k. Keen to set the standards high and are adventurous. Ventures into new goals as soon as one goal is achieved. l. Looks at the life as adventurous and are restless and energetic and are always striving persons who seek and enjoy challenges. 10. Why do persons with high nAch tend to be mobile? Persons with nAch tend to be mobile as described below. They are active, restless and like to take the initiative. Pioneers and adventurers: They are willing to leave their home and venture into the unknown. They tend to travel considerably and visit new places. The mobility and flexibility of nAch person is evident in terms of ideas as well as physical action.

11. Why do people with high nAch adopt different approaches to achieve the goals? The following characteristics depict the fact that people with high nAch adopt different approaches to achieve the goals. They tend to be innovative with different approaches to achieve the goals. Theyre always prepared to try out alternatives. Theyre goal oriented than technique-oriented. For them, the method of choice is the method which will work best. So, if the common sense approach fails, they will invent new ones They are ingenious at adapting and modifying whatever is at hand to solve the problems or achieve the objective.

Entrepreneurial Attitudes
Entrepreneurial Attitudes
1. It is said that Attitudes determine altitudes Do you agree? Give reasons for your answer. Yes. I agree. Attitudes form the nucleus of the growth and development profile of an individual. Attitudes provide 1 i.the necessary motivation ii.the drive iii.a sense of perseverance iv.commitment v.confidence Apart from this attitude also provide the development of the necessary competencies. Due to this reason, even the psychologists insist on the development of the right attitude among the younger generation. Thus we can say that Attitudes determine the altitudes.. 2. Why are positive attitudes essential for growth? Positive attitudes are essential for growth because of the following reasons. Positive attitudes inculcates in a person a high degree of motivation the energy and capacity to push ahead the qualities of head and heart. All of these help them in facing problems and decision-making. They also help them to stay optimistic under tough conditions. Thus, by imbibing optimistic behaviour in a person, the positive attitudes help them to exhibit the drive and energy to progress towards the realization of their goal. Thus we can say that positive attitude is essential for growth. 3. State any three inputs that show that education helps in building right and positive attitudes. Im still in the process of preparing an answer for this question. 4. What are the attitudes that show the entrepreneurial predisposition? The following attitudes that show the entrepreneurial predisposition. 1. Tendency to use imagination 2. Tendency to take risk 3. Tendency for freedom of expression and action

4. Tendency to look for economic opportunities 5. Tendency to find satisfaction on successful completion of task 6. Tendency to believe that they can change the Environment 7. Tendency to take initiative 8. Tendency to analyze the situation and plan action 9. Networking 10. Valuing the customer 11. Being in control of the business 5. Why are positive attitudes essential for an entrepreneur? Positive attitudes are essential for an entrepreneur because of the following reasons. Positive attitudes inculcates in a person a high degree of motivation the energy and capacity to push ahead the qualities of head and heart. All of these attitudes help a person in facing problems and decision-making. They also help them to stay optimistic under tough conditions. Thus, by imbibing optimistic behaviour in a person, the positive attitudes help them to exhibit the drive and energy to progress towards the realization of their goal. Thus we can say that positive attitudes are essential for an entrepreneur. 6. Imagination is crucial to the success of enterprise Why? Imagination is crucial to the success of an enterprise in the following ways. Imagination helps the entrepreneur to analyse the facts perceive a given situation identify the strength and weakness of a system find the opportunities for innovation, growth and development

integration of imagination with intuition helps in the innovation of a new meaning or a new product or a new service. Imagination when integrated with intuition make a new meaning, a new product or a new service. 7. Why should an entrepreneur have the right attitude for facing uncertainty? The entrepreneurs should have a tendency to take a certain amount of risk irrespective of the nature of the enterprise that they establish. They tend to travel towards unknown paths, explore adventurous routes and meet challenges with a smile and conviction. They love facing certain uncertainties. However, they do not risk their enterprise in this process, but calculate the amount of risk they can afford to take. As this entire process involves uncertainties, entrepreneurs should have the right attitude for facing the uncertainty. 8. Why is risk taking an important attitude to be developed in an entrepreneur? Risk taking is an important attitude to be developed in an entrepreneur because of the following reasons. It tends them to travel towards unknown paths. It motivates them to explore adventurous routes. It prepares them to meet the challenges with a smile and conviction. It prepares them to love certain uncertainities.

It enables the entrepreneurs to develop the habit of calculating the amount of risk involved and save their enterprise from getting into risk. 9. Why do entrepreneurs value independence? Entrepreneurs value independence because of the following reasons. By nature they have a tendency to enjoy freedom of expression and action.

