ENTREPRENEURSHIP DEVELOPMENT BA 953 Hints UNIT - 1 Entrepreneur- Derived from French word entreprendre which means to undertake Importance

e of entrepreneur: Develop new markets Discover new sources of material Mobilize capital resources Introduce new technologies Create employment Functions of Entrepreneur Primary Function Planning Organizing Decision making Management Motivation Risk bearing Entrepreneurial function Idea generation Determination of objectives Raising of funds Procurement of raw materials Procurement of machinery Market research Recruitment of manpower Implementation of the project Other functions Diversification of production Expansion of the enterprise Maintaining cordial employer employee relation Tackling labour problem Coordination with outside agencies Types of entrepreneur Business entrepreneur Trading entrepreneur Industrial entrepreneur Corporate entrepreneur Technical entrepreneur Non technical entrepreneur Professional entrepreneur Pure entrepreneur Motivated entrepreneur Spontaneous entrepreneur Growth entrepreneur Modern entrepreneur Innovating entrepreneur Imitative entrepreneur Urban entrepreneur

Men entrepreneur Women entrepreneur Induced entrepreneur Characteristics of successful entrepreneur Risk taker Positive self concept Analytical ability Ability to mobilize resources Search for new ideas and innovation Highly motivated Flexibility Business communication skill Self confidence Openness to change Accepting of constructive criticism and rejection. Knowledge and skill of entrepreneur Time management Administrative skills Environmental awareness Financial knowledge Interpersonal skills Problem solving skills Leadership skills Management skills Communication skills Technical skills Characteristics of entrepreneurship Economic activity Purposeful activity Decision making Accepting challenges Risk taking Building organisation Dynamic process Gap filling function Innovation Importance of entrepreneurship Increase in national income Balanced regional development Bringing change in structure of business New products, new ideas and new business Dispersal of economic power Better standards of living Creating innovation Enhancing welfare amenities Steps in entrepreneurial process Identify and evaluate opportunity Development of business plan Determine resources required

 Manage the enterprise Entrepreneurship as a career Aspects of entrepreneurship career: Being the boss in his own business Numerous opportunities for self development Working on ones own and thus rewards yield immense satisfaction Instead of depending on others he generates employment for others Significant contributor to the development of the country. Factors favouring entrepreneurship as a career option high need for independence to satisfy the dream of having high financial rewards achievement orientation opportunity to deal with all aspects of business implementation of ideas family business risk taking government economic policy Unit II Business environment social environment legal environment technological environment political environment economic environment cultural environment international environment Role of Family and Society in Entrepreneurship Family affects the perceived quality Financial background Occupational background Social impact on decision making Support in choosing entrepreneurship career Entrepreneurship Development Training Individual instruction Group Instruction Lecture method Demonstration Method Written Instructional Method Conference Meeting Entrepreneurship development programmes: a programme designed to help a person in strengthening his entrepreneurial motives and in acquiring skills and capabilities necessary for playing his entrepreneurial role effectively.

Objective of EDP To develop and strengthen entrepreneurial quality To analyse the environment To select project To formulate project To understand the process and procedure of setting up small enterprise To know the source of help To acquire basic mgmt skills To know pros and cons of being an entrepreneur. Women entrepreneurs It may defined as the women or a group of women who initiate, organise and operate a business enterprise. Functions Explore the prospects of starting new business Understanding risks Introduction of new innovations SMALL SCALE INDUSTRY Features Capital investment is small Employees are <20 Located in semi urban and urban areas Fixed assets are the large components of small units Most of the fund comes from entrepreneur savings These industries are quality conscious Financial discipline is weak Objectives To impart more vitality and growth To decentralise and delicence the sector To deregulate and debureaucratise the sector To review all status regulations To promote small enterprises To motivate small and sound entrepreneurs To maintain sustained growth To industrialise backward areas Accelerate process of growth Problems Lack of standardisation Poor designing Poor quality Lack of quality of control Lack of precision Poor finish Poor bargaining power Lack of service after sale Scale of production Brand preferences Lack of finance Scarcity of raw materials Organisation Supporting Entrepreneurship FINANCIAL INSTITUTIONS

