To understand the evolution of the term – ‘entrepreneur’
To study the reasons for the current growth in entrepreneurship
To list various reasons driving a person to starting a business
To explore the characteristics and skills of successful entrepreneurs
To classify different types of entrepreneurs
To look at the reasons for entrepreneurial failure
entreprende , which means – ‘to undertake’
Webster dictionary – one who organizes, manages and assumes the risks of a business or enterprise
Richard Cantillion – an entrepreneur is someone who takes the risk of running an enterprise by paying a certain price for securing and using resources to make a product and reselling the product for an uncertain price.
Joseph Schumpeter - an innovator playing the role of a dynamic businessman adding material growth to economic development
Timmons - Entrepreneurship is the process of creating or seizing an opportunity and pursuing it regardless of the resources currently controlled
Reasons for Growth of Entrepreneurship
Deregulation and privatization
Formation of new business communities
Increasing demand for variety
Government incentives and subsidies
Increasing flow of information
Easier access to resources
Return on innovation
Entrepreneur as a Hero
Self-employment is highly valued
Rising dissatisfaction at job
Acceptance of ex-entrepreneurs in the job market
Gurubhai and Dhirubhai
Both start their career from the gulf
Both come to Mumbai to deal in synthetic yarn
Guru’s battle against an anglicized scion of an established business family seems to mirror Ambani’s spat with Nusli Wadia.
Guru’s success in getting people to invest in his IPO is similar to what happened in Ambani’s case.
Mithun Chakraborty plays a newspaper owner in the film and his character resembles Ramnath Goenka. The virulent attacks of the newspaper on Guru are similar to what is alleged of Indian Express and Reliance in real life.
Impact of Entrepreneurial Firms
Serving small markets
Why Start a Business?
Pros & Cons
You are the boss
All profits are yours
There will be great variety in roles and tasks
Increases self confidence
Work can be very satisfying
Success will give you immense satisfaction
You are alone
All decisions are yours
All losses are yours
Work may not be satisfying
You will need to put in long hours
Lack of success will effect self esteem
Exiting the business is difficult
Pressures will affect social and family life
commitment and determination;
tolerance of risk, ambiguity and uncertainty;
creativity, self-reliance and ability to adapt; and
motivation to excel.
being an offspring of self-employed parents;
being fired from more than one job;
being an immigrant or a child of immigrants;
previous employment in a firm with more than 100 people;
being the oldest child in the family; and
being a college graduate.
Creativity and Opportunity Evaluation
Real-time Strategy and Decision Making
Comfort with Change and Chaos
Evangelism, Selling, Negotiation, and Motivation through Influence and Persuasion
Oral and Written Communication
Basics of Start-Up Finance, Accounting and Law
Comfortable with lifestyle changes
Willingness to break / bend / stretch laws
Patience to start small
Prepared to make enemies
Comfort with confrontations
Dealing with failure
Willingness to learn
Entrepreneurial Motivation Entrepreneurial Motivation Personal Characteristics Personal Goals IDEA Environment Entrepreneurial Activity Expectations Outcomes Match
Types of Entrepreneurs
Based on Timing of Venture Creation:
Based on Socio-cultural Variables:
1st generation entrepreneurs
From Business families
Based on Entrepreneurial Activity:
Reasons for Entrepreneurial Failure
Lack of experienced management
Few trained or experienced human resource
Poor financial management
Lack of business linkages
Weak marketing efforts
Lack of information
Improper inventory control
Short term outlook
To understand the importance of the business idea
To explain the significance of a ‘new’ business idea
To formulate a pre-selection process to precede the search for a business idea
To list the possible source of business ideas
To describe the process of researching a business idea
To develop a comprehensive framework for evaluating business ideas
Warren Buffer says, “Today’s successful companies live and die according to the quality of their ideas”.
Peter Drucker, “Innovation is the specific instrument of entrepreneurs, the means by which they exploit change as an opportunity for a different business”
Technological leadership: can also lead to
Economies of scale
Obtain and secure scarce resources before crowding
Impose switching costs on buyers
Reveal underlying business concept
Others can try different resource combinations
Investments in resolving problems: others can benefit from learnings
Inertia makes it difficult to abandon strategy no longer effective
An NDA should define what information is confidential.
Agreements should have clauses on restrictions on disclosure, copy and use of information
Restrictions on use of information when in employment and upon termination of employment.