 It frees them from working under someone and the routine task of getting instructions and then acting upon them. It gives them the freedom to think on their own and act accordingly. 10. Entrepreneurs cannot be mere onlookers; they need to have initiative. critically analyze the need for initiative for entrepreneurs. Entrepreneurs cannot be mere onlookers; they need to have initiative Entrepreneurs can not just dream about a goal. They should take the initiative to achieve the goal. As one has to work for achieving anything, the entrepreneurs should have a strong tendency to take initiative to put their plan/goal into action. Taking the initiative helps them to convert their dream into reality. If someone is a mere onlooker, theyll not be able to get the things done proactively and will not be able to define the task ahead of them. Only by taking initiative, theyll become the source of energy for any activity. 11. Why do entrepreneurs need the ability to influence the environment? Entrepreneurs need the ability to influence the environment because of the following reasons. To change the environment, to make it favorable to their goal, rather than leaving everything to luck, or forces beyond their control. work. It gives them the confidence that anything and everything can be achieved through their own

It helps them to develop a tendency to think that in any given situation they can change and influence the environment. 12. Why are innovations economically important?. Innovations are economically important because of the following reasons: Innovations accelerates the growth of economy. Innovations bring in more opportunities of employment and economic development. Innovation helps in development of entire new businesses. It also helps in development of business areas such as technology. It reduces the cost of operation of the business, there by increasing the profits. The profits are further invested to improve the business or start a new business altogether. 13. Do you think that the pursuit of excellence is an important entrepreneurial attitude? Examine its need. The pursuit of excellence is an important entrepreneurial attitude because of the following reasons. It inculcates in entrepreneurs the value for outstanding performance It helps in successful completion of the task, whether theyre performing well or not. It helps in development of a tendency to complete the task against all odds by mobilizing resources and by taking help from various resources. 14. What is networking? Why is it essential for an entrepreneur? Networking is an entrepreneurial attitude which enables entrepreneurs to test, evaluate and assess ideas as well as to collect and collate further information from different sources. It helps entrepreneurs in the following ways: To get experts who can help them to launch their business. To know then they need experts and how to use them effectively. Inculcates the skills and competencies for effective team work.

To persuade and convince people to see their point of view and to get people interested in their ideas 15. Valuing the customer is an important requisite for the entrepreneur. Why? Valuing the customer is an important requisite for an entrepreneur because of the following reasons: The sucess of the enterprise does not just lie on a single transaction with the customer but it lies in encouraging the customer to return again and again.

 Customer is usually the backbone for any business and the cutomer satisfaction and customer trust are critical for the running of the business. The success of a business rests to a great extend on the ability of the entrepreneurs to listen to the customer to find out quickly what the customer wants. The feedback from the customer is of immense importance because it helps the entrepreneurs in bringing about the changes in the entire process of entrepreneurship. 15. How does an entrepreneur differ from a manager?

ENTREPRENEURS AND MANAGERS The Entrepreneur 1. Creates 2. Innovates 3. Focuses on the business. 4. Builds a team 5. Looks for opportunities 6. Does the right things Maintains Adminsters Focuses on processes and systems Supervises and controls the team Searches for problems to solve Does things right. The Manager

7. The entrepreneur exercise the control by developing their own Manager is a status quo man who key indicators of performance that they monitor carefully. administers through controls

Entrepreneurial Attitudes

Entrepreneurial Values
Entrepreneurial Values
1. How do we define values? In a civilized society, qualities like honesty, truthfulness, cooperation, integrity etc are important for happy and healthy living. They are a set of beliefs or ideas that provide standards which guide behaviour. Such guiding principles established in a cultured society are called values. 2. What are the prominent entrepreneurial values? The following are the prominent entrepreneurial values. 1. 2. 3. 4. Innovativeness and Creativity Independence or ownership Quest for Outstanding Performance or Achievement Respect for Work