ICICI 5th January 1955 in Bombay Goals Providing long term goals Sponsoring and underwriting new shares and debentures Granting loans for reinvestment Furnishing marginal technique Assisting the promotion Functions Grants loan repayable period up to 15 years Guarantee rupee payment for credit It subscribes equity preference share capital It franchises technical and administrative assistance IDBI - July 1964 under IDBI act Objectives Coordinating the activities of other financial instit Supplementing the resources Planning and promoting activities Adopting and enforcing the system Functions Direct assistance, indirect assistance, special assist SFC 1951 Criticism Inadequate resources High rate of interest Uncertain performance IFCI 1948 Functions Generating loans Underwriting and issue of stocks, sharesetc Acting as agent of control Objectives/advantages Foster employment Encouragement to new enterprises STC May 1956 Objectives To explore new markets To diversify and consequently increase Indias export trade To promote long term export promotion Export houses: are those which direct their energies towards export promotion. Role of Central and State Government in Entrepreneurial Development: Promotional Schemes Tax holiday Rehabilitation allowance Exemption to Expenditure on scientific allowance Tax concessions Modified VAT

Industrial Policy Refer previous notes INTERNATIONAL BUSINESS Objectives of International business To integrate economies To offer new market To facilitate interchange of ideas, service and capital across the world To facilitate mobility of factors of production Importance of International Business Maximum utilisation of natural resources Stability in prices Encouragement to industrialisation Large scale production Check on monopoly Earning on foreign exchange Low cost due to modern techniques Development of transport and communication Entrepreneurship Entry into international business Exporting o Forms of exporting Indirect exporting Directing exporting Non equity arrangements o Licensing o Management contract Direct foreign investment o Assembly operations o Wholly owned subsidiary o Joint venture o Mergers o Strategic alliances Driving forces to go international Growth Profitability Achieving economies of scale Uniqueness of product or service Spreading R& D costs Profitability Access to imported inputs Marketing opportunities Risk spread Restraining forces for an entrepreneur to go international Market differences Organisational culture National control/ barriers to entry To many restrictions High risk Unit III

Sources of Product for Business Consumers Competitors Examine the wants and needs Middlemen Research and Development Existing companies Existing markets and products or services Use ideas to get ideas Channels of suppliers and marketers Government Methods of New product Idea generation Focus group Check list Problem inventory analysis Information and publications Seminars and publications Discussion with people Brain storming Prefeasibility Study Steps in prefeasibility study Need analysis Process work Engineering and design Cost estimate Financial analysis Project impacts Conclusion and recommendations Types of Prefeasibility analysis 1. Technical feasibility 2. Economic feasibility 3. Financial feasibility 4. Cultural feasibility 5. Political feasibility 6. Environmental feasibility 7. Legal feasibility Criteria for selection of a product 1. Technical knowledge 2. Financial strength 3. Priority of products 4. Restriction on imports 5. Availability of incentive and subsidy 6. Locational advantage 7. Availability of market 8. Level of competition 9. Seasonal stability 10. Supply of raw material 11. Ancillary products 12. Licensing system Precautions regarding product selection

Production process should not be long and time consuming Production process should be smooth and easy going Demand for the product should be adequate and continuous Industry of the product should have growth potentials. Product should be accepted in the market Plan, machinery and equipment used for the product should be easily available in the market. Product should have minimum support base in terms of export potential. Business Plan: A business plan is a well defined written argument based on relevant facts figures and estimates. It portrays an overall picture of a business proposal attempts to justify its technical feasibility as well as commercial success and makes clear suggested course of actions in distinguished sections. Objectives of business plan To give directions to the vision formulated by entrepreneur To objectively evaluate the prospects of business To monitor the progress after implementation of the plan To persuade other to join the business To visualise the concept in terms of market availability To guide the entrepreneur in actual implementation of the plan To identify the challenges in terms of opportunities and threats from external market To identify the resource that would be required to implement the plan. Types of business plan Start up plan Internal plan Operations plan Strategic plan Growth plan Feasibility plan Elements of business plan 1. History and background 2. Goals and objectives 3. Products or services 4. Forms of ownership 5. Management and staffing 6. Marketing 7. Current projected financial statements

Business plan process 1. Self audit 2. Evaluation of the business environment 3. Setting objectives and establishing goals 4. Forecasting market conditions 5. Stating actions and resources required 6. Evaluating proposed plans 7. Assessing alternative strategic plans 8. Controlling the plan through the annual budget. BUSINESS OWNERSHIP Refer previous notes FINANCING AND BUDGETING Types of entrepreneurial finance Internal sources Retained profit Controlling working capital Sale of assets Owners personal savings Trade credit External sources Short term sources Commercial paper Certificates of deposit Factoring Advances from customers Bills discounting Instalment credit Bank credit Letter of credit Private loans Loan from financial institutions Loans from cooperative banks Long term sources Equity shares Preference shares Debentures bonds Loans from financial institutions Public deposits Capital Structure It is a mix of a firms permanent long term financing represented by debt, preferred stock and common stock equity. Factors affecting capital structure. Financial leverage Growth and stability of sales Nature and size of the firm Flexibility Operating leverage Cost of capital

