CHAPTER-1

Entrepreneur:
Concept :
Economists has defined entrepreneur as a person who bring resources and generate wealth.
He is a person who introduces changes, innovations and new order. Psychologist has viewed
entrepreneur as a person who is typically driven by certain forces, like the need to attain or obtain
something, to experiment, to accomplish or to escape the authority of others.
The person or group of person who creates new idea, innovate or invent new thing, bear risk,
manage resources and turn into successful business is called Entrepreneur. Economists usually
treat their service as separate factor of production called Entrepreneurship. Entrepreneur is the only
factor of production whose role is to combine and organize other factors of production. The
entrepreneur sees the value of a new idea and is able to organize and carry out the job of turning it
into cash. They are the persons who shift economic resources out of an area of lower into an area
of higher productivity and greater yield. The term entrepreneur may be properly applied to those
who incubate (Develop) new ideas, start enterprises based on those ideas and provide added value
to society based on their independent initiative. Entrepreneur as a risk-Bearer, entrepreneur as an
organizer, and entrepreneur as a innovator. In conclusion we can say that Entrepreneur is the one
who organizes and manages a business undertaking, assuming the risk for the sake of profit. He is
the risk and uncertainty bearer, innovator, organizer of factors of production and effortful for
creating something new.

Characteristics of an Entrepreneur or Entrepreneurial Traits:

1. Desire for responsibility: The entrepreneurs feel personal responsibility about the result of the
ventures in which they are associated.
2. Preference for moderate risk: the entrepreneurs are calculating risk taker instead of being wild
risk-takers. They rarely play gamble.
3. Confidence in their ability to succeed: the entrepreneurs have ample confidence in their ability
to succeed. They are optimistic regarding their chance to succeed.
4. Desire for immediate feedback: the entrepreneurs want to know how they are doing work. They
are continuously interested for reinforcement.
5. High level of energy: the entrepreneurs have high level of energy than average men. To be a
successful entrepreneur, work long time and labor hard is a rule rather than exception. Their morale
is like this “the harder you fall, the harder you bounce.”
6. Future orientation: the entrepreneurs have well-defined sense of searching opportunities. They
always look forward. They are less interested in what was done yesterday.
7. Skill of organizing: the entrepreneurs are well organizer. They group tasks necessary to achieve
goal and allocate task to various positions. He delegates authority and responsibility of each
position. He must also established harmony of efforts.
8. Desire for high achievement: the main force that motivates the entrepreneurs is the desire for
high achievement. They have strong desire to achieve their goal.
9. High degree of commitment: the entrepreneurs need full commitment to initiate any venture
successfully. They fully surrender their body, mind and money to the business.
10. Flexibility: the entrepreneurs must flexible to adapt to the changing demand of their customers
and their businesses.
11. Independence: the entrepreneurs do not like to be directed by others. They like to work
independent according to their routine.
12. Foresight: the entrepreneurs have good foresight regarding the future business environment. They
are able to forecast the likely future change in the market, change in the attitude of the customers,
technological progress.
13. Innovative: the entrepreneurs are continuously involved in innovation to make necessary
arrangement to meet the changing taste of the consumer. For this they establish research and
innovative centers.

Function of Entrepreneur:

1. Planning
 Setting goals
 Developing business plan
2. Organizing
 Grouping of Tasks
 Coordination
3. Mobilizing Resources
 Financial resources
 Human resources
 Technology resources

4. Relationship Management
 Exchange relationship
 Professional relationship
 Government relationship
 Social relationship
5. Control
 Financial control
 Production control
 Management control
 Types of Entrepreneurs

Innovative Entrepreneurs: innovative entrepreneurs can be the following types:

 Innovative: The entrepreneurs who make innovation are known as innovative entrepreneurs. They
introduce new products, initiate new production technique, and discover new market, or new
energy, or new source of raw materials.
 Imitative: The entrepreneurs who imitate the innovations made by the innovative entrepreneurs
are known as imitative entrepreneurs. They themselves do not make dynamic innovations. They
simply adopt the technique and method initiated by others.
 Fabian: the entrepreneurs who take extreme care while making any type of experiment in their
business and who are of skeptic (pessimistic) are known as Fabian entrepreneurs.
 Drone: the entrepreneurs, who reject the opportunity to make improvement in the technique of
production even if the return has decreased in comparison the product of similar firms, are known
as drone entrepreneurs.
 Forced: they are the victim of circumstances. They forced to become entrepreneurs to fashion
their own economic livelihood.
 Empire builder: the entrepreneurs who go on creating new ventures one after another are empire
builder.
1. Behavioral
 Solo operators: The entrepreneurs who work alone are called solo (alone) operators.
 Active partners: the entrepreneurs who operate the business as joint venture are known as active
partners.
 Inventors: the entrepreneurs who discover new product from their capacity are called inventors.
 Challengers: the entrepreneurs who make business due to challenges are called challengers. After
meeting one challenge they search for other challenges.
 Buyers: the entrepreneurs who like to run the business by buying the business in operation are
called buyers.
 Life timers: the entrepreneurs who take business as inseparable part of their life is known as life
timers.
2. Focus Group
 Women: the women involved in independent business are known as women entrepreneurship.
 Minority: minority races are also involved in business which is called minority entrepreneurship.
 Immigrant: The people who go from one country to another country and run business are known
as immigrant entrepreneurs.
 Part-time: the person who do not sacrifice fixed salary but also run their independent business are
called part-time entrepreneur.
 Home-based: the entrepreneurs who run business from their home are called home-based
business.
 Family business: the business in which the financial control of the company lies with the two or
more than two members of the family is called business of family ownership and the persons
involved are known family business owners.
 Corpreneur: the couples who work together as co-owner in their own business are known as
corpreneurs.
 Intrapreneur: the corporate entrepreneur is known as intrapreneur.
 Distinction between an Entrepreneur and a Manager:
Entrepreneur and manager are not the same terms. In reality these two terms denote different
meaning. An entrepreneur may initiate new business and may work also as the manager of that
business. But managers cannot be an entrepreneur. The entrepreneur is the owner of the business
firm whereas the manager is an employee. The entrepreneur receives dividend or profit for making
investment, which is uncertain. On the other hand, the manager receives salary for the work done
which is fixed and certain. A firm’s managers are agents who work for the firm’s owners, who are
the principals. The main points of difference between an entrepreneur and a manager have been
shown in table below:
Points Entrepreneur Manager
1. Motive The main motive of entrepreneur is But, the main motive of a manager
to start a venture by setting up an is to render his services in an
enterprise. He understands the enterprise already set up by
venture for his personal someone else.
gratification.
2. Status An entrepreneur is the owner of the A manager is the servant in the
enterprise. enterprise owned by the
entrepreneur.
3. Risk-bearing An entrepreneur being the owner of A manager as a servant does not
the enterprise assumes all risks and bear any risk involved in the
uncertainty involved in running the enterprise.
enterprise.
4. Rewards The reward is profit which is highly The reward is salary which is
certain. certain and fixed.
5. Innovation Entrepreneur acts as an innovator Manager simply translates the
also called a change agent. entrepreneur’s ideas into practice.
6. Qualifications An entrepreneur needs to possess A manager needs to possess
qualities and qualifications like distinct qualifications in terms of
high achievement motive, sound knowledge in management
originality in thinking, foresight, theory and practice.
and risk bearing ability and so on.

Concept of intrapreneur
The corporate entrepreneurship is known as intrapreneurship and who perform such task is known
as intrapreneur. The managers who make innovation by remaining within any firm are known
intrapreneurs. Intrapreneurs are the creative employee of the organization who has ability to
innovate some things. Intrapreneurs are not the owner of the business. They do not have any risk,
profit or loss.
 Difference Between entrepreneur and intrapreneur:
Difference Entrepreneur Intrapreneur
1.Dependency An entrepreneur is independent in his But, an intrapreneur is
operation. dependent on the
entrepreneur. i.e., the owner.
2. Raising of funds An entrepreneur himself raises funds Funds are not raised by the
required for the enterprise. intrapreneur.
3. Risk Entrepreneur bears the risk involved in An intrapreneur does not fully
the business. bear the risk involved in the
enterprise.
4. Operation An entrepreneur operates from outside On the contrary, an
intrapreneur operates from
within the organization itself.

Concept of Entrepreneurship
Entrepreneurship is related to coordination, innovation and performance of the entrepreneur. The
function performed by the entrepreneurs is known as entrepreneurship. Entrepreneurship is to be
an entrepreneur. Entrepreneurship refers to the various activities done for the establishment and
operation of an enterprise. Hence entrepreneurship is a system of creating new business.
Entrepreneurship is the process of creating new idea and turning it into successful business. It
involves creativity and innovation. It involves creating new idea, bring together factor of
production, Plans organize, operates and assumes the risk of new venture and creating to
incremental wealth. It can be said that entrepreneurship is a process which consists in doing things
that are not generally done in the ordinary course of business routine.
The entrepreneurship is regarded as the engine of economic development. It has resulted in
millions of new ventures in the world. It has appeared as the driving force for economic
development. The interest in the concept of entrepreneurship is growing.
In conclusion, entrepreneurship means the process adopted by the entrepreneur for the operation
of the business. Since the function performed by an entrepreneur is the entrepreneurship.
Entrepreneurship is the creative process of exploiting opportunities by starting new venture
through resource pulling, risk taking, innovating and managing for rewards. It is a change from
present lifestyle.
The can be taken as the two faces of the same coin, which will be obvious from the following
table:
Entrepreneur Entrepreneurship
1. Person Process
2. Organizer Organization
3. Innovator Innovation
4. Risk-taker Risk-taking
5. Motivator Motivation
6. Creator Creation
7. Visualize Vision
8. Leader Leadership
 9. Imitator Imitation
10. Decision maker Decision-making

Features of Entrepreneurship/ Characteristics of Entrepreneurship

1. Dynamic process:
2. Innovation
3. Risk bearing
4. Decision making
5. Accepting challenges
6. Organization
7. Skillful management
8. Making the business success

Factor Affecting Entrepreneurship:

1. Economic Factors
 Economic factors (Free market economies/ capitalism, centrally planned economies/ socialism,
mixed economies.)
 Capital
 Human resources
 Raw material
 Market
 Competition
 Franchise
2. Non-economic factors
 Political factors
 Social factors
 Psychological factors
 Technological factor

Entrepreneurship Decision Process:

1. Conduct opportunity Analysis: opportunity is a favorable condition in the external environment.
It enables an entrepreneur to start a new business. Ideas provide opportunities. Entrepreneurs must
have the ability to generate a large number of ideas. Business opportunity identification consists
of there steps:
 Identifying sources of new ideas
 Determining methods of generating new ideas
 Selection of best idea
The entrepreneur can generate new ideas from the following sources:
 Situation survey
 Present work environment factors
 Outside sources
 Research and development
2. Develop business plan: A business plan is developed as road map of the new venture. It sets goals
to be achieved. It states the process and technology to be used. It identifies target market. It
determines product, price, and promotion and distribution aspect. It describes finance and
management aspects. Critical risks are assessed. Milestones are set for implementation.
3. Setup the venture (Start-up): in this stage the new venture is established and legal aspect of
venture is determined. The legal form of venture can be proprietorship, partnership and company.
The scope can be service, manufacturing, construction and infrastructural activities.
4. Acquire financial resources: Various options available for financing the new venture are
examined. Early stage funding can be from self, family, friends and government sources. Growth
stage finding can be debt from financial institutions or public offer of shares.
5. Implement business plan: after acquiring financial resources, the proposed plan is implemented
by organizing resources and building management team.

Role of Entrepreneurship in Economic Development

Economic development implies sustainable increase in quality of life. It encompasses increase in
per capita income, education, health, and environmental protection. Entrepreneurship is the driving
force for economic development. It plays a critical role in economic development in the following
ways:
1. Capital formation: the entrepreneurship promotes capital formation by mobilizing the idle
savings of the people.
2. Employment creation: the entrepreneurship creates employment opportunity by initiating new
business.
3. Increased productivity: entrepreneurship help in the optimum utilization of natural resources
including land, labor and capital available in the country. This increase production and
productivity.
4. Balanced development: the entrepreneurs operate business in the different parts of the country
on the basis of the availability of resources. This helps to achieve the objective of balanced regional
development or removing regional disparity of the government.
5. Equitable distribution: entrepreneurship help in reducing to concentration of economic power.
They help in equitable redistribution of income, wealth, and political power in the country. It is
because they provide employment to the deprived, exploited and poor people. The entrepreneurs
make these people conscious.
6. Export promotion: entrepreneurs promote foreign trade by initiating new products. This helps in
earning foreign exchange and helps in reducing the disequilibrium in balance of payment.
7. Industrialization: entrepreneur and entrepreneurship leads the country to industrialization. There
is an increase in the economic activities in the country. It helps to transfer the people overly
dependent on agriculture to the non-agriculture sector.
 Thus it is clear that entrepreneurship serves as a catalyst of economic development. On the whole,
the role of entrepreneurship in economic development of a country can best be put as “an economy
is the effect for which entrepreneurship is the cause”.