3. What is the difference between creativity and innovativeness?. Creativity: Creativity is the ability to see new ways of doing things and discovering new opportunities. Innovativeness: Innovativeness is the ability to make the opportunities work in practice by working out new combinations and seeing the new idea through to the end. 4. Entrepreneurs are not satisfied with the status quo and they are bent upon disturbing it. Discuss the statement with an example. Entrepreneurs, by the root characteristic of their innovative spirit and creativity, are capable of spotting and opportunity and initiating a change. Theyre never satisfied with the existing products or services and always strive to introduce better products or services by making the existing ones obsolete. The emergence of the cellular phone is a best example of the nature of the entrepreneurs not satisfied with the status quo of the land line phone and bent upon disturbing it by innovating a cordless and then ultimately the cell phone. 5. Select any three actions of the entrepreneurs that emerge from their innovative spirit and explain with an example each. The following are the actions that emerge from the innovative spirit of the entrepreneur. (You can write any three of the following). 1. Experimenting with new ideas 2. Enjoying the change 3. Facing uncertainity in order to try out new ideas 4. Not giving up or becoming upset when errors are made in doing the new work. 5. Valuing unconventional behaviour 6. Find problems to solve 7. Finding new use of existing methods or equipments. 8. Demonstrating originality 9. Working on a problem which causes great difficulty for others. 10. Looking for unstructured work assignments 11. Providing critical inputs for new ideas 12. Providing evaluation of proposed ideas 6. How do independence and a sense of ownership act as a driving force for entrepreneurs? Entrepreneurs derive great satisfaction in their sense of Ownership. The following constitute the ingredients of the Ownership factor. Commitment Sense of complete identification and sincere hard work too achieve their mission Entrepreneurs need to be independent to savour the sense of achievement. The sense of Independence or ownership creates a very strong and positive ego which involved in the action plan of all significant entrepreneurial ventures. This enables entrepreneurs to develop a mission concept which drives them to achieve their goal with a clear vision. Such an orientation stems from the entrepreneurs propensity to act in an atmosphere of freedom, it implies that the entrepreneurs likes to be the master of their destiny. Thus we often here budding entrepreneurs proclaiming that they could not work under anyone and they would be their own masters. This trait of self-reliance is an important asset because it provides confidence and courage to innovate. 7. Why is an entrepreneur described as an overcomer? What value does it indicate? An entrepreneur is often described as an Overcomer due to the following characteristics. Theyre always ready to face and resolve the challenges. The set for themselves certain standards of excellence and can deal with unexpected obstacles with confidence. Most companies experience three or four life-threatening crises in their early years; to survive this period, the true entrepreneur deals with these crises and wins through.

Sometimes they turn problems into opportunities They are persistent and work harder when things go wrong.

They try not to be beaten and find another way to solve the problem. Thus an entrepreneur, due to his quest for excellence is an overcomer who can resolve problems even under pressure. All this indicates the value of performance of high order. 8. How does respect for work become a value for entrepreneurs? The entrepreneurial culture respects and values the work. Harwork constitutes an important value for all entrepreneurs. Successful entrepreneurs believe that they achieve anything through hard work. This value provides goal direction which encourages entrepreneurs to pursue a path and career in which the rewards and incentives are linked to the degree and quality of efforts made. This fact is evident from the surveys conducted in USA where in the persons who became entrepreneurs substantially increased their working hours. In India too, we see that even small merchants put in more than 12 hours in work each day. All this proves that the respect for work becomes a value for entrepreneurs.

Characteristics of an Entrepreneur
Characteristics of an Entrepreneur
1. How does a small business differ from an entrepreneurship?

Small Business

Entrepreneurship

1. They lack innovation. The 1. Theyre backed by innovation. Entrepreneurs converts a threat investment is done in small trades or or a challenge into an opportunity. They also scan the social or products or services. commercial environment for new ideas, products or services. 2. Theyre usually started with small 2. Theyve very good planning and vision and possibilities of investment and have limited scope for future growth and development are more. growth and development. 3. When there is an anticipation of a loss, the small business owner will shift his trade or service. 4. May or may not create job opportunities. 3. Under such situations and entrepreneur would analyze the situation and improve his quality so that he meets the target.

4. Scope for creating more employment opportunities.

2. What is the corporate intrapreneurship? Give two examples? Corporate intrapreneurship is an activity related to the innovations of some companies or corporate ventures leading to establishment of new ventures, new subsidiaries or new divisions. This results in when managers of some leading companies exhibit a sense of enterprise combining their resources systems, in unusual ways to get new products, new ventures or to provide new services.