Cash flow analysis Marketability Legal constraints Capital market conditions Asset structure Purpose of financing Period of finance Components of capital structure Equity shares Preference shares Retained earnings Debentures Term loans Budgeting Uses of budget Fine tuning the strategic plan Co ordination Assigning responsibility Basis for performance evaluation Types of budget Long term budget Short term budget Current budget Operating budget Financial budget Master budget Fixed budget Flexible budget Sales budget Purchase budget Production budget Labour budget Overhead budget Material budget Steps in budget preparations 1. Specification and communication of organisation objectives 2. Determination of key success factors 3. Establishment of clear lines of authority and responsibility 4. Establishment of budget centres 5. Determination of budget period 6. Establishment of budget committee 7. Appointment of budget controller 8. Preparation of budget manual 9. Preparation of sales or revenue budget 10. Preparation of other budget PROJECT PROFILE PREPARATION A project profile is a simplified description of an eventual project. In addition to defining the purpose of

ownership of the project, it presents a first estimate of the activities involved and the total investment that will be required as well as the annual operating costs and in case of income generating projects the annual income. Elements in project profile preparation Background information Investment Operating costs and income per activity General and maintenance cost Preliminary estimation Matching the entrepreneur with the project It is practically not possible that a single entrepreneur can handle all types of project successfully there could be few projects in which entrepreneur can perform well another few in which he could perform average and some projects would also be there which are out of his capability to handle. While matching entrepreneur with the project one must analyse the nature of the project which is to be handled as well as the traits of the entrepreneur. Feasibility Analysis Feasibility report preparation Marketing feasibility 1. Situation analysis and specification of objectives 2. Collection of secondary information 3. Conduct of market survey 4. Characterisation of the market o Effective demand in the past and present o Method of distribution and sales promotion o Supply and competition o Government policy o Demand forecasting 5. Demand forecasting o Opinion polling method o Statistical method Trend projection Least square method Time series method Regression method Barometric technique 6. Market planning o Current market situation o Opportunity and issue analysis o Marketing strategy o Action programme Technical feasibility Aspects of technical feasibility 1. Selection of process or technology 2. Location of projects

3. 4. 5. 6. 7. 8. 9. 10.

a. Raw material b. Proximity to market c. Availability of labour d. Availability of supporting industries Scale of operations Raw materials Technical know how Collaborative agreements Product mix Selection and procurement of plant and machinery Location of the project Project scheduling refer previous notes

Economic Feasibility Financial feasibility

Guidelines in the preparation of feasibility report 1. General information 2. Preliminary analysis of alternatives 3. Project description 4. Marketing plan 5. Capital requirement and cost 6. Operating requirement and cost 7. Financial analysis 8. Economic analysis 9. Miscellaneous aspects PROJECT EVALUATION Project evaluation is a step by step process of collecting recording and organising information about project results including short term outputs and immediate and long term project outcomes . Types of project evaluation 1. Pre process evaluation 2. Ongoing project evaluation 3. Projection completion evaluation 4. Post project evaluation EVALUATION CRITERIA Investment criteria I non discounting criteria Pay back method Accounting rate of return II Discounting criteria Net present value Internal Rate of Return Profitability Index UNIT IV Resource Mobilisation Finance Mobilisation {how to find and manage money} Estimating the cost of launching a business

 Premises Utilities Equipment Initial stock Insurance Obtaining funds for launching a business Personal savings Family funds Community organisation Micro finance Post office Financial institutions including banks Mobilisation of other resources- refer previous notes OPERATIONS PLANNING Dimensions of operation / production plan 1. Plan location 2. Plant layout 3. Capacity planning 4. Inventory management Plant location Availability of raw material Proximity to market Integration with other parts of the organisation Availability of labour and skill Availability of amenities Availability of transport Suitability of climate Availability of services Regional regulations Room for expansion Site cost Safety requirements Political and economic situation Special grants, tax concession etc Plant Layout objectives Integration of production centres Reduce material handling Effective utilisation of available space Worker convenience Flexibility Quick disposal of work Avoids industrial accidents Capacity planning Objectives Costs Revenues Working capital