Challenges and Drawbacks of Entrepreneurship

1. Uncertainty of income
2. Risk of losing entire invested capital
3. Long hours and hard work
4. Lower quality of life
5. Complete responsibility
6. Centralized decision making system
7. Traditional management
8. Lack of professionalism and training
9. Poor Human resource system
10. Traditional technology
11. Limited market
12. Inadequate infrastructure
13. Government policy and facilities

Family Business Succession Strategy:

Concept of Family Business
A family business includes one or more members of a family with financial control. A family
business is a business in which one or more number of one or more families has significant
ownership interest and significant commitment toward the business’s overall well being. It roots
are fixed in family values. In USA, almost 90% of business is family owned and managed. In India
and Nepal as well their share is significant in total business. In some countries, many of the largest
publicly listed firms are family owned. A firm is said to be family-owned, if a person is the
controlling shareholders.
Family participation as manager or owners of family business can strengthen the company because
family members are often loyal and dedicated to the family enterprise. However, family
participation as manager and/ or owners of a business can present unique problem because the
dynamics of the family system and the dynamics of the business system are often not in balance.
Succession Planning
Business succession refers to the successfully passing the business down to a family members. It
is big threat to family business. Only 50% of family business survives to the second generation.
Only 14% make it to the third generation. And 14% make it to the third generation. And only 3%
serving to the fourth generation and beyond.
 Succession planning is a planning of transferring the business to the family member of the next
generation. It is concerned with setting up a smooth transition between you and the future owners
of your business. Business succession planning seeks to manage the following issues:
 Who is going to manage the business when you no longer work the business?
 How will ownership be transferred?
 Will your business even carry on or will you sell it.
In family business, succession planning can specially complicated because of the relationship and
emotion involved and because most people are not the comfortable discussing topics such as aging,
death, and their financial affairs. An effective strategy needs to be formulated for family business
succession. It should consider the following aspects:
 The role of the owner in the transition (Change) stage should be clear. It can be working full time,
part time or retirement. It can be staying as an advisor.
 Family dynamics regarding the ability of family members to work together should be considered.
Specific responsibilities should be given to each member succeeding the business.
 Income for working family members and shareholders should be clearly stated.
 Business environment during the transition should be congenial (friendly).
 Loyal employee should be retained
 Tax implications of succession should be considered
 Training of the succession should be considered.

TYPES OF START-UPS

Concept:
Start-ups refer to the establishment of new venture. In this stage legal form of new venture, legal
environment, financial sources and scope of new venture are determined. Start-ups is concerned
with three main entrepreneurial issues. They are:
 Legal forms of entrepreneurial organization: The prospective entrepreneurial organization
legal structure that will best suit the demand of the new venture. The necessity for this comes from
changing tax laws, liability situation, the availability of capital and complexity of business. Legal
form of new venture can be sole trading, partnership and Joint Stock Company. Each form of
organization has specific characteristics. It also has specific advantages and disadvantages. The
entrepreneur’s specific situation, concerns, and desires will dictate the choice.
 Legal environment and entrepreneurship: Entrepreneurs cannot be the legal expertise or
background of a lawyer but they should be sufficiently knowledgeable about certain legal concepts
that have implications for the business venture. There are many legal concepts that can affect
entrepreneurial ventures. These concepts can be divided into 3 groups:
 Legal concepts that relate to the inception of the venture.
 Legal concepts that relate to the ongoing venture
 Legal concepts that relate to the growth and continuity
 Financial sources for entrepreneurial ventures: Finance is one of the important prerequisites
to start-ups an enterprise. It facilitates and entrepreneur to bring together land, labor, machinery
and raw material to combine them to produce goods. It is a lubricant and life blood to the process
 of production. Therefore, entrepreneurs must made plan to acquire required capital for start-ups.
In financial plan, the entrepreneur should clearly answer the following three questions:
 How much money is needed?
 Where will money come from? And
 When does the money need to be available?
Types of Start-Ups
1. Life-Style Firms (Home Firms): A life-style firm is a private firm which is also called home
firm. It usually achieves only modest growth due to the nature of the business, the objectives of
the entrepreneur and the limited money. In this style of enterprise limited money is devoted to
research and development. These types of firm may grow after several years. The no. of employees
may be limited to 30 to 40 and have annual revenue of about $2 million. A life-style firm exists
primarily to support the owners and usually has little opportunity for significant growth and
expansion.
2. The foundation company (innovation enterprise): the second types of start-ups are the
foundation company which is also called innovation enterprise. It is created by research and
development and lays the foundation for a new industry. This firm can grow in 5 to 10 years from
40 to 400 employees. Annual revenues may be about $10 million to $20 million. Since these types
of start-up rarely goes public.
3. The high-potential venture: the third type of start up is the high potential venture. This types of
start-up requires greatest investment interest and publicity. Investors are striving to invest money
in it. It growth is far more rapid than life style and the foundation company. After 5 to 10 years the
company could employ 500 employees with 20 to 30 million in annual revenue. The company
usually shortly becomes a public limited company.
Sources of Generating New Ideas:
Opportunity is a favorable condition in the external environment which enables an entrepreneur to
start a new business. The first phase of lunching a successful venture is to search the ideas of good
project because ideas provide opportunities to the entrepreneurs. Generating good business ideas
seem to be simple but it is difficult to implement well. The imagination, sensitivity to
environmental change and realistic evaluation regarding what the firm can do is needed for
identifying such ideas. In order to select the most promising project, the entrepreneur needs to
generate a few ideas about the possible projects he/ she can undertake. The project ideas can be
discovered from various sources. They may include:
1. Situation Survey: this involves survey of current situation in the general environment. Changes
and developments in general environment such as political, legal, economic, socio-cultural and
technological forces may provides ideas for the establishment of new business. The following
forces of general environment are examined to generate new business ideas:
 Technological changes
 Political-legal changes
 Socio-cultural changes
 Economic changes
2. Present work environment factors: Present work environment factors include internal factors
which also provide some business ideas. They can be:
 Vision, mission, goals, strategies and priorities
 Sudden identification of opportunities
 Efforts to overcome problems
 Job experience, hobby and interest of entrepreneurs
 Creativity of entrepreneurs
 Existing companies can be source of new idea
3. Outside sources (external sources): Potential entrepreneurs can develop ideas from the external
sources which includes:
 Needs and requirement of consumers
 Outside consultants and experts
 Members of distribution channels
 Foreign countries companies
 Suggestions from friend, family etc.
 TV, newspapers and media publication
 Visiting to trade fairs and exhibitions
 Attending education and training courses
 Competitor’s activities
 Government regulations
4. Research and development: Research and development is the main sources of generating mew
ideas. It is concerned with generating creative ideas. It helps to invent and innovate new things.
Research can be conducted in the labs of current employment. It can also conduct in an informal
lab in the basement or garage of home. A formal research and development department is a better
place for the entrepreneur to come up with new ideas.

Entrepreneurial Issues for Growth and Development

The entrepreneurial issues for growth and development of business organization in the present
business environment are grouped into 3 parts:
I. Strategic planning and entrepreneurship:
Most entrepreneurs do some form of planning for their ventures, but it tends to be informal and
unsystematic. The actual needs for systematic planning will vary with the nature, size and structure
of the business. A small firm may successfully use informal planning because little complexity is
involved. But an emerging venture that is rapidly expanding with constantly increasing personnel
size and market operation will need to formalize it planning because a great deal of complexity
exists. In the present business environment, an entrepreneur’s planning will need to shift from an
informal to a formal systematic style. Formal planning is usually divided into two major types:
a. Strategic Planning:
Strategic planning is the formulation of long range plans for the effective management of
environmental opportunities and threats in light of a business’s strength and weaknesses. It
includes:
 Defining the venture’s mission
 Specifying achievable objectives
 Developing strategies
 Setting policy guidelines.
Dynamic in nature, the strategic management process is the full set of commitments, decisions and
actions required for a firm to achieve strategic competitiveness and earn above-average returns.
The five basic steps must be followed in strategic planning:
  Examine the internal and external environment of the venture (strength, weaknesses,
opportunities, threats)
 Formulate the venture’s long rang and short-range strategies (mission, objectives, strategies,
policies)
 Implement the strategic plan (programs, budgets, procedures)
 Evaluate the performance of the strategy
 Take follow-up action through continuous feedback
Value of Strategic Planning
Strategic planning is a key factor that influences a venture’s survival. Lake of formal and
systematic strategic planning is a main cause of business failure in the current business
environment. Research showed that the firm that engaged in strategic planning performed well
those that did not use such planning. Proper strategic planning leads to better decision that in turn
lead to increased profitability, increased time efficiency, company growth and knowledge of
market. Survey of 500 US incorporation showed that majority of the entrepreneurs did not have a
business plan when they started their firms but as the firm grew the planning process become more
prevalent and formalized. This survey helps to conclude that strategic planning is a tool that helps
to manage complexity in the business.
In conclusion, an entrepreneurs planning will need to shift from an informal to a formal and
systematic because it helps firms to establish and exploit competitive advantages within particular
environment context.
b. Operational planning:
Operational planning also referred to as short-range planning or functional planning, consists of
the specific practices established to carry out the objectives set forth in the strategic plan. The
operational plan is thus an outgrowth or extension of the strategic planning process. In the area of
finance, marketing, production, and management, functional policies need to be established in
order to implement the goal determined in the strategy.
The overall planning process incorporates all of the factors involved in strategic planning and
implementation tools of operational planning. Specifically, the tools applied in functional areas of
the business will be a key to implementation of the planning process. Some of the tools must
widely know and used are budgets, policies and procedures
 Budgets are planning devices used to establish future plans in financial terms.
 Policies are the fundamental guides for the venture as a whole.
 Procedures are similar to policies; they are usually policies that have been standardized as
continuing method.
II. The challenge of Entrepreneurial Growth
The life cycle stages of an enterprise can be divided into deferent stages. These stages include:
 New venture development
 Start-up activities
 Growth
 Stabilization
 Innovation or decline
Among these stages, managing growth can be a great challenge to the successful development of
any venture. In this stage, a venture usually reaches major crossroads in the decision that affect its
future. The growth stage often requires major changes in entrepreneurial strategy. Competition and
 other market forces call for the reformulation of strategies. The growth stage present newer and
more substantial problems than the entrepreneur faced during the start-up stage. These newer
challenges force the entrepreneur into developing a different set of skills while maintaining an
entrepreneurial perspective for the organization. Growth stage is a transition from entrepreneurial
one-person leadership to managerial team-oriented leadership. This is not easy to do. A number of
problems can occur during this transition. They can be:
 A highly centralized decision-making system
 An overdependence on one or two key individuals
 An inadequate managerial skills and training
 A paternalistic atmosphere
These characteristics are effective in the new venture’s startup and initial survival but provide a
threat to the firm’s development during the growth stage. In order to bring about the necessary
transition, the entrepreneur must carefully plan and then gradually implement the following
process:
 The entrepreneur must want to make the change and must want it strongly enough to undertake
major modifications in his or her own task behavior.
 The day to day decision making procedures of the organization must be changed. Participation in
this process must be expanded. Greater emphasis also should be placed on the use of formal
decision techniques.
 The two or three key operating tasks are primarily responsible for the organization’s success must
be institutionalized. This may involve the selection of new people to supplement or replace
indispensable individual who have performed these task in the past.
 Middle level management must be developed. Specialists must learn to become functional
managers, while functional manager must learn to become general managers.
 The firm’s strategy should be evaluated and modified, if necessary, to achieve growth.
 The organizational structure and its management system and procedures must be slowly modified
to fit the company’s new strategy and senior manager
 The firm must develop a professional board of directors.