One of the examples is the penetration of TATA into communications sector. Other example is the establishment of retailing outlets by Aditya Birla Group and Reliance. 3. Why is the individual sense of enterprise of an employee in a corporate organization not deemed as entrepreneurship? In corporate intrapreneurship, managers of some leading companies exhibit a sense of enterprise combining their resources, systems, in unusual ways to get new products, new ventures or to provide new services. They will not venture any of their personal capital or held any personal risk, in doing so. They do these actions as part of their regular activity in gratifying the customer needs, managing market or boosting the sales. Though, all the above actions indicate the features of entrepreneurship, these individuals cannot be branded under the category of entrepreneurs. 4. Give two examples of opportunistic entrepreneurship? An opportunistic entrepreneur is one who is not only technically competent, but has educated himself in nottechnical subjects such as history, economics, law etc. One of the examples is that of a small building developer and contractor, who has acquired sophisticated skills in management, precise bidding, accounting and budgeting and systematic market research. Another example is that of a software developer who gets an insight into the subject international software export laws, corporate auditing, accounting and finance and uses this knowledge to establish an innovative software enterprise. 5. Why is an entrepreneur called an incubator of new ideas? We can call an entrepreneur an incubator of new ideas due to the following factors: An entrepreneur is not a routine businessman. He may not have even resources to start an enterprise. But he has new ideas to experiment and innovate. He is full of energy to see his ideas put into action. He is keen to generate a new vision, new products, new services and new methods of operating system. The entrepreneur is a creative individual. He creates opportunities for innovation, experimentation and production. 6. Why should an entrepreneur have a high achievement orientation? An entrepreneur should have a high achievement orientation for the following reasons. In order to plan his methods and work in a focussed manner to achieve his goal. To achieve success through non-routine methods To accomplish things which are otherwise difficult, while obtaining job satisfaction through aggressive pursuit of his actions. To pursue achievement through establishing certain standards and benchmarks of excellence. 7. Why should an entrepreneur be familiar with the skills of problem solving? Entrepreneurship is always an exercise in adventure. That means that the entrepreneur should always be ready to meet challenges, resistance and problems. He should be ready to welcome those problems and attempt to solve them by application of mind, experience and through consultancy. Escaping from the problem does not qualify him as an entrepreneur. Problems will never bring discouragement for an entrepreneur but instead they act as source of inspiration for him. 8. A high sense of initiative is a prerequisite for an entrepreneur Comment? A high sense of initiative is a prerequisite for an entrepreneur because of the following reasons His path is not defined but he should be the path finder. He would love to follow his own directions and instructions, not those of others. He has to find new ways of addressing routine problems so that he can optimize on his time, money and resources. To take advantage of the challenges and convert them into opportunities

9. Commitment and faith are required for the success of an enterprise why? One of the most important features of the entrepreneurs is their faith in the task they have taken up. If they lack faith, then they wont be able to put in the required effort for the success of the enterprise. The faith acts as an unshakable motivating factor in executing the task. To intensify this, they should have commitment towards the task they have undertaken and feel that the assignment they have undertaken is exclusively because of their own choice and hence they need to own the responsibility of the task. Thus the commitment and faith are required for the success of an enterprise. 10. Why should an entrepreneur have the quality of persistence?. An entrepreneur should always be persistent so as Not to be deterred by the failures. To learn from the experiences and continue to work towards their goal through persistence. To obtain feedback from the existing systems, take the criticism in the correct perspective and continue to act with the sense of courage and conviction. 11. Why does an entrepreneur seek a sense of independence? An entrepreneur seeks a sense of independence because It is the way he usually love to work. It gives him the choice to take his own decisions and avoid intervention from others. It helps him to achieve his goal of self-starting and being a master of his own. 12. What are the myths associated with entrepreneurship? The following are some of the myths associated with the entrepreneurs. Myth Entrepreneurs are gamblers: Entrepreneurs invest their time and money on unpredictable situations and try to assimilate others money or assets by unfair practices. Fact: Entrepreneurs take risk, are adventurous and exploit opportunities but are not gamblers. They work hard and are rewarded for their enterprise and work. Myth Entrepreneurs are born: Entrepreneurs are born with certain generic traits, which resemble the characteristics of an entrepreneur. Fact: Though it is true only in some cases, all the characteristics of the entrepreneurs can be acquired, by careful study, observation and practice. Proper training also helps them to acquire the entrepreneurial skills. Myth Entrepreneurs are high-tech professionals: Only those with high technical education can shape themselves as entrepreneurs. Fact: Technology will help but is not a basic requirement for a person to become an entrepreneur. If a person has the ability to grasp the entrepreneurial skills, it is enough for that person to become an entrepreneur, though he is not a high-tech professional. Myth Entrepreneurs have to be rich: It is one of the common myths that if one has to become an entrepreneur, then one must be from a sound economic background or from rich families. Fact: Entrepreneurs doesnt have to be from rich family. One must understand the place where the resources are available and work out a strategy to mobilize the resources to ones own advantage. Money does not assure success nor does facilitate creativity and innovation. Myth Entrepreneurs should have good knowledge of English: Some people believe that to become an entrepreneur, one must have a very sould knowledge in English. Fact: English or any other language is not at all a barrier for an entrepreneur. It is only attittude that is trainable. Any one can acquire these competencies through ones own mother toungue. One should acquire a reasonable amount of communicative skills so that one can communicate with others easily.