Entrepreneurship Development

Concept
 Entrepreneurship:Pros &Cons
• Pros
• You are your own boss and have control over your failure
• Choices ( employees , working hours ,opportunities etc )
• Opportunities to fully utilize your talents , skill ,
knowledge , creativity etc .
• Financial rewards ( eg : profit , income etc )& job security
• Self satisfaction . Personal achievement and recognition
 Cons
• Chance of business failure
• Time consuming
• No secured/regular income
• Pressure to succeed
• Stress
• Sacrifices (not much family time )
• Responsibility
• Regulations and paper work etc .
 Self Assessment/Working profile
• Self-confident
• Task –result oriented
• Risk taker
• Leadership
• Originality
• Future orientation
 Successful Entrepreneur/ Personality
• An especially skillful person
• An innovator
• Decision making person
• A man of creative personality
• A basic Plan maker
• Dynamic leader
• Self confident and ambitious
• Risk bearer
• Mental strength and Power
• Adaptability and flexibility
• Determination
• Marketing Orientation
Development of new Products and Processes

• Innovation of new Product / Idea

• Need for developing a new product : go- No
Go decision
• Process of New Product Development/ Idea
development : Mental sequence
• Causes of failure of new product
• Exploration of new markets – Reasons
/Considerations
 Innovation of new Product : Factors
• Primary Research : Product , quality , capability to
satisfy needs , attitude of people etc .
• Applied Research : commercial feasibility of the
product , practical implementation of research is
made to assess the demand
• Development: Innovate the new product with the
above 2 researches in consideration
• Implementation: transformation of development
works into practical works …introduction of
distribution system etc .
 Evaluating Business Opportunity
• Recognition of opportunities
• Use of methods i.e brainstorming
• Determination of trends and implications :
demographic , economic , socio-cultural
,psychological etc .
• Identifying opportunities inferred by these trends
• SWOT analysis for evaluation of business
opportunities
 Preliminary Evaluation …..
• Who will be the potential customers- child , families ,
households , organizations etc ?
• How many families / organizations will actually buy ?
• What is the income group of potential customers ?
• What are their expectations in terms of features , price ,
service etc .?
• What do they feel about similar products already
available in the market ?
• Is the required technology readily available ?
• What will be the expected returns on investment ?
 Need for developing new market
• Limited span of life cycle of a product .
• Adjusting with changing time
• Change in choice and preference of the
consumer
• Creation of new customers
• Withstanding competition
• Others : for full utilisation of production
capacity etc .
 Process of New Product Development

• Idea Generation stage

• Incubation stage
• The implementation stage
 Idea generation stage
• Giving an idea form : design , put on paper and
make a “bench model “…on the basis of which
proposal can be built .
• Transition to the next stage : justifying the
development plans …research etc ….Screening
the product : to check the commercial viability
• Business analysis in detail : cost benefit analysis ,
possibility of competition
• , cost of production
 Incubation stage
• Product Design
• Making the Prototype
• Commercialization of decision
 Implementation stage
• Gearing up for manufacturing
• Limited production for testing
• Market testing
• Market test milestone
 Exploration of new Markets
• Saturation of existing market
• Gaining competitive advantage
• Attaining a dignified status
 Considerations for explorations of New
Market / Competition
• Demand of goods in the home market
• Number of competitors and share of market
occupied by them
• Possibility of exports
• Quality and price of goods in the competitive
markets
• Sales and distribution methods
• Socio economic and demographic change
 Feasibility Study

• Assessment of effectiveness or acceptability of

a project by means of its analysis and
evaluation
 Feasibility study : Key aspets
• Demand Analysis
• Technical Development
• Location of the Project
• Cost
• Profitability analysis
 Business Plan
• “A business Plan is a roadmap for the organization ,
showing the destination it seeks , the path it will
follow to get there , and all that is required to
complete the journey “

• It is a plan for business , clarifying why it exists , who

it exists for , what products and services it provides
to the client groups , how it intends to develop and
deliver these products and services and where it is
headed .
 Importance of a Business Plan
• Internal Planning
– blueprint for the operation of an entire company
– Company’s performance vis-a vis planned goals of sales ,
expenditures , time frame etc .
– Identification and focus on potential problem areas
– Guides decision making , performance targets
– Used for restructuring and re-organization of business
• Used by banks and lenders
– To evaluate a company’s ability to handle more debt, how
much cash flow is required , detailed description of assets ,
capitalization and projected financial performance
 Importance of Business Plan Contd…

• Primary source of information for potential

purchasers of a company or one of its
divisions or product line .
 Preparation of a Business Plan
• Organize the Process
– Who will be involved , determining basic scope of the
Plan , establishing time frame for completion .