Requirements relating to return of confidential documents and paperwork upon termination of association
Specification of penal clauses like withholding salary, imposing fines, etc
Addition of non-compete clause in an NDA prevents employees and vendors from setting up competing businesses or helping competitors.
Care should be also taken to ensure that employees do not violate the rights of third parties.
Protecting Trade Secrets
Employees should be made to realize their responsibility to protect confidential material.
Employees should be educated to identify confidential material
Data and information which is confidential should be marked as such.
Access to sensitive material or sensitive areas of the workplace should be restricted on a need to know basis
Interactions and disclosure to third parties should be channeled through specified responsible employees
When leaving an organization, an employee should be reminded of his obligations with respect to confidential information through an exit interview.
FAMILY BUSINESS CHAPTER 4 ENTREPRENEURSHIP
Define a family business
Discuss the history of family business in India
Discuss the roles and responsibilities of the founder
List the characteristics of able successors
Describe the roles, rights and responsibilities of family members in a family business
Explain the role of non-family managers
Describe the issues in succession in a family business
List the best practices in managing family business, from across the world.
What is a Family Business
High percentage of share capital owned by a family either jointly or individually.
Family members employed in the highest decision making posts
Expression of intention to maintain family involvement in the future.
A number of generations of the same family involved in management or ownership
Direct descendants of the founders have management or ownership control
Advantages of a Family Biz
There is a long term orientation as the continuity of the firm is of great concern to the older generations.
The family culture is a source of great pride for family and non-family employees alike.
The family firm functions in a less bureaucratic manner and it is not impersonal in dealing with employees and customers.
Family firms have shown greater willingness to weather the bad times by ploughing back profits.
It is structured to impart training to younger members of the family.
They may have a confusing structure where the role of many family members is not clearly defined.
The style of functioning may be autocratic or patriarchal.
Many of the younger generation may not be worthy of their position and role in the organization
There can be very strenuous succession battles
Sometimes family members can selfishly drain the finances from the company.
Roles of the Founder
Starting the business
Building the organization
Providing guidance and direction to employees and family members
Constructively involving family members in business
Planning for succession
The Next Generation
They know the business well. Ideally, they like or even love the nature of the business
They know themselves and their strengths and weaknesses
They have had the necessary outside experience and education
They want to lead and serve
They are guided responsibly by the previous generation, advisors and the board
They have good interpersonal relationships particularly with other family members in business
The Next Generation
They can count on competent non-family managers to complement their own skills
They have controlling ownership either directly or through allies
They have earned the respect of employees, suppliers, customers and other family members
Their skills and abilities fit the strategic needs of the company
They respect the past and focus their energies and resources on the future of the business and the family
A new entrant should have a track record that gives legitimacy to his ideas and his claims.
It pays to consult the older generation while making the plan.
Suggest a step by step approach.
If the plan is still not acceptable, accept that there may be something wrong with the plan.
Retaining Non-family Managers
Discuss career paths in the company and clearly state if top positions are not open for them.
Offer compensation and benefits that are at par with the others in the industry.
Involve non-family managers in top level decision making by getting them to be part of decision making teams with other owner-managers.
Set targets and use performance measures to build motivation. Achievement of targets provides significant motivation.
Retaining Non-family Managers
Emphasise the contribution of non-family managers in company meetings.
Treat family members like employees at work. It helps build a healthy atmosphere.
Involve non-family managers in succession planning.
Some senior non-family managers can be used as ‘bridge’ heads to smoothen the succession from one generation to another.
Periodically assess the motivation level of non-family managers and the working relationship between family members and non-family managers.
Choose a successor
Grooming the successor
Advantages of Early Entry
The successor becomes familiar with the nature of the business
Gets a chance to develop relationships with other employees
Gets to know other business associates
Skills specifically required for the business can be acquired and developed
Good performance during employment will lead to credibility with employees and other stakeholders
Advantages of Late Entry
Success outside the firm establishes credibility
Best practices from other firms are brought into the family business
Business perspective of the successor is broad
The successor’s competence is judged with greater objectivity.