III. The management succession challenge:

Management succession challenge is another issue for entrepreneurs. Lack of succession planning
leads to venture’s failure. Research shows that many privately held firms go out of existence after
ten years; only three out of ten survive into a second generation. More significant, only 16% of all
privately held enterprises make it to a third generation. The survey of 200 successful
manufacturing firm showed that the average life expectancy for a privately held business is 24
years, which is also the average tenure for the founders of a business. One of the major problems
most privately held businesses have is the lack of preparation for passing managerial control to the
next generation. Most privately held firms never formulate succession plans.
 Chapter 2:
The Entrepreneurial and Intrapreneurial Mind
The entrepreneurial Process:
1. Identification and evaluation of opportunity:
Opportunity is a favorable condition in the external environment. It enables an entrepreneur to start
a new venture. Business opportunity identification and selection consists the following steps:
a. Generation of ideas:
First of all the entrepreneur should create idea about various alternative projects that he can
undertake in order to select the best project. The idea of project or business opportunities can be
found out from various internal and external sources. Some of the sources of creating identifying
good project idea may be explained as follows:
i. Situation survey: situation survey refers to the survey of current situation in the external
environmental factors. Under situation survey, technological changes, political-legal changes,
socio-cultural changes, economic changes are surveyed.
ii. Internal sources/ Present work environment factors: Internal environment of the
organization can be the sources of new idea. Internal sources of idea are:
 Vision, mission, goals, strategies and priorities of entrepreneurs provide ideas for new ventures.
 Effort to overcome problem or identify opportunities by entrepreneur suddenly provide new idea.
 Job experience, hobby and interest f entrepreneur provides new ideas.
 Entrepreneurial creativity also provides new ideas.
 Existing companies can be sources of new ideas.
 Suggestion made by research and development department, committees, task forces, work teams,
and quality circles can provide useful ideas for project
iii. External sources/ Outside Sources: The following outside sources can be helpful in generating
new ideas:
 Need and requirement of consumers
 Outside consultants and experts
 Members of distribution channel
 Foreign country
 Suggestion from family, friend etc.
 Television, newspaper, and media publication
 Visit to trade fairs and exhibitions and attending education and training courses.
 Competitor’s activities
 Government policies, rules and regulation.
iv. Research and development: It is the largest source of new ideas. Research can be conducted
in the labs of current employment. It can also conduct in an informal lab in the basement or garage
of home. A formal research and development department is a better place for the entrepreneur to
come up with new ideas.
b. Evaluation of ideas: the new idea is evaluated in terms of :
i. Profit Test: In this criterion, the profitability of the idea is assessed. Marketing, production and
financial aspect are analyzed.
ii. Constraints Test: the idea should fit the financial, manpower, time, and other constraints faced
by the entrepreneur.
iii. Risk Test: A risk is any event that could prevent the realization of objective. The evaluation of
idea also involves risk analysis. Risk can be:
 Idea risk
 Process risk
Risk analysis consists of assessment of risk and possible action.
c. Selection of Best idea: After identifying business ideas, the entrepreneur should select the
appropriate project from among various alternative ideas. The evaluated ideas are classified into
three group:
 Promising ideas: they are possible alternatives for new opportunities.
 Marginal ideas: they are stored for future uses.
 Reject ideas: they are dropped
A choice is made from among promising ideas.

2. Develop Business Plan:

After identification of best idea, business plan is developed to convert the idea into successful
venture. The business plan is a roadmap of proposed new venture of the entrepreneur. It is written
document that details the proposed venture. It is required to mobilize financial resources for the
new venture. It also serves as a working document once the venture is established. It covers
business description of the venture, marketing aspects, financial aspects, operations aspects and
management aspects. It analyses critical risks and presents a timetable for implementation of new
venture. A detailed business plan consists of ten sections:
 Executive Summary
 Business description element
 Marketing element
 Production element
 Finance element
 Management element
 Critical risk element
 Harvest strategy element
 Milestone schedule
 Appendix.
3. Determine the resources required:
The resources needed for the new venture should be determined. No business can thrive (succeed)
without resource capabilities. The following factors should be considered:
 Determine resources needed
 Determine existing resources
 Identify resource gaps and available suppliers
 Develop access to needed resources
4. Manage the enterprise:
The management aspects of running the new venture are considered. They are:
 Organization structure of the venture.
 Development management style
 Understand key variables for success
 Identify problems and potential problems
 Human resource management aspects of the venture.
 Implement control system
 Develop growth strategy

Managerial Versus Entrepreneurial Decision Making

The difference between the entrepreneurial and the managerial styles can be viewed from five key
business dimensions—strategic orientation, commitment to opportunity, commitment of
resources, control of resources, and management structure. Managerial styles are called the
administrative domain.
1. Strategic Orientation
The entrepreneur’s strategic orientation depends on his or her perception of the opportunity. This
orientation is most important when other opportunity have diminishing returns accompanied by
rapid changes in technology, consumer economies, social values or political rules.
The administrative (managerial) domain is operant in nature. Managerial strategic orientation is
driven by controlled resources. Managerial domain is concerned with the use of planning system
as well as measuring performance to control current resources.

2. Commitment to Opportunity
Entrepreneurs are revolutionary and have a short time span in terms of opportunity commitment.
The entrepreneurial domain is pressured by the need for action, narrow decision windows,
acceptance of reasonable risk and few decision constituencies.
In terms of commitments to opportunities, managers are evolutionary with long duration. The
managerial domain is not only slow to act on an opportunity but once action is taken, the
commitment is usually for a long time span. They are pressured by acknowledgement of multiple
constituencies, negotiation about strategic, course of risk reduction and coordination with existing
resources base.
3. Commitment of Resources
An entrepreneur is used to having resources committed at periodic intervals that are often based
on certain tasks or objectives being reached. This multistage commitment allows the resource
providers (such as venture capitalists or private investors) to have an exposure at each stage of
business development. The following factors pressures entrepreneurs for the periodic commitment
of resources
 Lack of predictable resource need
 Lack of control over the environment
 Social demand for appropriate use of resource
 Foreign competition
 Demands for more efficient use
In administrative domain, commitment of the resources is for the total amount needed. He desires
a single stag with complete commitment of resources. This resources commitment come form need
to reduce risk, incentive, compensation, turnover in mangers, formal planning system.
4. Control of Resources
Entrepreneur tries to use rented resources where possible. If the has difficulty in obtaining
resource, he tends to have multi uses for the same resources. He focus on rented and multi use of
 same resources due to the pressure of long resource life compared with need, risk of obsolescence,
risk involved in the identified opportunity, inflexibility permanent commitment resources etc.
The administrator is rewarded by effective resource administration. He wants to own or
accumulate as many resources as possible. The pressures of power, status, financial status,
coordination of activity etc cause the administrator to avoid rental or other periodic use of the
resources. Thus, manager tends to accumulate resources as it is a source of power for him.
5. Management Structure
Entrepreneurs tend to have a flat organization as it allows him greater degree of control. He focuses
on multiple informal networks. He want such flat with multiple inform network due to pressure of
coordination of key non controlled resources, challenge to hierarchy, employees’ desire for
independence etc.
Manager tends to follow a formal hierarchical structure as they know this consolidated their power.
Manager wants clearly defined lines of authority and responsibility.

Corporate Entrepreneurship or Intrapreneurship:

The corporate entrepreneurship is known as intrapreneurship and who perform such task is known
as intrapreneur. Intrapreneurship is a process of innovation that occurs inside established
companies through efforts of creative employees. Corporate management is promoting
entrepreneurs within the corporate structure. This development of entrepreneurial within the
corporate structure is called intrapreneurship. In the globalized context, corporations are promoting
individuals with entrepreneurial skill within the organization and capitalizing on their skills and
capabilities.
Intrapreneurship is developed within big business houses. This means, intraprenership is the
outcome of the creative activities of employees in big business. The intrapreneurship emerges
through long years of experience in big corporation. Intrapreneurship requires large amount of
capital and team of people with multidisciplinary expertise.

Difference between entrepreneurship and intrapreneurship

 Entrepreneurships the process of establishing an independent business venture whereas
intrapreneurship developed within big business houses.
 Entrepreneurship is the outcome of the creative activities of entrepreneur whereas
intrapreneurship is the outcome of the creative activities of employees in big business.
 The entrepreneurship depends on the nature and attitude of the entrepreneur whereas
intrapreneurship depends on the climate of corporation.
 The entrepreneurship generally begins with development of small business with limited capital
and other resources whereas intrapreneurship requires large amount of capital and a team of people
with multidisciplinary expertise.

Causes for interest in Intrapreneurship (The need for corporate entrepreneuring)

Many companies today are realizing the need for corporate entrepreneuring. Both business firms
and consultants are recognizing the need for in-house entrepreneurship. This need has arisen in
response to a number of pressing problems. They can be:
1. Interest in intrapreneurship has resulted from events occurring on social, cultural, and business
levels. There is an increasing interest in “doing your own thing.”
Individuals frequently desire to create something of their own. They want responsibility and
 want more freedom in their work environment. Frustration can develop and result in the
employee becoming less productive or leaving the organization. This has recently caused more
discontent in structured organizations. When meaning is not provided within the organization,
individuals often search for an institution, such as intrapreneurship, that will provide it.
Intrapreneurship is one method for stimulating and capitalizing on those who think that
something can be done differently and better.
2. It is important to instill the entrepreneurial spirit in an organization in order to innovate and
grow. In a large organization problems occur that thwart creativity and innovation. This growth
and diversity that can result are critical, since large corporations are more efficient in a
competitive market than are smaller firms.
3. The resistance against flexibility, growth, and diversification can be overcome by developing a
spirit of entrepreneurship, called intrapreneurship, within the existing organization.
4. There are social, cultural, and business pressures for intrapreneurship. Hyper competition has
forced companies to focus on new product development, increased productivity, and decreasing
costs.

Establishing Intrapreneurship in an organization:

Intrapreneurship is reflected in the entrepreneurial activities of the colorations and top level
management’s shift in paradigm. The entrepreneurial efforts consist of four elements. They are:
a. New business venturing: New business venturing refers to the creation of new business within
an existing organization.
b. Organizational innovativeness: Organizational innovativeness refers to product and service
innovation with an emphasis on development and innovation in technology.
c. Self Renewal: Self-renewal reflects the transformation of organizations through the renewal of
the key ideas on which they are built.
d. Proactiveness: Proactiveness includes initiative and risk taking, as well as competitive
aggressiveness and boldness.

Climate for Intrapreneurship:

a. Management commitment: The first step is to secure a commitment to intrapreneurship in the
organization by top, upper, and middle management. Without top management commitment, the
organization will never be able to make the necessary changes. Once top management has
committed to intrapreneurship for a sufficient length of time, the concept is introduced
throughout the organization.
b. Technology: The organization operates on the frontiers of technology. Research and
development are key sources for new product ideas. The firm must operate on the cutting edge of
technology and encourage and support new ideas instead of discouraging them.
c. Failure allowed: Experimentation, or trial and error, is encouraged. Successful new products
usually do not appear fully developed; instead they evolve. A company has to establish an
environment that allows mistakes and failures. Without the opportunity to fail, few corporate
intrapreneurial ventures will be developed.
d. Resources available and accessible: The resources of the firm need to be available and easily
accessible. Often, insufficient funds are allocated to creating something new. Available resources
are committed instead to problems that have an immediate effect on the bottom line. Some
companies, such as Xerox, 3M, and AT&T have established separate venture capital areas for
 funding new internal and external ventures. When available, the reporting requirements can
become obstacles to obtaining resources.
e. Multidiscipline teamwork approach: A multidisciplinary team approach needs to be
encouraged. One key to intrapreneurial success is the existence of “skunkworks” involving key
people. Another complication is the fact that a team member’s promotion within the corporation
is based on performance in the current position, not in the new venture. The corporate
environment must establish a long time horizon for evaluating the success of the overall
program.
f. Voluntary involvement: The spirit of intrapreneurship cannot be forced on individuals; it must
be voluntary. Most managers in a corporation are not capable of being successful intrapreneurs.
Those that emerge must be allowed to carry a project through to completion. An intrapreneur
falls in love with the new venture and will do almost anything to ensure its success.
g. Reward system: The seventh characteristic is a reward system. The intrapreneur needs to be
appropriately rewarded for the energy and effort expended on the new venture. An equity
position in the new venture is one of the best motivational rewards.
h. Sponsors and champions available: A corporate environment favorable for intrapreneurship
has sponsors and champions throughout the organization who support the creative activity and
resulting failures.
i. Strong support system: The intrapreneurial activity must be whole-heartedly supported
j. Training: The organization can use a group of managers to train and share their experiences
with other members. These sessions should be conducted one day per month for a specified
period of time. Information about intrapreneurship and about the company’s specific activities
should be well publicized.
k. Customer oriented: The organization needs to develop ways to get closer to its customers by
tapping the data base, hiring from smaller rivals, and helping the retailer.