• Assessment :Internal and external

– Internal - Identification of strengths and weaknesses of
all areas of business
– External – General economy , competitors , relevant
technologies , trends etc .
 Preparation of a Business Plan
• Setting Goals and defining strategies:
– Competitive/ customer service philosophy ,
performance and operational strategies are
established
• Specific Plans and Programs are developed
– Management of resources to implement its
strategies
– Overall organization of the company , sales &
marketing , products , finance etc
 Elements of a Business Plan
• Executive summary
• Description of Products and services
• Implementation schedule
• Contingency Plans
• Other Details
• Banks , investors and other sources of Funding
• Potential Buyers
• Internal users
 Why some Business Plans fail?
• Unreasonable goals set by entrepreneur
• Vague goals ( not measurable )
• Inexperience and going for trial and error method
• Not proper SWOT analysis of the business by the
entrepreneur
• No customer orientation
• Poor handling of financial matters
• Unreasonable time schedule
 Business Plan format
• As discussed and shown in the class .
• Live Business Plan discussed
 Franchising : Types of Franchising
• Product distribution franchising
• Pure franchising
 Types of Franchising contd ….

• Product Distribution franchising involves a franchiser

licensing a franchisee to sell specific products under the
franchiser’s brand name and trademark.
– Eg : Automobiles , soft drinks etc .

• Pure franchising involves providing the franchisee with

complete business format , including a license for a trade
name , the product or services to be sold , the methods of
operation , marketing plan , quality control process and
necessary business support services .
 The Franchising relationship
Element The Franchiser The Franchisee
Site Selection Oversees and approves Chooses site with
;may choose site franchiser’s approval
Employees Makes general Hires , manages and fires
recommendations and employees
training suggestions
Products and services Determines product or Modifies only with
service line. franchiser’s approval
Prices Recommends prices May or may not set final
price
Advertising Develops and coordinates Gets franchiser’s approvals
national ad campaigns on local ads
;may require minimum
level of spending on local
advertising
 The Franchising relationship

Quality control Sets quality standards and Maintains quality

enforces them with standards ;trains
inspections ;trains employees to implement
franchisees quality systems
Support Provides support through Operates business on a
an established business day-to-day basis with
system franchiser’s support
 Benefits of buying franchisee
• Management training and support
• Brand name appeal
• Standardized quality of Goods and services
• National advertising programs
• Financial assistance
• Proven Products and business formats
• Site selection and territorial Protection
• Greater Chance of success
 Drawbacks of buying a franchisee
• Franchise Fees and Ongoing royalty
• Strict adherence to standardized Operations
• Restrictions on purchasing
• Limited product line
• Contract Terms and Renewal
• Unsatisfactory training programs
• Market saturation
• Less freedom
UFOC( Uniform Franchise Offering Circular)

• A document that every franchiser is required

by law to give prospective franchisees before
any offer or sale of a franchisee .
 Evaluation before buying a franchisee..

• Evaluate yourself
• Research your market
• Consider your franchise options
• Get a copy of franchiser’s UFOC
• Talk to existing franchisees
• Make your choice
 Trends in Franchising
• Changing face of franchisees
• Multiple unit franchising
• International opportunities
• Master franchising
• Piggybacking (multibranded franchising)
Start up factors
 Factors influencing Entrepreneurship
• Cultural Factors
– Family culture , focus on saving for future, regional culture , sub culture etc .
• Political factors
– Stability of political conditions ,government support to economic
development through infrastructure development ,good roads ,
communications industrial parks , labor laws etc .
• Economic factors
– General purchasing power of people , market conditions etc .
• Availability of resources
– Capital , human assests , raw materials , infrastructure /utilities etc .
• Skill sets and psychological factors
– Strong will power , persistence , determnation , comprehensive business
plan . Risk orientation etc .
 Barriers to entrepreneurship
• Lack of viable / realizable concept
• Lack of motivation or being complacent /Fear of social stigma
• Pressure due to shortage of time and distractions
• Lack of relevant technical skills /Lack of business know how
• Lack of capital
• Lack of market knowledge
• Legal constraints and regulations
• Monopoly
• Patent inhibitions
• Lack of access to distribution channels
• Product differentiation
 How to overcome barriers
Barriers How to overcome
Lack of realizable concept /lack of market Market contacts
familiarity
Lack of technical skills Capable local manpower , technical
education and support
Lack of capital Financial planning , supplier credit , local
venture capitalists, banks etc .
Lack of business know how Capable local advisers / entrepreneurial
education
Time pressure and distractions Time management skills, competent
manpower
Legal constraints , regulations Legal consultants
Product differentiation Creation of niche product or service
Lack of access to distribution channels Strong networking , concentation on niche
product or service
Patent inhibitions Innovative manpower ,niche products
 Sources of Business Ideas
• Observing market characteristics (demand , changing tastes and
preferences , market surveys )/ Interacting with Prospective
Consumers
• Developments in other countries : gadgets in developed countries
etc
• Environmental changes : global warming
• Study of Product Profiles
• Magazines / Research institute bulletins / government publications
• Trade fair and Exhibitions
• Emerging technologies
• Social and economic trends
 Basic start up problems
• Selection of Industry
• Product selection
• Choice of Factory site
• Form of Organization
• Problem of Construction
• Supply of raw materials
• Financing the Unit
• Recruitment and training of staff
• Trial run
• Marketing
• Gestation period
 Impact of Industry and New Venture