Best Practices in Family Biz
DOING BUSINESS IN INDIA CHAPTER 5 ENTREPRENEURSHIP
To understand the ground realities of doing business in India
To identify the socio-cultural issues facing an Indian entrepreneur
To list the various forms of business ownership available in India
To understand some of the major laws and regulations governing conduct of business in India
Characteristics of ideal bureaucracy:
Official business is conducted on a continuous basis
Official business is conducted according to written rules
Roles and responsibilities are defined within a hierarchy, with rights of supervision and appeal
Official and private business and income is strictly separate
Factors Working Against Corruption
There is greater transparency in procedures to be seen across government departments.
The right to information act (RTI) has significantly changed the situation
Lately the media too has played an active and visible role
Measures Against Gray Markets
Manufacturers may drastically reduced prices to narrow the gap in prices in local and overseas markets.
Warranties may not be extended to products not purchased through the regular channels.
Some high tech solutions have also been devised like the use of DVD regional codes to protect movies and other digital content.
Negative consequences of ‘Pehchaan’:
Exclusion of meritorious outsiders
Excessive claims on group members
Restrictions on individual freedom
Norms aimed at downward leveling
Types of Ownership
Limited Liability Partnership
One Person Company
Features of VAT
Input tax credit even on capital goods
Credit is carried forward for 2 yrs and then it is refunded in case it cannot be offset
Uniform rates throughout the country
Self assessment of possible tax liability is allowed
In case of excess payment, refund is made within 60/90 days
Interest can be claimed on delayed payments
Sell after stock transfer
Be careful of bogus stock transfer
Collect Forms C D F & H on time
Advise your dealer to be registered
Use ‘input tax credit’ on capital goods
Encourage dealers to get registered
Ensure that purchase and sales registers and stock- books are maintained
Claim interest for delayed payment
Find out if the product is excisable
Find out its classification
Find out its rate of duty
Pay the tax
Bill directly to the buyer
Advice all distributors and dealers of your products to be registered
Avail of SSI concession if your unit is eligible
Know your product properly. There may be an opportunity for reclassifying your product in a lower rate slab.
Avail of all concessions under ‘ CENVAT ’
Let the customer pay separately for add-ons like transport and warehousing expenses so it does not get included in calculating the total excise liability
ENTREPRENEURIAL SUPPORT CHAPTER 6 ENTREPRENEURSHIP Entrepreneurship
Discuss various sources of support for the entrepreneur
List policies from all over, that help entrepreneurs
Discuss how to evaluate these policies
Describe the benefits of a business incubator
Explain the intricacies of incubator management
Define a business cluster
Discuss identification and development of clusters
Support in the form of progressive policies which help entrepreneurial ventures.
Incubators – which are set up to provide support to new firms in the early stages.
Business clusters – which are made up of firms in the same industry in close proximity to one another.
Aims of Policies
Access to debt:
Access to equity:
Simplifying administrative burden:
Access to markets:
Encourage weaker sections:
Take up of policy
Opinion of beneficiaries
Benefits from an incubator
Access to shared flexible spaces
Shared offices services
Providing a business consulting network
Facilitating access to capital
There should be an incubator manager and a team of professionals
The incubator should set clear guidelines for eligibility.
An incubator should have clear cut guidelines for an admission process.
A contract should be signed by the incubator and the entrepreneur laying down all the terms and conditions.
Clear guidelines for the entrepreneur’s exit should also be laid out
The long term financial viability of the incubator will depend on its business model.
Revenue Streams for Incubators
A fixed rental to cover the cost of basic infrastructure
A usage based charge for services like conference room, copier, etc.
A success fee which can be in the form of an equity stake in the new venture.
Exiting an Incubator
The entrepreneur should exit:
After a fixed period
When the start up receives substantial funding
When it achieves a certain level of profitability
In case of irresolvable disputes
Some of the successfully incubated companies from SINE, the incubator at IIT, Bombay
Herald Logic Pvt. Ltd.
Powai Labs Pvt. Ltd.
Seclore Technology Pvt. Ltd
Eisodus Networks Pvt. Ltd.
Quantum Phynance Pvt. Ltd.
A geographical concentration of industries that gain performance advantages through co-location
Well developed and intense links with suppliers
Formal and informal business networks
Shared supporting infrastructure like buildings and road connections
A certain level of cooperation in spite of a high degree of rivalry and competition
Auto industry in Detroit
Paris for high fashion
Antwerp for diamonds
Hollywood for movie production
5th Avenue in New York for Advertising
Hsinchu in Taiwan for high technology
IT firms in Bangalore
Diamond polishing in Surat
Textiles in Tirupur
Seafood processing in Kochi
Call Centres in Gurgaon / NCR
Jute mills in Kolkata
Benefits of Clusters
productivity of the companies in the cluster increases
there is increased scope for innovation in the sector
new businesses are encouraged to come up
Types of Clusters
A vertically-integrated cluster is made up of businesses linked through intense buyer-seller relationships.