Intrapreneurial Leadership Characteristics:

There are certain individual characteristics needed for a person to be a successful intrapreneur.
They includes:
1. Understanding the environment:
An intrapreneur needs to understand all aspects of the environment. Creativity tends to
decrease with age and education. The individual must be creative and have a broad
understanding of the internal and external environments of the corporation.
2. Being visionary and flexible:
The intrapreneur must be a visionary leader. Leadership is the ability to dream great
things and communicate them in a way that people say “yes” to being part of the dream. To
establish a successful new venture, the intrapreneurial leader must have a dream and overcome
all obstacles to achieve it.
3. Flexible and creating management options:
 The intrapreneur must be flexible and create management options. An intrapreneur is
open to and encourages change. By challenging the beliefs and assumptions of the corporation,
an intrapreneur can create something new in the organization structure.
4. Encouraging teamwork:
He or she needs the ability to encourage teamwork and use a multidiscipline approach.
Every new company formation requires a broad range of business skills. Recruiting those in the
organization requires crossing established departmental structure. The intrapreneur must be a
good diplomat to minimize disruption
5. Encouraging open discussion:
Open discussion must be encouraged to develop a good team for creating something
new. Many corporate managers have forgotten that frank, open discussion is part of the learning
process. A successful venture can be formed only when the team feels the freedom to disagree
and to review an idea. The degree of openness among the team depends on the degree of
openness of the intrapreneur.
6. Building a coalition of supporters:
Openness leads to a strong coalition of supporters and encouragers. The intrapreneur
must encourage each team member, particularly during hard times. A good intrapreneur makes
everyone a hero.
7. Persisting:
an intrapreneur must be persistent to create a new venture and move forward towards
successful commercialization.
 Chapter 3
The Environment for Entrepreneurship
Entrepreneur’s Environment:
Environment for entrepreneurship consists of forces that directly or indirectly influence the
activities of creating and developing new business in the society. It is the composite of all forces
surrounding and influencing the entrepreneur’s activities. They consist of political-legal,
economic, socio-cultural and technological forces in external environment. They cannot be
controlled. Environmental forces and factors influence entrepreneurial activities by providing
opportunities and threats. They are complex, dynamic and uncertain. The entrepreneurs most
monitor and respond to changes to exploit the opportunities and face challenges resulting from
changing business environment. The effect of environmental factors differs from organization to
organization, industry to industry and markets to markets

Government Policies and Actions:

The policies and actions may directly and indirectly affect the entrepreneurial activities. It may
promote or limit entrepreneurial activities. Government policies and actions influence
entrepreneurial policies and practices. It defines what entrepreneurs can and cannot do.
Entrepreneurs must follow the legal provision of the country.
The entrepreneurship friendly industrial policy, industrial act, commercial policy etc. can promote
entrepreneurship. The government must create conductive environment for entrepreneurship by
making available basic facilities and services live transport, communication, power etc. and
incentive, subsidy, concession sound legal system etc. such facilities reduce the risk and
uncertainties of the entrepreneurs. Hence, the supportive actions of the government are very
conductive for entrepreneurial development. Entrepreneurship has flourished and developed in the
countries where the government has provided such facilities. On the other hand entrepreneurship
and economic growth is slow in the countries where the government has adopted indifference
policy regarding entrepreneurship. One of the main reasons rapid economic growths in the
countries is regarded to be the positive or market friendly role played by the government towards
the business.
In order to increase more positive business environment, the role of the government should not be
interfering and regulating in the daily activities of the enterprises. But, should be supporting,
faciliting and removing and constraints of initiative, innovation and risk-taking.
The government in order to help and create positive business environment should make following
changes in its policy formulation and involvement (Kohli and Sood, 1987):
 Simplification of labor policy
 Reforms in the tax policy
 Streamling legal frame work fro enterprise creation, operation and liquidation
 Make effort to create competitive market (remove entry barriers)
 Simplification of the regulation and controls (investment, production, marketing, prices, foreign
direct investment and technology transfer)
 Address practical implementation of the policy.
 Transparency of policy and their implementation.
Government polices that affect entrepreneurship
 Industrial policy
 Monetary policy
 Fiscal policy
 Privatization policy
 Trade policy
 Employment and trade policy
 Tourism policy
 Foreign investment policy
The industrial policy, 2010 spells out its policies, strategies, promises and commitments:
 Commits state-support for the development of infrastructure up to factory sites for priority
industries.
 Provides special tax holidays for industries in rural and under-industrialized parts of the country.
 Recognizes and allow sub-contracting of production for the first time in the country’s history.
 Promises to help foster backward linkages, mainly facilitating small scale industries, in
incorporate in the large manufacturing process
 Provision of differential tariff rates for raw material imports and the import of finished goods. The
aim of this provision is to promote domestic manufacturing over direct trade.
 Promises protection, duty and tax discount incentives for industries using local raw material and
higher value addition.
 Entrusts the government to lay down industrial infrastructures such as roads, electricity, and
telecommunication in different districts that have been identified as possessing manufacturing and
processing potentials
 Pledges additional promotional incentive packages for export industries, particularly the small
and medium enterprises.
 Recognizes Research and development and market promotion as an integral part of the industrial
activities and allows 5% income tax deduction for each purpose.

Infrastructure:
Infrastructure is basic physical and organizational structures needed for the operation of a society
or enterprise. They are the services and facilities necessary for an economy to function. It can be
defined as the set of interconnected structural elements that provide framework supporting an
entire structure of development. It includes both physical infrastructure such as transport,
communication, water supply, energy etc and non physical infrastructure such as financial system,
education system, health care system, the system of government, law enforcement as well as
emergency services. Infrastructure facilitates the production of goods and services and also the
distribution of finished products to markets. In least developed and developing countries
entrepreneurs are not motivated to establish enterprise due to the lake of adequate infrastructure.
Inadequacy of infrastructure limits the entrepreneur’s activities. Therefore, government is
responsible to develop basic infrastructure in the country to promote entrepreneurship.
Types of Infrastructure:
 Hard Infrastructure: hard infrastructure refers to the large physical networks necessary for the
functioning of a modern industrial nation. It includes the capital assets that serve the function of
entrepreneurs. It include:
 Transportation infrastructure
 Energy infrastructure
 Water management infrastructure
 Communications infrastructure
 Solid waste management
 Soft Infrastructure: soft infrastructure refers to all the institutions which are required to
maintain the economic, health, and cultural and social standards of a country, such as the
financial system, the education system, the health care system, the system of government, and
law enforcement, as well as emergency services. The essence of soft infrastructure is the delivery
of specialized services to entrepreneurs. It includes
1. Governance infrastructure

 The system of government and law enforcement, including the political,

legislative, law enforcement, justice and penal systems, as well as specialized
facilities (government offices, courthouses, prisons, etc.), and specialized systems
for collecting, storing and disseminating data, laws and regulation
 Emergency services, such as police, fire protection, and ambulances, including
specialized vehicles, buildings, communications and dispatching systems
 Military infrastructure, including military bases, arms depots, training facilities,
command centers, communication facilities, major weapons systems,
fortifications, specialized arms manufacturing, strategic reserves

2. Economic infrastructure
 The financial system, including the banking system, financial institutions, the payment system,
exchanges, the money supply, financial regulations, as well as accounting standards and
regulations
 Major business logistics facilities and systems, including warehouses as well as warehousing and
shipping management systems
 Manufacturing infrastructure, including industrial parks and special economic zones, mines and
processing plants for basic materials used as inputs in industry, specialized energy, transportation
and water infrastructure used by industry, plus the public safety, zoning and environmental laws
and regulations that govern and limit industrial activity, and standards organizations
 Agricultural, forestry and fisheries infrastructure, including specialized food and livestock
transportation and storage facilities, major feedlots, agricultural price support systems (including
agricultural insurance), agricultural health standards, food inspection, experimental farms and
agricultural research centers and schools, the system of licensing and quota management,
enforcement systems against poaching, forest wardens, and fire fighting
3. Social infrastructure
 The health care system, including hospitals, the financing of health care, including health
insurance, the systems for regulation and testing of medications and medical procedures, the
system for training, inspection and professional discipline of doctors and other medical
professionals, public health monitoring and regulations, as well as coordination of measures
taken during public health emergencies such as epidemics
 The educational and research system, including elementary and secondary schools, universities,
specialized colleges, research institutions, the systems for financing and accrediting educational
institutions
 Social welfare systems, including both government support and private charity for the poor, for
people in distress or victims of abuse
4. Cultural, sports and recreational infrastructure
 Sports and recreational infrastructure, such as parks, sports facilities, the system of sports
leagues and associations
 Cultural infrastructure, such as concert halls, museums, libraries, theatres, studios, and
specialized training facilities
 Business travel and tourism infrastructure, including both man-made and natural attractions,
convention centers, hotels, restaurants and other services that cater mainly to tourists and
business travelers, as well as the systems for informing and attracting tourists, and travel
insurance
Assistance for Entrepreneurship (institutional support to entrepreneurship
development)
Concept:
The support provided to the entrepreneurs by various institution like government, non-government,
cooperatives and private organization in the form of facilities, incentives and policies that aims to
promote, support and facilitate entrepreneurship in a country is known as institutional support or
assistance. Entrepreneurship required promotional, supportive and facilitative assistance from
various institution to solve and diminish various problem faced by entrepreneurs. Availability of
support makes the business environment conducive and enabling for entrepreneur. These may
come up in various forms such as loan, access to capital market, market facility and locations,
research and development, information flow, training and skill entrancement programs,
competency development oriented classes etc.
Need for institutional assistance or support:
Establishing a business is not a small task. In the contest of Nepal it has to be coordinated a lot of
channel. Different types of resources and facilities are required in order to establish any business
or industry. For example, the adequate of finance, availability of raw material, adequate supply of
skillful manpower. Without it, it is only a day dream of person to establish an industry. Small
entrepreneurs are unable to make available such facilities by themselves. The main problems that
confront entrepreneurs are:
 Shortage of capital: Poor access to capital and credit
 Scarcity of raw materials: Unreliable supply sources for inputs
 Marketing problems: Poor access to market and tough competition. Lack of market information.
 Lack of opportunities for competency development
 Lack of access to appropriate infrastructure
 Poor access to information, research and extension services
 Lack of supportive policies and incentives
Institutional assistance to entrepreneurs is mainly needed in the following areas:
a. Capital resources: entrepreneurs have lack of adequate capital resources. New venture also do
not easy assess to capital market instruments. Loans from formal financial institutions such as
 commercial and development bank and other financial institutions are needed to finance new
venture. Besides this international NGO’s also provide loans to target entrepreneur.
b. Limited market: the domestic market for Nepalese products is very limited due to small size of
the country and its population. Besides, this purchasing power of the people is very low. Due to
the low development of transportation and communication the products can not be marketed easily
through in low cost.
c. Infrastructure availability: entrepreneurs need infrastructure facilities in terms of industrial
sheds, transport, communication, power, water, waste disposal etc. institutions are needed to build
infrastructure. Generally government institution, supported by foreign aid, undertakes the task of
infrastructure development.
d. Raw material supply: easy availability of raw material facilities supports entrepreneurial growth.
The scarcity of raw materials in the country is also a cause of low industrial investment. New
ventures, especially those based on new technology, require raw material from foreign sources.
Nepal’s major industries such as woolen carpet, ready-made garments and handicrafts are
dependent on imported raw material and intermediated products. The problem of raw material is
one of the main reasons for low capacity utilization. Institutions are needed to take care of raw
material supply to meet the need of a variety of entrepreneur.
e. Defective government policies and incentives: entrepreneur needs a sound policy for creating
sound industrial environment. But the government policy of Nepal is neither sound nor consistent,
nor are they effectively implemented. Government institutions are the prime sources of
formulation policies. The industrial policy of Nepalese has reserved cottage and small industries
for Nepalese citizens. The legal frame work enacted by the government generally carries a number
of incentives for entrepreneurial activities.
f. Long procedures of bureaucratic: Entrepreneurs have faces a long bureaucratic process. They
have complete different processes like, visit different ministries and departments for registering
industries for exports of the product. For getting foreign exchange for getting financial support etc.
the bureaucracy being inefficient is corrupted as well. Entrepreneurs are needed a sound
bureaucratic system.
g. Access to information, research and development: this is the age of information technology.
Information is power. Research and development is the sources of innovation and inventions.
Institutions are needed to supply relevant information to entrepreneurs. They are also needed to
conduct research and provide extension services relevant to entrepreneurs. Government
institutions are important fulfill such needs.

Institutional Assistance to Entrepreneurs in Nepal

Entrepreneurship has remained the backbone of Nepalese economy. But the pace of its growth has
remained slow. Majority of entrepreneurial ventures currently remain sick or closed. Institutional
support to industries in Nepal is through government agencies, specialized agencies, consultancy
services, institutional finance and marketing services.
1. Government Agencies
 Ministry of industry
 Department of industry
 Department of cottage and small industries
 Office of the registrar of companies
 Nepal bureau of standards and metrology
 Nepal tourism board
2. Special agencies of government
 Industrial promotion board
 One-window committee
 Nepal industrial development finance
 Industrial district management limited
 National productivity and economic development centre
 Microenterprise, cottage and small industries promotion board
 Industrial enterprise development institute
 Private sector associations
3. Institutional Finance
 Commercial banks
 Development banks
 Micro finance banks
 Finance companies
 Rural cooperatives (approved by NRB)
 Unregulated cooperatives
 Insurance companies
 Employee provident fund
 Citizen’s investment trust
 Postal saving bank branches
 NGO microfinance co.
 Deposit insurance and credit guarantee corporation
4. Consultancy services:
 Institute of chartered accountants of Nepal (ICAN)
 Centre for economic development and administration (CEDA)
 Nepal engineering consultancy service (NEPECON)
5. Marketing services
 Trade and export promotion centre
 Carpet and wool development board
 Ready-made garment export promotion committee
6. Industrial estates:
Balaju, Hetauda, Patan, Nepalgunj, Dharan, Pokhara, Butwal, Bhaktapur, Birendranagar,
Dhankuta, Fajbiraj.