• Macro level
– How large is the industry?
– How fast is it going?
– Is the industry as a whole profitable?
– What are the threats I the industry?
– What are the opportunities in the industry?
– How crowded is the industry ?
– What trends are shaping the industry’s future ?
 The Five force model of competition
Developed by Michael Porter :
Potential Entrants

Threat of new entrants

Bargaining Bargaining
Suppliers Industry competitors Buyersrs
power of power of
Suppliers Buyers
Rivalry among existing firms

Threat of substitute products or service

Substitutes
 Rivalry Among companies competing in the
industry
• Industry is more attractive when :
– The number of competitors is large or at the other
extreme ,quite small
– Competitors are not similar in size or capability
– The industry is growing at a fast pace
– There are opportunities to sell differentiated
product or service
 Bargaining Power of Suppliers
• An industry is attractive when :
– Many suppliers sell a commodity product to the
companies in it
– Substitute products are available for the items
suppliers provide
– Switching cost is low ( from one supplier to the other
)
– The items suppliers provide in the industry account
for a relatively small portion of the cost of the
industry’s finished products .
 Bargaining Power of the buyers
• An industry is attractive when :
– Industry customers’ switching cost to competitors
products or substitutes is relatively high
– The number of buyers in the industry is large
– Customers demand products that are
differentiated
– Customers find it difficult to gather information on
supplier’s costs , prices .
Threat of new entrants to the industry

• Industry is more attractive to new entrants

when :
– Economies of scale are absent
– Capital requirements to enter the industry are low
– Cost advantages are not related to company size
– Buyers are not extremely brand loyal
– No restriction by the Government for new
entrants
 Threat of substitute products or services

• A industry is more attractive when :

– Quality substitute products are not readily
available
– Prices of substitute products are not significantly
lower
– Buyer’s cost of switching to substitute products is
high .
 Women Entrepreneurs
• A woman or group of women who initiate ,
organize and run a business enterprise .
• An enterprise owned and controlled by a
woman having minimum financial interest of
51% of the capital and giving at least 51% of
employment generated in the enterprise to
women
Growth of Women Entrepreneurship..Some
facts …

Criterion Women Men

Literacy rate 40% 60%
Work participation 28% 52%
Urban population share 10% 18%

Only 5.2% of Women are self employed in the country

Problems of Women Entrepreneurs
• Problem of Finance
• Scarcity of Raw Materials
• Limited Mobility
• Stiff Competition
• Family Ties
• Lack of education
• Male Dominated Society
• Low Risk Bearing Ability `
Measures to promote women entrepreneurs
• Training in Skills and Finanacial Assistance
– Sponsorships by World Bank , Women’s Polytechnics NGOs ( eg RUDSET) , baks ,
governemnt ,Integrated Rural Development Programme ( IRDP), Prime Minister
Rozgar Yojana (PMRY), Mahila Udyam Nidhi by SIDBI for finance assistance etc .

• Confidence in Marketing : support by NGOs , Women Development

Corporations hold frequent exhibitions etc . , Women entrepreneurs
Guidance Cell in Karnataka

• Better Educational Facilities and Schemes should be extended from the

Government
• Making provision for micro credit system for women entrepreneurs at
local level