A horizontally-integrated cluster is made up of businesses which share a common market for their end products, use a common technological base or common skilled workforce, or require similar raw materials.
Supplier buyer relationships can be forged by collecting and distributing information about potential industry linkages.
Common infrastructure can be supported by external agencies.
Especially in the case of industries heavily dependant on specialized skills, providing skills training and education is a good means of supporting a cluster.
Industries in a cluster can be aided by providing marketing channels.
BUYING A BUSINESS CHAPTER 7 ENTREPRENEURSHIP
To list the benefits of buying an existing business
To list the disadvantages of buying an existing business
To discuss the possible sources of information about a business for sale
To describe a step by step process of buying a business
To tabulate the factors to be investigated before a purchase
To understand various methods of valuing a business
To discuss the major mistakes made in buying a business
To understand the concept of franchising
To list the benefits of being a franchisee
To discuss the factors important in evaluating a franchise opportunity
To describe the elements of a franchise agreement
Advantages of Buying a Business
Buying an existing business will enable you to go around a lot of problems likely to crop up in opening a business.
The existing business would have already got some licenses and government approvals which would be otherwise difficult to get.
Land is scarce and it is difficult to find an appropriate location. An existing business is likely to come bundled with the land.
The plant and machinery have already been bought and have been installed and tested.
Employees are experienced.
A supplier base has already been established.
Advantages of Buying a Business
There is a readymade market.
A distribution network has been set up and money and effort has already been invested in establishing a rapport with retailers and wholesalers.
Goodwill and reputation would have been built up.
Cash flow is going to start immediately.
Banks may be more willing to lend to a business with running operations, an established customer base and a steady cash flow.
It might be cheaper than setting up new operations.
The former owner may be persuaded to guide you in the early days. This free advice may prove to be invaluable.
The industry as a whole is not doing well and the situation is not likely to improve in the near future.
The owner may not have been truthful about the business.
The equipment could be old and outdated.
The location is bad or is likely to become bad.
Employees may be unproductive or incapable of meeting the standards required of them.
Any bad reputation that the business had acquired amongst suppliers, distributors and other people in the industry is likely to pass on to you.
The previous owner may have got into some unfavourable long term contractual obligations
The inventory lying in stores could be obsolete or unfit for use.
If the company’s products have not been received well by the market it will be harder to gain market share than it would have been for a new product.
Buying a Business
Preliminary information collection
Additional information collection
Other statutory documentation
Valuation of capital equipment
Licenses and permits
Contracts with customers and suppliers
Debt and accounts payable
Reputation of the firm
Value of assets
Return on investment
Discounted cash flow
Elements other than cash:
Combination of stock and cash
Lease; with option to buy
Common Mistakes While Buying
Risk vs returns
Valuation of receivables
Antagonising the seller
Arguably the most successful franchise chain
Operates 30,000 outlets in over 100 countries
Became a success after Ray Croc bought it from the McDonald Brothers
Advantages of a Franchise
By taking a franchise, you get a proven system of operation.
The franchisor allows you the use of an established brand name.
The franchisees can also use professionally designed point of sale advertising materials, packaging material, posters and print and TV ads.
This brand recognition is driven by national and regional advertising programmes.
The franchisor will often train the franchisee and the franchisee’s employees before letting a new franchisee start the business.
Advantages of a Franchise
Ongoing product development and research is another advantage of being with a franchise chain.
Large companies can gain from economies of scale but that would not be possible for individual entrepreneurs.
The cost of starting up the franchise operations and the ongoing operating costs are very well documented by the franchisor and the details are shared with all prospective franchisees.
A franchisor can add value by putting a quality program in place.
The franchisor often does market research to find out if the market is big enough to support an outlet.
Choosing a Franchisor
It is good to get into an industry that is growing and shows signs of sustaining a rate of high growth over the next few years.
It is also important to take into account, the performance of the franchisor’s products in the market.
It is better to choose a franchisor, which has been in this business for a long time.
It is disadvantageous to become one of the initial franchisees in a chain.
The reputation of the franchisor counts for a lot.