Franchising:

Franchising can simply be defined as a form of contractual arrangement in which a retailer

(franchisee) enters into an agreement with a producer (franchisor) to sell the producer’s goods or
services for a specified fee or commission. It is a form of business ownership created by contract
 whereby a company grants a buyer the rights to engage in selling or distributing its products or
services under a prescribed business format in exchange for royalties or share of profits. The buyer
is called the franchisee and the company that sells rights to its business concept is called the
franchisor.
Thus, franchising is any arrangement in which the owner of a trademark, trade name or copyright
has licensed others to use it in selling goods or services. The franchisee is generally legally
independent but economically dependent on the integrated business system of franchisor.
Advantage of Franchising:
1. Training and guidance: The greatest advantage of buying a franchise is that the franchisor will
usually provide both training and guidance to the franchisee. As a result, the like hood of success
is much greater for franchisees who have received this assistance than for small business owners
in general.
2. Brand-name appeal: the franchiser’s brand name appeals the customer. The national advertising
by the franchisor creates such brand name appeal. The layout, facilities and decorations are
standardized.
3. Financial Assistance: another reason a franchise can be a good investment is that the franchisor
may be able to help the new owner to secure the financial assistance needed to run the operation.
In fact some franchisors have personally helped the franchisee get started by lending money and
not requiring any repayment until the operation is running smoothly. In short, buying a franchise
is often an ideal way to ensure assistance from the financial community.
4. A proven track record: Franchising makes the task of getting started easier because the
franchisee gets a business format already market tested and found to work. Hence, buying a
franchise is so far safer than trying to start a business.
5. Increase purchasing power: Franchising may increase the franchisee’s purchasing power also.
Because, being part of a large and that too recognized organization means paying less for a variety
of things such as supplies equipment, inventory, services, insurance and so on. It also can mean
getting better service from suppliers because of the importance of the organization (franchisor) of
you is part (franchisee).

Disadvantage of Franchising:

1. The controlled exercised by the franchisor: Unlike entrepreneurs who start their own business,
the franchisees find no room or scope for enjoying their creativity. They have to work as per the
given format. A number of restrictions are also imposed upon the franchisees. Restriction may
relate to remain confined to product line or a particular geographical location only.
2. Franchise Fees: the franchisee must pay different fees to the franchisor. Such fees are franchisee
fee, royalty payment, promotion costs, inventory and supplies cost, and building and equipment
cost. the larger and more successful the franchisor, the greater the franchise fee.
3. Unfulfilled promises: In some cases, especially among less-known franchisors, the franchisees
have not received all they were promised. Many franchisees have found that the promised
assistance from the franchisor has not been forthcoming. If franchisees complain, they risk having
their agreement with the franchisor terminated or not renewed.
4. No right to sell the business: Franchisees usually do not have the right to sell their business to
the highest bidder or to leave it to member of their family without approval from the franchisor.
5. No goodwill: Though the franchisee can build up goodwill for his or her business by his or her
efforts, goodwill still remains the property of the franchisor.
6. Dependent: The franchisee may become subject to fail with the failure of the franchisor.
7. Buy back option: Franchisors generally reserve the option to buy back an outlet upon termination
of the contract. Many franchisees become vulnerable to this option. As such, they operate under
the constant fear of non-renewal of the franchise arrangement.
Types of Franchising:

Franchising arrangements are broadly classified into three types;

1. Product Franchising: this is the earliest type of franchising. Under this, dealers were given the
right to distribute goods for a manufacturer. For this right , the dealer pays a fee for the right to
sell the trademarked goods of the producer. Product franchising was used, perhaps for the first
time, by singer Corporation during the 1800s to distribute its sewing machines. This practice
subsequently becomes popular in the petroleum and automobile industries also.
2. Manufacturing Franchising: Under this arrangement, the franchisor (manufacturer) gives the
dealer the exclusive right to produce and distribute the product in a particular area. This type of
franchising is commonly used in the soft-drink industry.
3. Business-Format Franchising: this is recent type of franchising and is the most popular one at
present. It is an arrangement under which the franchisor offers a wide range of services to the
franchisee, including marketing, advertising, strategic planning, training, production of operations
manuals and standards and quality-control guidance.

Difference between Franchising and Distributorship or Agency

Distributorship and agency are the more traditional forms of distributing goods or services. Under
these, the principal is not allowed to exert the real control over the distributor or agent. Here, the
franchising differs from the distributorship and the agency in the sense that it allows the franchisor
to exercise a higher degree of control over the franchisee. As a matter of fact, the franchisor has a
right to say in all important matters like branding, methodology and mergers.

Strategic Alliances:
A Strategic Alliance is a relationship between two or more parties to achieve a set of agreed goal
or to meet a critical business need while remaining independent organizations. An arrangement
between two companies that have decided to share resources to undertake a specific, mutually
beneficial project is called strategic alliance. In a strategic alliance, each company maintains its
autonomy while gaining a new opportunity. A strategic alliance could help a company develop a
more effective process, expand into a new market or develop an advantage over a competitor,
among other possibilities. Well-structured strategic alliances can improve profitability and allow
a company to more easily enters new markets
Partners may provide the strategic alliance with resources such as products, distribution channels,
manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual
property. The alliance is a co-operation or collaboration which aims for a synergy where each
partner hopes that the benefits from the alliance will be greater than those from individual efforts.
The alliance often involves technology transfer (access to knowledge and expertise), economic
specialization, shared expenses and shared risk.

Stages of Alliance Formation

A typical strategic alliance formation process involves these steps:

 Strategy Development: Strategy development involves studying the alliance’s feasibility,
objectives and rationale, focusing on the major issues and challenges and development of
resource strategies for production, technology, and people. It requires aligning alliance
objectives with the overall corporate strategy.
 Partner Assessment: Partner assessment involves analyzing a potential partner’s strengths
and weaknesses, creating strategies for accommodating all partners’ management styles,
preparing appropriate partner selection criteria, understanding a partner’s motives for
joining the alliance and addressing resource capability gaps that may exist for a partner.
 Contract Negotiation: Contract negotiations involves determining whether all parties
have realistic objectives, forming high caliber negotiating teams, defining each partner’s
contributions and rewards as well as protect any proprietary information, addressing
termination clauses, penalties for poor performance, and highlighting the degree to which
arbitration procedures are clearly stated and understood.
 Alliance Operation: Alliance operations involves addressing senior management’s
commitment, finding the caliber of resources devoted to the alliance, linking of budgets
and resources with strategic priorities, measuring and rewarding alliance performance, and
assessing the performance and results of the alliance.
 Alliance Termination: Alliance termination involves winding down the alliance, for
instance when its objectives have been met or cannot be met, or when a partner adjusts
priorities or re-allocates resources elsewhere.
Advantage of strategic alliance:
The advantages of strategic alliance include:
1. Allowing each partner to concentrate on activities that best match their capabilities.
2. Learning from partners & developing competences that may be more widely exploited
elsewhere.
3. Adequate suitability of the resources & competencies of an organization for it to survive.
Disadvantages
Implementing and managing a strategic alliance may be difficult because each alliance partner has
a different way of operating. Mistrust could occur, particularly when competitive or proprietary
information is involved. The alliance partners could become more dependent on each other,
making it difficult to operate again as separate entities if required.

Types of Strategic Alliance:

There are four types of strategic alliances: joint venture, equity strategic alliance, non-equity
strategic alliance, and global strategic alliances.
  Joint venture is a strategic alliance in which two or more firms create a legally
independent company to share some of their resources and capabilities to develop a
competitive advantage.
 Equity strategic alliance is an alliance in which two or more firms own different
percentages of the company they have formed by combining some of their resources and
capabilities to create a competitive advantage.
 Non-equity strategic alliance is an alliance in which two or more firms develop a
contractual-relationship to share some of their unique resources and capabilities to create
a competitive advantage.
 Global Strategic Alliances working partnerships between companies (often more than
two) across national boundaries and increasingly across industries, sometimes formed
between company and a foreign government, or among companies and governments.
 Technology Licensing: this is a contractual arrangement whereby trademarks, intellectual
property and trade secrets are licensed to an external firm. It is uses mainly as a low cost way to
enter foreign markets. The main downside of licensing is the loss of control over the technology-
as soon as it enters other hands the possibility of exploitation arises.
 Product Licensing: this is similar to technology licensing except that the license provided is only
to manufacture and sell a certain product. Usually each licensee will be given an exclusive
geographic area to which they can sell to. It’s a lower-risk way of expanding the reach of your
product compared to building your manufacturing base and distribution reach.
 Franchising: franchising is any arrangement in which the owner of a trademark, trade name or
copyright has licensed others to use it in selling goods or services. The franchisee is generally
legally independent but economically dependent on the integrated business system of franchisor.
 Research and development: Strategic alliances based around Research and development tends
to fall into the joint venture category, where two or more businesses decide to embark on a research
venture through forming a new entity.
 Distributors: if you have a product one of the best ways to market it is to recruit distributors,
where each one has its own geographical area are type of product. This ensures that each
distributor’s success can be easily measured against other distributors.
 Distribution Relationships
This is perhaps the most common form of alliance. Strategic alliances are usually formed because
the businesses involved want more customers. The result is that cross-promotion agreements are
established. Consider the case of a bank. They send out bank statements every month. A home
insurance company may approach the bank and offer to make an exclusive available to their
customers if they can include it along with the next bank statement that is sent out. It’s a win-win
agreement – the bank gains through offering a great deal to their customers, the insurance company
benefits through increased customer numbers, and customers gain through receiving an exclusive
offer.
 Outsourcing
The 1980s was the decade where outsourcing really rose to prominence, and this trend continued
throughout the 1990s to today, although to a slightly lesser extent. The early forecasts, such as the
one from American Journalist Larry Elder, have been shown to not always be true: “Outsourcing
and globalization of manufacturing allows companies to reduce costs, benefits consumers with
lower cost goods and services, causes economic expansion that reduces unemployment, and
increases productivity and job creation.”
 Affiliate Marketing
 Affiliate marketing has exploded over recent years, with the most successful online retailers using
it to great effect. The nature of the internet means that referrals can be accurately tracked right
through the order process. Amazon was the pioneer of affiliate marketing, and now has tens of
thousands of websites promoting its products on a performance-based basis.

E-Commerce
E-Commerce is establishing exchange relationships electronically through e-mail, internet, and
electronic platforms to satisfy individual needs of customers. It is direct marketing based on
electronic communication. E-commerce is conducted through on-line computers. E-commerce is
the buying and selling of goods and services on the Internet, especially the World Wide
Web. Internet serves as the communication channel.
E-commerce encompasses the use of technologies, processes and management practices that
enhance organizational competitiveness through strategic use of electronic information. E-
commerce is, thus a modern methodology that addresses the need of organizations merchants, and
consumer. It cuts costs while improving the quality of goods and services and increasing the speed
of service delivery.
Ecommerce can be broken into four main categories: B2B, B2C, C2B, and C2C.
 B2B (Business-to-Business)
Companies doing business with each other such as manufacturers selling to distributors
and wholesalers selling to retailers. Pricing is based on quantity of order and is often
negotiable.
 B2C (Business-to-Consumer)
Businesses selling to the general public typically through catalogs utilizing shopping cart
software.
 C2B (Consumer-to-Business)
A consumer posts his project with a set budget online and within hours companies review
the consumer's requirements and bid on the project. The consumer reviews the bids and
selects the company that will complete the project.
 C2C (Consumer-to-Consumer)
There are many sites offering free classifieds, auctions, and forums where individuals can buy
and sell things to online payment systems like PayPal where people can send and receive money
online with ease. eBay's auction service is a great example of where person-to-person
transactions take place everyday since 1995
Features of E-Commerce
 Individualized communication:
 Data depository
 E-mail and Electronic platforms
 On-line selling
 Relationship marketing
Connectivity through e-commerce:
E-commerce takes a customer concept for individualized marketing. It is rapidly growing.
1. Connecting with customers:
 E-commerce connects directly with customers on one to one basis. Voice mail has facilitated
interactions with customers. Connectivity can be: Business to consumer (B2C), business to
business (B2B), Consumer to consumer (C2C), consumer to business (C2B). Databases are built
to provide information about individual customer. Cost, time, distance and space are minimized.
 Ecommerce connects with carefully selected customers. It targets profitable customers.
 E-commerce connects customers for a lifetime. It helps to build relationship to make longer term
profits.
2. Connecting with stakeholders:
 E-commerce connects with stakeholders, such as employees, suppliers, competitors, middlemen,
and marketing intermediaries. Paper work is eliminated
 E-commerce connects with strategic alliance partners. They can be related to marketing, logistics,
technology, finance.
3. Connecting globally:
 E-commerce has facilitated connections with global customers. It has expanded geographical
coverage of purchasing manufacturing and marketing.

Benefits of e-commerce
E-commerce is win-win situation for the consumer and the product/ service provider. The distinct
advantages e-commerce can offer to the consumer are:
 Consumer has much wider choice available on the cyber market.
 They can compare products, features, prices and even look up reviews before they select what
they went.
 They also have the convenience of having their orders delivered right to the doorstep.
 Finally, consumers are driven to e-shopping in hordes as even branded goods cost less on the net.
The major advantages that e-commerce can bring to the companies are:
 It minimizes inventory cost: E-commerce venture need not maintain huge inventories or
expensive retail show rooms. Their marketing and sales force is a fraction of those of traditional
mortar-based businesses. E-commerce can minimize inventory costs by adopting just-in-time
system enhancing the firm’s ability to forecast demand more accurately.
 Improve customer services: It has been found that providing both customer and after-sale
services account for up to 10 per cent of the operating costs. By putting these services on-line
under e-commerce, these costs get reduced, on the one hand, and simultaneously the quality of
services also gets improved, on other. High quality customer relationship called customization is
crucial for retaining customers in the e-commerce environment. It become necessary for the
company to enhance customer loyalty, otherwise the customer, who is full of choices, can jump
from one website to another. If company is to stay in business then it will have to deliver the
products or services to customer as they want, when they want and how they want.
 Reduce distribution cost: E-commerce also reduce distribution cost of goods and service. The
Electronic Data Interchange (EDI) based on EECD study has revealed that the time needed to
process an order declined by a minimum of 50% to maximum of 96% per cent. It is really amazing.
 Helps business globalize: E-commerce by minimizing costs enables companies’ especially small
ones to make information on its products and services available to all the potential customers
spread over worldwide.
 Helps market products more quickly: By taking the entire product design process on-line,
drawing partners and customers into the process and removing the traditional communication
barriers, companies can bring products and services to market far more quickly.