Quality Speed Dependability Flexibility Inventory management Classification of inventory o Raw material o Work in progress o Consumable o Finished goods o Stores and spares Market selection Attractiveness of market segment 1. Size of the segment 2. Growth rate in the segment 3. Competition in the segment 4. Brand loyalty of existing customers 5. Attainable market share 6. Sales potential 7. Expected profit margin CHANNEL DECISION Types of channel members 1. Sole selling agent 2. Wholesaler 3. Retailer 4. Merchants 5. Distributors Factors influencing channel selection I factors relating to product characteristics Industrial or consumer product perishability Unit value Style obsolescence Weight and technicality Standardised products Purchase frequency Seasonality Product breadth II factors relating to company characteristics Financial strength Marketing policies Size of the company Past channel experience Product mix Reputation III Factors relating to market or consumer characteristics Consumer buying habits Location of the market Size of orders

 Number of customers Iv Factors relating to middlemen consideration Sales volume potential Availability of middlemen Services provided by middlemen Cost of channel Product Launch

Product Launching: It means launching or introducing a new product into the market. Companies fail to develop new products are putting themselves at great risk. Their existing products are vulnerable to changing customer needs and tastes, new technologies, shortened product life cycles and increased domestic and foreign competition. New product development process Idea generation Idea screening concept development and testing market strategy development business analysis product development market testing commercialisation Commercialisation: - it means introducing a new product into the market. In this stage the company has to spend a lot in advertising and sales promotion. The following factors are considered in launching new product. When (timing) in commercialising a new product market entry time is critical. The company has three choices First entry: entering the market at first Parallel entry: the might time its entry to coincide with the competitors entry Late entry: the firm might delay its launch until after the competitor has entered. The competitor will have borne the cost of educating the market. Where ( Geographic strategy): the company must decide whether to launch the new product in a single locality, a region, several regions, the national market or the international market. To whom (Target market Prospects) the company should target its initial distribution and promotion to the best prospect groups. How (Introductory Market Strategy) - What kind of marketing strategy the company should use in targeting the product. Factors to be considered in product launch

Acceptance by customers and intermediaries Production capabilities Promotional mix Competition Price Breakeven point Time period Cost of commercialisation Product launch process I review of current review process Testing, qualification and certification Pilot production Forecasting and ERP set up Vendor qualification Product and service manual Package design Marketing and advertising program Market testing Sales and distribution planning Sales and support service training Spare parts planning and logistics II Develop improved process III Integrate Organisation IV Determine system Integration requirements V Develop plan templates VI Deploy Improved process and Tools VII Develop product launch plan Common mistakes during product launch Not coming with early enough Poor or nonexistent promoting strategy Falling to outline the target market Launching too soon Poor quality product Insufficient funding Over estimating results Not delegating Not having a crisis plan Performing inadequate market research Having too much overhead MANAGING GROWTH Objectives of growth Survival Economies of scale Expansion of the market

 Owners mandate Technology Prestige and power Government policy Self sufficiency Types of growth Financial growth Strategic growth Structural growth Organisational growth

Factors influencing growth of an enterprise

Globalisation Market conditions Leadership, vision and purpose Policies and rules Building teams Size Creativity and innovation Consumer trends Self sufficiency Communication Growth strategies Internal growth strategies 1. Market penetration strategy 2. Market development strategy 3. Product development strategy 4. Diversification strategy External growth strategies 1. Merger and amalgamation 2. Acquisition and takeover 3. Strategic alliance 4. Franchising UNIT V MANAGEMENT OF SMALL BUSINESS Features of small business 1. Personal character 2. Independent management 3. Limited investment 4. Simple technology 5. Local area of operation 6. Unorganised labour Importance of small business to Indian economy 1. Employment 2. Balanced regional development 3. Optimisation of capital 4. Mobilisation of local resources

5. Exchange earnings 6. Feeder to larger industries 7. Promotion of standard of living 8. Equitable distribution of income 9. Social advantage Functions of Management 1. Planning 2. Organizing 3. Staffing 4. Directing 5. Controlling 6. Others a. Time management b. Strategic management c. Financial management d. Human resource management e. Production management f. Marketing management Evaluation of small business Evaluation process Identify objectives Specify criteria and standards Identify and collect evidence Analyze data Compare results with standards Make judgments Evaluation strategies Self evaluation Participatory evaluation External evaluation Interactive evaluation Sickness refer previous notes