Choosing a Franchisor
The franchisor’s relationship with other franchisees is also a very important factor to consider.
Take a close look at the profitability indicated in the figures shared by the franchisor. Some of the assumptions made while arriving at those figures may need to be changed.
It might need a good amount of investigation to come up with accurate estimates of the success rate of franchisees.
The Franchise Agreement
The size and location of space needed
The franchise fee including down payment and continuing royalties
A franchisee’s allotted territory
The range of products and services which are offered by the franchisor
To understand the process of securing debt finance
To discuss the importance of collateral security
To tabulate the lending strategies of banks
To discuss the characteristics of venture capital
To understand the structure of venture funds
To list the various roles within a venture fund
To understand how venture capitalists get compensated for their efforts
To describe a step by step screening process followed by venture funds while making an investment
To list the elements of a termsheet
To understand the current scenario of VC funding in India
Disadvantages of Equity Finance
Dilution of shareholding
Increased 3rd party governance
Increased external controls
Increased commitment to stated strategy
Sources of Debt
State Finance Corporations
Drawing up the business plan.
Identifying sources of debt finance.
Presenting the proposal to the bank.
If the manager is considering your proposal favourably, you will have to go for further talks
Once the two parties have broadly agreed, details have to be worked out.
Principles of Good Lending
Length of relationship
Breadth of relationship
Degree of trust
Venture capital is characterized by:
Financing of new and potentially high growth companies
Investments primarily in the form of equity participation
Assistance in the early days of the enterprise
Adding value to the company through active participation, even joining the management on occasions
Willingness to take on higher risk
Expectation of higher rewards
A long-term outlook regarding the investment
Roles in a Venture Fund
Screening by VCs
Get rid of scamsters
Major broad concerns
Growth and industry considerations
The entrepreneurial team
Personal or individual characteristics
Experience of the individual
Ease of exit
Sale to PE, etc
Amount and terms of investment
Composition of the board of directors
Liquidity (exit) plans
Rights of sale
Matters requiring venture capitalist approval
Problems Facing VCs in India
Large established firms with strong growth figures look like a very attractive proposition.
Investments in public listed firms are giving returns in excess of 30%, at far lesser perceived risk
Small firms in India are informationally opaque.
Indian entrepreneurs are perceived as lacking in marketing and management skills.
Indian entrepreneurs are more reluctant to give up controls than their western counterparts.
VCs face an exit challenge as the capital markets in India are still shallow
Brand ‘India’ is strong only in some manpower driven services sectors like IT and ITES.
Sectors Favored by VCs
IT and IT-enabled services
Wireless and telecom
Banking and financial services
Divestments in public sector units
Media and entertainment
Pharma and diagnostics
High technology Manufacturing
MAKING A BUSINESS PLAN CHAPTER 9 ENTREPRENEURSHIP
To understand how a business plan is divided into sections
To list the uses of a business plan
To lay out the steps involved in writing a business plan
To list out data required in drawing up a business plan
To discuss about the various types of business plan
To understand the significance of an executive summary
To understand the structure and composition of various sections of a business plan
To list the various appendices and exhibits needed in a business plan
Uses of a Business Plan
Clarify the business
Kinds of Business Plans
Full Business Plan
Operational Business Plan
The oral presentation
Steps in Writing a Business Plan
Put it down
The rough draft.
Documents relating to formation
Permits and registrations
Details of key employees
Consultants and advisors
Compensation and other employee agreements
Industry and Competitors
Market statistics from secondary sources
Reports on trends, etc
Contracts and purchase orders for raw materials
Details of Intellectual Property (Patent, license, and trademarks)
Industry standards as per regulations
Plant layout and operations plan
Research and development plans
Marketing and Sales
Advance orders, if any
Data on fixed and variable costs to be incurred
Key Sections of a Business Plan
The management team
The industry and the market
The marketing plan
Risks and contingencies
The executive summary is probably the most important section of the business plan.
It is basically the whole business plan condensed into a few pages
The main objective of the executive summary is to entice the reader to go through the entire plan.
The Management Team
Technical and professional qualifications
Quality of work experience
Experience in the relevant sector
Reputation in the business community
Evidence of moral integrity
Networking with other vital people in the industry
The Industry and the market
An industry is a collection of sellers
A market is a collection of buyers
Concentrate on the relevant segments
Gantt chart outline setup
Raw material strategy
Projected financial statements
Break even and payback analysis
Risks and Contingencies
Identify major threats and risks
Outline strategies for countering them
Copy of documents pertaining to incorporation or formalisation of partnership.