Challenges of e-commerce
E-commerce in spite of opportunities also bears the challenges as well at the same time. The major
challenges of e-commerce facing by small enterprises are mentioned below:
 Infrastructural problems: infrastructural problem is the main challenge of e-commerce. Without
development of modern communication and transportation, e-commerce is not possible.
 Absence of cyber laws: Another big challenge associated with e-commerce market is the near
absence of cyber laws to regulate transactions on the net. WTO is expected to enact cyber laws
soon.
 Privacy and security concern: another challenge related to e-commerce is privacy and security.
There is no protection offered either by Website or outside watchdogs against hazard created by
exploitation one’s privacy.
 Digital Illiteracy and consumer awareness: At present, digital illiteracy is one of the formidable
problems e-commerce is facing in Nepal. On the other hand, the continuous exodus of skilled
computer engineers to other countries has denuded Nepal of software engineers. This has posed a
real threat to the Nepal IT industry.
The consumer does not browse the net knowing the consequent hassles of connectivity and other
botherations. Added to this building trust on the electronic media also takes long time more
especially when the vendor is situated at a very far off place.
 Virus Problem: the computer virus is also a major problem in the execution of e-transactions.
 English specific: the software so far in the country is English specific. But, in order to make e-
commerce reach to the small enterprises, it needs to be available in the languages (regional) of the
owners of the small enterprises to enable them to adapt e-commerce processes in their operations.
Sooner it is done better will be it for small enterprises to adapt e-commerce.
 Payment issue: the electric payment is made through credit card which could not become popular
in Nepal due to the penetration of credit card in Nepal is very low and the Nepali customers are
quit skeptical of paying by credit card with the increasing threat of fraud played by hackers. In
Nepal credit card could not gain growth mainly because of authentification and recognition
problems of electronic signatures.
 Tax related issue: Tax administration is yet another complex problem in e-commerce. It is
difficult to administer tax related matter in e-transactions. It will provide ample scope for tax
evasion.

Impact of E-commerce on Entrepreneurship

 Direct marketing
 Electronic marketing
 Cost effective
 Marketing mix
 Promotion
 Strategic alliances
E-commerce strategy for entrepreneurs:
 Presence: The e-name is registered. The entrepreneur builds excitement about products of the
venture in the market place to make its presence felt.
 Penetration: the entrepreneur focused on gaining greater market share for the products.
 Profitability: The entrepreneur focuses on increasing revenue.
Ethic and Social Responsibility
In the broadest sense, ethics provide the basic rules or parameters for conducting any activity in
an acceptable manner. More specifically, ethics represent a set of principles prescribing a
behavioral code that explains what is good and right or bad or wrong. It is a set of moral principles
or values that governs the conduct of an individual or a group. What is lawful conduct is not always
ethical conduct. The law may permit something that would be ethically wrong. Business ethics
comprises the moral and standards that guide behavior in the world of business.
Business ethics is an important issue today. Business organizations are being questioned and
charged for their unethical behavior. Ethical issues arise in every stages of business. Criticisms are
being labeled against them for their unethical actions by different sections of the society.
Entrepreneurs cannot afford to overlook such criticisms and charges. Their role has thus, increased.
They have now to adopt ethical behavior and be responsive. The call for better business ethics is
clearly a challenge for managers today.
Some business collapses over the last few years that have exposed the lack of moral code &
ethics. It appears that business needs a core of ethics & integrity to flourish and enjoy long term
success. Ethics are not optional because entrepreneurs work & live with other human beings.

Sources of Business Ethics:

An organization’s ethics is derived from three principal sources:
 Societal ethics: Societal ethics are standards that govern how members of a society deal with
each other in matters involving issues such as fairness, justice, and rights of the individual. The
ethical standards originate from a society’s laws, customs and practices. These are basically
unwritten values and norms of a society. Societal ethics differ from society to society.
 Professional ethics: Professional ethics are standards that govern how members of a profession
like entrepreneurs make decisions.
 Individual ethics: individual ethics are personal standards and values that govern how individuals
interact with one another. Sources of individual values include the influence of one’s family,
friends and relatives.

Role of Ethics in Entrepreneurship

 Ethics have a huge role to play in business as they give a guideline as to which business
practices are socially and morally acceptable and which are not.
 In cases where there are no laid down rules as to the right and wrong ways of doing business,
Ethics fill in the gap and give the much needed direction.
 Awareness of ethics promotes entrepreneurs to stop from engaging in business practices that
lead to loss of human life and human rights compromise the environment or bring about gain at
the unfair expense of other businesses, employees, consumers, etc.
 Sound business ethics benefit the consumer as they strive to direct businesses to be open and
honest to their customers
Professor David Bat stone offers ten Principles for entrepreneurial ethics:
 Company directors and management will consider their work force valuable team members, not
merely hired labor
 A company will think of itself as a part of a community, not just a “market”
 A company will take every possible care to ensure the quality and safety of the products it
brings to the public
 A company will treat the environment as a silent “stakeholder,” a party to which it is wholly
accountable
 A company will strive to diversify the kind of people who lead and manage its affairs
 A company will pursue international trade and production based on reciprocal exchanges that
respect the same rights accorded its own people
 A company will care for an organizational culture that encourages its employees to give critical
feedback on unethical practices, and even “blow the whistle” when their voices are ignored
 A company will protect the privacy rights of its suppliers, customers, and employees
 A company will deliver what it promises, and promise what it can deliver
 A company will not seek to generate any revenue from practices that threaten life

Social Responsibility:
The obligation of an organization's management towards the welfare and interests of the society
in which it operates is called social responsibility. It is a principle that companies should
contribute to the welfare of society and not be solely devoted to maximizing profits. It focuses on
what an organization does to society and what it does for society.
Socially responsible companies can act in a number of ways to benefit society. For example,
companies can give money to the arts, fund academic scholarships, support community-building
initiatives, and so on. They can also commit to not pollute or to reduce the pollution they put out,
to not build weapons, and so forth.

Areas of Social Responsibility:

Enterprises have clear and distinct responsibilities to various groups and entities that have a stake
in the firms. These include:
1. Towards Consumers: Consumer plays an important role in the survival and growth of business.
Consumers provide sales revenues, the main source of income for a business firm. Therefore, the
purpose of a business is to create customer. For that, business has the accountability towards its
customers. This includes:
 Charge reasonable prices for products.
 Provide quality products, product guarantee, and after sale services consistent with customers’
requests.
 Truthful and socially responsible advertising
 Protection against monopoly and restrictive trade practice.
 Treat customers fairly in all respects of the business transactions
 Make effort to ensure that the health and safety of consumer will be enhanced by the product and
services.
2. Towards Shareholders: Shareholders are the investors. They together own the business. They
contribute capital to the business in the hope of earning dividends and appreciation in share prices.
The shareholders are also the members of society. Thence, the accountabilities that a business
owes to its shareholders are:
 Regularity of dividend
 Disclose relevant information to shareholders
 Respect shareholders’ requests, suggestions, complaints, and formal resolution
 Report on social issues ( the amount spent on social and development programmes)
3. Towards employees: Employees are the vital components of a business firm. They are employed
in a business as workers and managers. As workers, they are directly involved in performing the
basic and operating organizational functions. Thus, business firm owes responsibilities to these
employees on the following counts:
 Provide legitimate decision-making and policy-making freedom to managers and ensuring their
full potential growth.
 Provide fair wages, bonus and other economic benefits to all employees that improve their living
conditions
 Grant right to form union, giving representation on decision-making bodies
 Provide working conditions that respect each employee’s health and dignity
 Institute grievance settling, social security and welfare schemes.
4. Towards government: government is the agency that governs all the institution and individuals
in the country. It is done through promulgation and implementation of appropriate laws and
regulations. With this background, business must be responsible to the government in the
following ways:
 Pay tax regularly
 Follow the guidelines and policies
 help the government’s efforts to solve national problems
 purchase treasury bills issued by government
 Avoid unfair trade practices
 Help government stop black marketing
5. Towards Society: Business is operated in a society and has to consider the necessity to improve
the quality of life and contribute towards well being of the society. In doing so, business has to
fulfill following responsibilities:
 Make efforts to reduce pollution of any kind
 Make optimum utilization of natural and national resources
 Provide maximum employment opportunities
 Preserve social and cultural values
 Promote national integration and development
 Business must act as a good citizen.
Small Business Venturing Exporting:
Exporting is the practice of sending or carrying merchandise to a foreign country for trade or sale.
International business is a potentially lucrative area for many businesses, but the small business
owner should be aware that establishing oneself in a foreign market is a complex, time-consuming
task. Small business should not enter the world of international trade until they have fully
researched both their own exporting capabilities and various business conditions in the target
market(s) abroad. Indeed, consultants point to a wide range of factors to consider when assessing
your company's readiness to expand its business beyond borders. These include company export
readiness, potential foreign markets, product distribution options, legal factors, operating costs and
profit margin, financing resources, and exporting alternatives (such as joint ventures or off-shore
manufacturing facilities).
Exporting is sometimes thought of as a practice that is largely the province of large businesses and
international corporations, but exporting can also be helpful to a small business in a variety of
ways. A small business that establishes its products in the international marketplace can increase
sales and profitability, enhance its domestic reputation, reduce its dependence on domestic
markets, reinvigorate the sales potential of existing products, stabilize seasonal market
fluctuations, sell excess production capacity, and increase awareness of possible foreign
competitors.
Of course, exporting is not a risk-free venture. Expanding a small business's operations into foreign
markets may require the development of new promotional materials, assumption of increased
short-term debt as a result of new operational and administrative costs, re-assignment of personnel,
and adjustments in product functionality and appearance to meet the commercial and social
standards of the environment in which the business hopes to establish itself.

Preparing for the World of Exporting:

Small business consultants counsel their clients to undertake research and self-analysis before
committing time and resources to breaking into international markets. Indeed, consultants stress
that a small business should be able to answer positively to the following questions before
considering expanding its business to include exporting:
 Is the business currently successful in its domestic operations?
 Does the business owner understand the types and amounts of investments (time, capital,
and people) he or she will have to make to establish the business's product in the targeted
market?
 Is the business sensitive to the cultural implications of doing business in the targeted
market?
 Is the business willing to commit needed resources to make the exporting effort work?
In order to arrive at an informed answer to the above questions, consultants recommend that
business owners with an eye to international markets take the time to complete an international
business plan. This document can highlight potential trouble spots and business areas that need
further research. Exporting factors that should be considered in any international business plan
include:
 Identification of potential market
 Demographic and political environment of potential market
 Economic status of potential market
 Social and cultural environment of potential market
  Access to potential market (includes research on tariffs and other trade barriers, treaties,
trade regulations, patent and trademark protection)
 Demand for product
 Possible competition within potential market
 Possible distribution channels
 Local distribution and production environment within potential market
 Exporting methodology
 Any necessary adjustments to product or packaging
 Marketing strategy
 Cost of exporting operation
 Pricing strategy
 Projected sales
 Projected fortunes of domestic operation

Method of Exporting
There are two types of exporting: direct and indirect.
1. Direct exports
Direct exports represent the most basic mode of exporting, capitalizing on economies of scale in
production concentrated in the home country and affording better control over distribution.
Direct export works the best if the volumes are small. Large volumes of export may trigger
protectionism. Direct exporting practices generally require greater initial outlays of funds,
personnel, and other resources, and they are generally regarded as riskier in nature than indirect
exporting options. But direct exporting can also be a tremendously profitable practice. It
basically requires businesses to find a foreign buyer for its products and make all arrangements
to deliver those goods to the buyer.

Types of Direct Exporting:

a) Sales representatives
Sales representatives represent foreign suppliers/manufacturers in their local markets for an
established commission on sales. Provide support services to a manufacturer regarding local
advertising, local sales presentations, customs clearance formalities, legal requirements.
Manufacturers of highly technical services or products such as production machinery, benefit the
most form sales representation.
b) Importing distributors
Importing distributors purchase product in their own right and resell it in their local markets to
wholesalers, retailers, or both. Importing distributors are a good market entry strategy for
products that are carried in inventory, such as toys, appliances, prepared food.
Advantages of direct exporting
 Control over selection of foreign markets and choice of foreign representative companies
 Good information feedback from target market
 Better protection of trademarks, patents, goodwill, and other intangible property
 Potentially greater sales than with indirect exporting.
Disadvantages of direct exporting
 Higher start-up costs and higher risks as opposed to indirect exporting
  Greater information requirements
 Longer time-to-market as opposed to indirect exporting.
2. Indirect exports
Indirect exports are the process of exporting through domestically based export intermediaries.
The exporter has no control over its products in the foreign market.
Types of Indirect Exporting
a) Export trading companies (ETCs)
These provide support services of the entire export process for one or more suppliers. Attractive
to suppliers that are not familiar with exporting as ETCs usually perform all the necessary work:
locate overseas trading partners, present the product, quote on specific enquiries, etc.
b) Export management companies (EMCs)
These are similar to ETCs in the way that they usually export for producers. Unlike ETCs, they
rarely take on export credit risks and carry one type of product, not representing competing ones.
Usually, EMCs trade on behalf of their suppliers as their export departments.
c) Export merchants
Export merchants are wholesale companies that buy unpackaged products from
suppliers/manufacturers for resale overseas under their own brand names. The advantage of
export merchants is promotion. One of the disadvantages for using export merchants result in
presence of identical products under different brand names and pricing on the market, meaning
that export merchant’s activities may hinder manufacturer’s exporting efforts.
d) Confirming houses
These are intermediate sellers that work for foreign buyers. They receive the product
requirements from their clients, negotiate purchases, make delivery, and pay the
suppliers/manufacturers. An opportunity here arises in the fact that if the client likes the product
it may become a trade representative. A potential disadvantage includes supplier’s unawareness
and lack of control over what a confirming house does with their product.
e) Nonconforming purchasing agents
These are similar to confirming houses with the exception that they do not pay the suppliers
directly – payments take place between a supplier/manufacturer and a foreign buyer.
Advantages of Indirect Exporting
 Fast market access
 Concentration of resources for production
 Little or no financial commitment. The export partner usually covers most expenses
associated with international sales
 Low risk exists for those companies who consider their domestic market to be more
important and for those companies that are still developing their R&D, marketing, and
sales strategies.
 The management team is not distracted
 No direct handle of export processes.
Disadvantages of Indirect Exporting
 Higher risk than with direct exporting
 Little or no control over distribution, sales, marketing, etc. as opposed to direct exporting
 Inability to learn how to operate overseas
 Wrong choice of market and distributor may lead to inadequate market feedback
affecting the international success of the company
  Potentially lower sales as compared to direct exporting, due to wrong choice of market
and distributors by export partners.
Those companies that seriously consider international markets as a crucial part of their success
would likely consider direct exporting as the market entry tool. Indirect exporting is preferred by
companies who would want to avoid financial risk as a threat to their other goals.

Major Constraints
The major constraints encountered by the small units in exporting their products are as follows:
a) Credit Policy: The small scale units have weak-base of their own funds, on the one hand, and
have no access to other sources of funds like capital market, on the other. Hence, they have to
depend upon the state financial corporations, the commercial banks and private money lenders to
meet their long-term and short-term capital requirements. It requires high cost of capital.
Therefore, there should be the need for a comprehensive credit scheme targeted at small industry
exports.
b) Infrastructure: Lack of infrastructure facilities like power supply, transportation and
communication adversely affect the quantity and quality of production, its costs and delivery.
c) Technology: Technology is the heart of quality and competitiveness. However, the adoption of
technology in small industries hampered due to lack of infrastructural facilities, on the one hand,
and the present investment ceiling of the small scale industry, on the other.

How to Export Commercial Goods into New International Markets

1. Export Planning
2. Screening Potential Markets
 Obtain export statistics.
 Identify potential markets.
 Target the most promising ones.
3. Assessing Your Target Markets
 Examine product trends
 Research the competition
 Analyze the market.
 Identify barriers.
 Choose a market.
4. Finding Qualified Buyers
 Search online. .
 Attend trade shows. .
 Contact industry associations.
 Use the Department of Foreign Affairs and International Trade (DFAIT) Trade
Commissioners Service.
5. Taking Care of Logistics
6. Export Documentation
7. Pricing it Right
 Cost based.
 Market demand.
  Competitor pricing.
8. Payment Terms
 Cash in advance.
 Documentary Letters of Credit (LCs).
 Open account.
9. Export Financing

Entrepreneurial network
In business, entrepreneurial networks are social organizations offering different types of
resources to start or improve entrepreneurial projects. Having adequate human resources is a
key factor for entrepreneurial achievements. Combined with leadership, the entrepreneurial
network is an indispensable kind of social network not only necessary to properly run the
business or project, but also to differentiate the business from similar projects.
Purpose
The goal of most entrepreneurial networks is to bring together a broad selection of professionals
and resources that complement each other's endeavors. Initially a key priority is to aid successful
business launches. Subsequently provide motivation, direction and increase access to
opportunities and other skill sets. Promotion of each member’s talents and services both within
the network and out in the broader market increases opportunities for all participants.
One of the key needs of any startup is capital, and often entrepreneurial networks focus on
providing such financial resources, particularly tailored to their membership demographic.
Entrepreneurial networks may also become community involved, endorsing reforms, legislation
or other municipal drives that accommodate their organization's goals.
Membership composition

 lawyers, various specialties

 scientists
 engineers
 architects
 contractors/construction managers
 real estate professionals
 suppliers
 government people or institutions
 partners
 high skilled employees
 clients or any other kind of social contacts that can make the entrepreneurial business (or
project) successful
 mentors
 investors

E-entrepreneurship
E-entrepreneurship describes entrepreneurship in e-business. E-entrepreneurship refers to
establishing a new company with an innovative business idea within the Net Economy. It uses an
electronic platform in data networks. E-entrepreneurship offers its products or services based upon
 a purely electronic creation of value. We use the term e-entrepreneurship to refer primarily to the
digital enablement of transactions and processes within a firm, involving information systems
under the control of the firm. E-entrepreneurship does not include commercial transactions
involving an exchange of value across organizational boundaries. This value offer by e-
entrepreneurship is only made possible through the development of information technology.
Example of e-entrepreneurship is Google.com, eBay.com, yahoo.com, amazon.com, etc.
The e-dimension of entrepreneurship incorporates all the key elements of entrepreneurship
including risk-taking, proactive, and innovation in building, running and managing e-business.
The concept of e-entrepreneurship is not limited to small e-businesses but includes corporate e-
intrapreneurship which is embedded in establishing e-infrastructure to do e-business in large
organizations. E-entrepreneurship operates in a fast-moving, highly uncertain, unknowable and
unpredictable context. It requires change in the traditional concept of entrepreneurship. For
example, the traditional notion of entrepreneurship of being or becoming an expert or finding
and protecting a unique knowledge in a niche market, clashes with the fact that e-business
knowledge is often short-lived and available to everyone, anytime, and anywhere.
Advantages:
 The advantage of e-business is its ubiquity, or the ability to transcend geographical constraints
and remain accessible from everywhere.
 The second biggest advantages of e-business are its cost-effective nature. An e-business does
away with many processes and costs associated with a traditional business.
 The e-business also requires fewer employees, with the entrepreneur herself able to single-
handedly manage the entire operations of a small or medium e-business.
 E-businesses help in serving the customer better. In e-business, customer’s access
comprehensive information of the desired product or service, make comparisons, and effect the
purchase, all with a few clicks of the mouse.
 The customer of an e-business can access the entrepreneur directly through email or online chat,
compared to dealing with the many hierarchical levels, or lengthy telephone holds up when
trying to access the customer service department of a traditional business.

Disadvantages:
 The biggest disadvantage of e-business is its inherent separation from the customer. The
customer and the product come face to face in a traditional brick and mortar business. The
faceless nature of an e-business causes an issue of trust, which remains hard to resolve.
 Another big disadvantage of e-business is its unsuitability in many areas or sectors. E-business,
for instance, cannot treat a patient.
 The success of an e-business depends on strong computer systems, updating and maintaining the
website, security of e-commerce transactions, reliability of shipping and delivery, and search
engine optimization.
 A far bigger threat is the danger from viruses, Trojans, worms, and other malware.
 Finally, success of an e-business depends largely on the success of the delivery channel partner.
Only those e-businesses that can ensure delivery of the product to the customer in a timely and
safe manner can survive.

Success factors
 Computer Science
 It is important to have substantial knowledge about the technologies
 Information Management
The technological basis provided by CS must be managed and it is important to have knowledge
about security, data warehousing, data mining.
 Business Administration
It is essential to have solid business knowledge

2.1. Entrepreneurship vs. e-Entrepreneurship

entrepreneurship consist on the process of creating something new and assuming the risks and
rewards, e-Entrepreneurship will consist on creating owner business activity on internet in some
area to sell or provide service something only online, such as email service DVDs, including
rental and Books, Computers, T-shirts, Cell phones, Magazine subscription, Software, etc.

Chapter 4
Creativity and Business Ideas
Concept of Creativity:
Creativity is the generation of ideas that result in the improved efficiency or effectiveness of a
system. It is the ability to discover new ways of looking at problems and opportunities. Creativity
can be defined as the tendency to generate or recognize ideas, alternatives, or possibilities that may
be useful in solving problems, communicating with others, and entertaining ourselves and others.
It is any act, idea, or product that changes an existing domain or that transforms an existing domain
into a new one.
It is the result of free, unbiased and unconventional thinking. It is based on mental vision,
imagination and observation. It is systematic and logical process to see, recognize, and create
opportunity. It concerned with solving business problem by continually asking “What if….?” or
“Why n…?”
In conclusion, creativity is the entrepreneurs’ ability of analyzing problem from every possible
angle: what is the problem? Whom does it affect? How does it affect them? What costs are
involved? Can it be solved? Would the marketplace pay for a solution?

Aspect of Creativity:
Creativity has two aspects:
1. Process: creativity process is goal-oriented. It is designed to find solution to a problem. This
process occurs in a creative climate.
2. People: creativity lies in people. They are inherently creative. It is people who determine the
solution to a problem. They use following approaches to discover to solve problems:
 Adaptive approach: existing solution are adapted to solve problems.
 Innovative approach: innovative solution is formulated to solve problems.
 Essentials of Creative Climate:
Creativity occurs in a creative climate. Characteristics creative climate are:
 Trustful management that does not over control.
 Open communication inside and outside the organization
 People with variety of personality types.
 Willingness to accept change.
 Experimentation with new ideas.
 Little fear of making mistakes.
 Merit-based human resource management.
 Encouragement to ideas through brainstorming, suggestion system etc.
 Sufficient financial, physical and information resource.
 Channeling of creativity in various arenas.

Creative Process:
The creative process has four commonly agreed steps:
1. Background or knowledge accumulation: the first step in creative process is knowledge
accumulation. It involves investigation and information gathering to get various perspectives on
the problem. People practice the creative search for background knowledge in a number of ways.
Some of the most helpful follow:
 Read in a variety of fields
 Join professional groups and associations
 Attend professional meetings and seminars
 Travel to new places
 Talk to anyone and everyone about your subject
 Scan magazine, newspaper, and journals for articles related to subject
 Develop a subject library for future reference
 Carry a small notebook and record useful information
 Devote time to pursue natural curiosities.
2. Incubation: the second step involves sleeping on the problem. It involves assimilation of
knowledge to generate new idea to solve the problem. Creative individuals allow their
subconscious to mull over the tremendous amounts of information they gather during the
preparation phase. The incubation process often occurs while they are engaged in activities totally
unrelated to the subject or problem. It happens even when they are sleeping. Some of the most
helpful steps to induce incubation follow:
 Engage in routine mindless activities (cutting the grass, painting the hours)
 Exercise regularly
 Play (sports, board games, puzzles)
 Think about the project or problem before falling asleep
 Meditate or practice self-hypnosis
 Sit back and relax on a regular basis
3. The idea experience: this phase of the creative process is often the most exciting. In this stage
the idea or solution the individual is seeking is discovered. Ideas emerge in a rough form. Idea
experience can be speeded up by:
 Daydream and fantasize about your project
 Practice your hobbies
 Work in a leisurely environment (for example, at home instead of the office)
 Put the problem on the back burner
 Keep a notebook at bedside to record late-night or early-morning ideas
 Take breads while working.
4. Evaluation and implementation: the fourth step is to modify, test or rework on rough ideas to
put them in final form. It takes courage, self-discipline and preservance to evaluate and select the
ideas. Some of the most useful suggestions for carrying out this phase follow:
 Increase your energy level with proper exercise, diet, and rest
 Educate yourself in the business-planning process and all facets of business
 Test your ideas with knowledgeable people
 Take notice of your intuitive hunches and feelings
 Educate yourself in the selling process
 Learn about organizational policies and practices
 Seek advice from others
The ideas that pass the test of evaluation are implemented.

The Role of Creativity:

Basically creativity can play important role in following aspect of entrepreneurial work:
 A creative person can innovate ideas as per the demand of market chance.
 They can materializing the imagination to mould the change
 Able to change the domain of thought
 They can synthesize the ideas from scientific invention to changing demand of people.
 The leader of the organization is creative they can allow to set the governing rules themselves
which can help them to bring new business ideas in the organization.
 To bring the new ideas in the organization they have to allow trial and error which may cause
failure. Creative people may allow such failure in the organizations.
 Routine work may kill the creativity. People may have different ways to perform particular task.
So, they should be flexible in the activities to perform.

Sources of new business ideas:

The sources of new business ideas can be:
1. Consumers: organization may get new business ideas through regular listening to the customers.
Customer complaints or suggestions can lead for the development of new products, services or
processes. If we regularly records complaints and try to minimize such complaints it may give a
birth of a new product.
2. Competitors: Entrepreneur always constantly monitors the activities of the competitors. What are
competitor’s new products, services or processes? What alteration in the existing system are they
binging into the practice? Who are competitors’s dissatisfied customers? That do they want? What
 new readjustment can help to bring hose to company’s offering? Seeking answers of such
questions may help for development of new products, services or process.
3. Channel members and sales force: these people are very close to the customers. They frequently
listen customer complaints and suggestions. They also can notice the inconveniences of customers
and competitors activities and offering. They regularly monitor the customer’s evaluation of the
offering with respect to competitor’s offerings.
4. Government: government can be the sources of new product idea. Government agencies may
suggest ideas through training or registration activities while entrepreneurs go for registration of
the entrepreneurial work. They can pursue different policies and publications for entrepreneurship
development in the country. Government can establish different standards and measures for
business up gradation which can provide the avenues for new product, service or process
development to the entrepreneurs.
5. Research and developmental work: Entrepreneur can establish a separate unit for regular
research and development work, or hire such expert team for a specific research and development
work or can find out a new combination of offering uniquely in their day to day activities.

Technique or Method of Idea Generation:

1. Brainstorming: Brainstorming is a method of idea generation. Its purpose is to solve problem
that are new to the organization. In brainstorming, the group meets to generate alternatives. The
members present ideas and clarify them with brief explanation. Each idea is recorded on a flip
chart. Group members are encouraged to offer any idea that occurs to them, even those that seem
too risky and impossible to implement. In this process, criticisms or evaluation of ideas in not
allowed. Quantity of ideas is very important. Each individual should not screen his or her ideas.
After a list of ideas has been generated, those most obviously impracticable are eliminated from
the list. The quantities of ideas that remain in the list are then kept for serious discussion. This
process ultimately lead to a broad agreement on the vital ideas to be considered for implementation.
2. Reverse Brainstorming: Reverse brainstorming is like brainstorming but in reverse
brainstorming criticism is allowed. It is conducted finding the fault of others. Questions are asked
how it cannot work or idea can fail.
3. Brain writing: unlike in brainstorming, the individual in groups write down their ideas on sheets
of paper. The papers are then exchanged and other members of the group make modifications and
suggestions writhing. Each participant thinks and records ideas individually, without any verbal
interaction.
Here are the steps in a typical Brain writing session:
 Participants sit around a table and each one gets a sheet of paper with the same problem statement
written at the top. Just like in traditional brainstorming, also need a moderator for the session.
 At the moderator’s signal, each participant has to write down ideas on the sheet of paper. Just like
in traditional brainstorming, the ideas should always go unedited.
 When time is up (or when everybody’s done), each participant passes the sheet of paper to the
participant to the left.
 Each participant now reads the ideas that were previously written and a new round starts. Each
participant must again come up with new ideas. Participants are free to use the ideas already on
the sheet as triggers — or to ignore them altogether.
 The group can agree to stop after a fixed number of rounds (such as when sheets come to a full
turn around the table) or when participants feel that contributions are exhausted.
 After the idea-gathering phase is completed, the ideas are read, discussed and consolidated with
the help of the moderator, just like in traditional brainstorming.
4. Nominal Group Technique: nominal group technique involves a two-stage process. In the first
stage, individual work separately. Then, in the second stage, they work as an interacting group to
evaluate and choose the alternatives. Thus, the first stages involve generating ideas, goals and
alternatives. The second stage involves the group collectively listing and then evaluating the ideas,
goals and alternatives generated in the first stage. This technique is very useful for identifying and
evaluating options, and solving a problem when no standard is available. It is especially useful
because it allows individuals to generate ideas independently and then bring them together to
evaluate those ideas.
5. Free association: Free association is a technique used in psychoanalysis and also in
psychodynamic theory. In this method person work through their own material, rather than
parroting another’s suggestions considered free association as the first instrument for the scientific
examination of the human mind. It is a technique that asks questions about objects or ideas in an
effort to develop new ideas. It is five step process:
 Isolate the element of the problem
 Find the relationship between these element
 Record the relationship in an orderly form
 Analyze the resulting relationship
 Develop new idea from these patterns
6. Expert Opinion (Delphi Technique): in this method opinion of experts and experienced person
is taken as basis of generating new idea. This method is called Delphi technique. Delphi technique
is particularly used for decision making among geographically scattered organization. The
experienced and knowledgeable persons are asked to give their opinion through a questionnaire
about a particular event and situation. The opinions are, thus, gathered and compiled to get on
overall integrated view of the experts on the subject. This integrated version is sent back to the
experts for moments and further opinion. This expert opinion, thus, becomes the useful input for
generating new idea. 1.
2. Factual Information: in this method, information is collected to define the problem, identify
alternatives, and evaluating the outcomes of these alternatives. In all these activities, information
is vital. Decisions, which are based on objective facts and information, are unbiased and more
scientific. There is no scope for emotions and social pressures when decisions are based on
information. The problem with this approach is that desired information is not available all at time.
Access to information requires cost, time and money.
3. Intuition and Experience: information is not available all the time. Hence, the decision makers
use intuitions. They use their hunches, instincts, inner feeling, and previous experience to reach a
decision. In situation such as customer complaints, an injury, or a natural disaster, time constraints
 make this action the only viable choice. Intuition produces good results because they are derived
from previous experience.

Business Incubation Program:

A business incubation program is an economic and social development process designed to advice
potential start-up companies through a comprehensive business assistance program. It is a business
support system that accelerates the establishment of successful business by providing resources
and services to the entrepreneurs. The primary goal of business incubation is to produce successful
businesses that are able to operate independently and financially viable. It offers services to support
the establishment and development of new, small and medium companies. It catalyze the process
of starting and growing companies by providing entrepreneurs with the expertise, networks and
tools they need to make their venture successful. It is concerned with:
 Start up consulting and business planning
 Consulting in all areas important for business development and growth
 Consulting for access to financing
 Training and networking
What does the business incubation program offer?

 Mentoring on Business Basics

 Online Resources for Entrepreneurs
 Financial Management
 Business Plan Development
 Technology Assistance
 Links to Strategic Partners
 Advisory Boards and Mentors
 Access to Networking Activities
 Marketing Assistance
 Legal Advice
 Access to Local Funds

Business Incubator:
A business incubator is an economic and social development entity designed to advise potential
start-up companies, help them to establish, and accelerate their growth and success through a
comprehensive business assistance program. A business incubator (Business and innovation
center) is a physical facility aimed promoting economic development of its community
development. Business incubators will provide a variety of resources or resourcefulness which
may include the following:
 Shared premises
 Business advice
 Business services
 Networking
 Mentoring
 A full time manager
The importance of Business incubators:
Business incubators support the development of start-ups by providing them with advisory and
administrative support services. An incubator's primary objective is to produce successful and
financially viable firms that can survive on their own. Early incubators focused on technology
companies or on a combination of industrial and service companies, but newer incubators work
with companies from diverse industries.

Finance
Incubators help start-ups save on operating costs. The companies that are part of an incubator can
share the same facilities and share on overhead expenses, such as utilities, office equipment
rentals, and receptionist services. Start-ups can also take advantage of lower lease rates if the
incubator is located in low-rent industrial parks. Incubators may also help start-ups with their
financing needs by referring them to angel investors and venture capitalists, and helping them
with presentations. Start-ups may have better luck securing financing if they have the stamp of
approval of incubator programs.

Management
In addition to financial help, start-ups also need guidance on how to compete successfully with
established industry players. Incubators can tap into their networks of experienced entrepreneurs
and retired executives, who can provide management guidance and operational assistance. For
example, a biotechnology start-up would benefit from the counsel of retired pharmaceutical
executives who have first-hand experience of the drug development and clinical approval
process. Similarly, a restaurant entrepreneur could learn about the difficulties of overseas
expansion from retired hospitality-industry executives. Start-ups usually benefit from having
respected individuals on their boards of directors and scientific advisory panels, because these
individuals bring invaluable connections and experience to the table.

Synergy
\The close working relationships between an incubator's start-ups create synergies. Even after the
start-ups leave an incubator, the connections and networks established through these
relationships can endure for a long time. Start-up entrepreneurs can provide encouragement to
one another, and employees may share ideas on new approaches to old problems. Start-ups may
plan joint marketing campaigns and cooperate on product development initiatives.

Economy
By helping new businesses prosper, incubators assist in creating long-lasting jobs for their host
communities. They create long-lasting jobs for new graduates, experienced mid-career
personnel, and veteran executives. This benefits communities and drives economic growth.

Chapter 5:
Business Development Plan for a New Venture.
 Business plan is a written statement regarding what the entrepreneur is going to do. It is a guideline
regarding what the entrepreneur has wanted to achieve and how has he wanted to achieve. The
business plan is a roadmap of proposed new venture of the entrepreneur that describes current
status, expected needs and projected results of new venture. It develops the new venture for
investment and allocates resources in a coordinated manner. It provides a clear picture about:
 Business description of new venture.
 Goal of new venture.
 Activities to be done in the new venture.
 Timing of doing the activities and their sequence.
 Methods of doing the activities.
 Responsibilities for doing each activity.
 Resources needed for doing each activity.
 Projected profit.
A clear and complete business plan is the main document required to mobilize financial resources
for new venture. It also serves as a working document once the venture is established. It analyses
critical risks. It also presents a time table for implementation of new venture.

Benefits of Business Plan (Value of Business Plan)

The benefits of business plan are as follows:
1. Risk management: all aspects of the new venture are carefully analysed. This helps the
entrepreneur to deal with risks and uncertainties that may arise. It also provides contingency plans
for such situations.
2. Objectivity: the time, effort, research and discipline needed to prepare a business plan forces the
entrepreneur to view the venture objectively and critically. Close scrutiny of assumption made
about the venture’s success is done.
3. Communication: the completed business plan helps entrepreneur to communicate with outside
parties. Financial sources can use it for investment purposes.
4. Implementation: the business plan serves as an operational tool for guiding the implementation
of new venture toward success.
5. Control: the business plan establishes standards for performance as bench marks. Actual
performance can be compared with standards to take corrective actions.
6. Efficiency: the business plan improves efficiency of new venture by minimizing waste. Results
can be achieved on time within budgeted costs and of desired level of quality

Scope of the business plan:

The business plan may be read by employees, investors, bankers, ventures capitalists, suppliers,
customers, advisors, and consultants. Whoever is expected to read and focus? Since each of these
groups reads the plan for different purpose, the entrepreneur must be prepared to address all their
issues and concerns. In some ways, the business plan must try to satisfy the needs of everyone,
whereas in the actual marketplace the entrepreneur’s product will be trying to meet the needs of
selected groups of customers.
However, there are probably three perspectives that should be considered when preparing the plan.
 Entrepreneur’s perspective: the perspective of the entrepreneur, who understands better than
anyone else the creativity and technology involved in the new venture. The entrepreneur must be
able to clearly articulate what the venture is all about.
 Marketing perspective: entrepreneur will consider only the product or technology someone
would buy it. Entrepreneurs must try to view their business through the eyes of their customer.
 Investor perspective: the entrepreneur should try to view his or her business through the eye of
the investor. Sound financial projections are required. If the entrepreneur does not have the skills
to prepare this information, then outside sources can be of assistance.
The depth and detail in the business plan depend on the size and scope of the proposed new venture.
Thus, differences in the scope of the business plan may depend on whether the new venture in a
service involved manufacturing or is a consumer good or industrial product. The size of the market,
competition, and potential growth may also affect the scope of the business plan.

Reasons of some business fail:

Generally a poorly prepared business plan can be blamed to fail due to one or more of the following
factors:
 Goal set by the entrepreneur are unreasonable
 Goals are not measurable
 The entrepreneur has not made a total commitment to the business or to the family.
 The entrepreneur has no experience in the planned business.
 The entrepreneur has no sense of potential threats or weakness to the business.
 No customer need was established for the proposed product or services.
Setting goals requires the entrepreneur to be well informed about the type of business and the
competitive environment. Goals should be specific and not so mundane as to lack any basis of
control.
In addition, the entrepreneur and his or her family must take a total commitment to the business in
order to be able to meet the demands of a new venture. For example, it is difficult to operate a new
venture on a part time basis while still holding on to a full time position. And it is difficult to
operate a business without an understanding from family members as to the time and resources
that will be needed. Lenders or investors will not be favorably inclined toward a venture that does
not have full time commitment. Moreover, lenders or investors may expect the entrepreneur to
make a significant financial commitment to the business even if it means a second mortgage or a
depletion of saving.
Generally, a lack of experience will result in failure unless the entrepreneur can either attain the
necessary knowledge or team up with someone who already has it.
The entrepreneur should also documents customers’ needs before preparing the plan. Customer
needs can be identified from direct experience, letters form customers or marketing research. A
clear understanding of these needs and how the entrepreneur’s business will effectively meet them
is vital to the success of the new venture.