CV’s of the entrepreneur/s and of key employees
Copies of various permits or permissions granted.
Copies of papers pertaining to sale or lease of land for the business
Copies of documentation of proprietary intellectual property
Graphical representation of schedule including milestones and dates
Photographs of location
Factory or plant layout
Graphical representation of production process
Findings of market survey conducted
Photograph of product or prototype
Storyboards or mock-ups of advertisements
Projected balance sheets
Projected profit and loss accounts
Projected cash flow statements
Sensitivity analysis of P&L a/c
Break even analysis
MANAGING OPERATIONS CHAPTER 10 ENTREPRENEURSHIP
To understand the importance or correct purchasing in a venture
To list the activities involved in purchasing
To tabulate the elements of a purchase policy
To discuss the ways to evaluate suppliers
To discuss the best practices in purchasing
To list the kinds of inventory carrying costs
To classify different kinds of inventory
To understand the importance of cash management
To understand the role of the cash manager
To appreciate the challenges posed by cash flows
To understand the principles of receivables management
To discuss managing for disasters
To understand the strategies followed by seasonal businesses
Unplanned purchasing can lead to:
spending more money than you need to
buying goods that aren't of the proper quality
choosing suppliers that don't offer the required level of customer service
Role of the Purchase Manager
gather orders from various departments
make sure the orders are complete,
stay within specified spending parameters
select appropriate vendors
order for the goods
check condition upon receipt
check to make sure the invoice is correct
ensure timely payment of the invoice by forwarding it to the accounting department
communicate effectively with the suppliers on various issues
The purchase policy should address the following issues:
Who is authorized to purchase various goods?
How is the budget set for a purchase?
How does the venture hope to ensure competition among vendors?
How to ensure quality of received goods?
What will be the payment system?
What will be the level of confidentiality between the venture and vendors?
Evaluate a supplier on:
Completeness of orders shipped
Quality of items
Strength of financial condition
Ability to service special orders
Quality of customer service
Expertise of sales representatives and technical staff
Consistency on above factors
Some items need more attention than others, on the basis of:
Time to delivery
Costs of carrying inventory
Interest on the financial investment in inventory.
Cost of insurance covering inventory.
Rental or ownership related costs of the store
Cost of handling inventory
Pilferage, wastage or deterioration of stock
Types of Inventory
On the basis of stage in process:
Work In Progress (WIP)
Goods for resale
Types of Inventory
On the basis of reason for stock to be held:
Lot delay stock
Demand fluctuation stock
Line balance stock
The efficient utilization of current assets and current liabilities throughout each phase of the business cycle.
The systematic planning, management and monitoring of the company’s collections and disbursements.
The collection, management and dissemination of information to enable effective use of available funds.
Good Vs Bad Cash Management
Increasing the possibility that your business never runs out of cash.
Eliminating the constant worry associated with not knowing your current and future cash position
Improved relationships with your vendors as a result of good payment practices.
The ability to foresee cash flow problems long before they actually happen.
Suppliers are going to be dissatisfied with late paymentsand that will lead to higher prices, late deliveries or quality problems.
If you are unable to meet salary obligations on payday, employees are going to be worried about the financial stability of the firm.
If your cash problems are a result of tardy collections, customers will stand to gain a lot by not paying up and taking their business elsewhere.
Role of the cash manager:
Efficiently collecting cash inflows
Concentrating collected funds
Controlling the timing of cash outflows
Forecasting the cash position
Securing adequate sources of short-term funds
Optimizing use of any temporary cash surpluses
Gathering timely information
Implementing the systems necessary to monitor, manage and control the cash position
Ensuring the internal and external transfer of financial data between departments or with the bank.
As a result of business growth, cash can be:
Collecting Accounts Receivable
Investigate new customers.
Supply against written orders.
Sign on a legal contract.
Maintain close contact with customers.
Get and repeat positive feedback.
Send invoice ASAP.
Collecting Accounts Receivable
Contact before sending invoice.
Keep a close watch on customer’s fortunes.
Immediately contact on any delayed payment.
Allow a customer to graduate in his credit ratings with you.
Managing During Disasters
Getting back to business
Seasonal businesses try to cut costs during the off season. The easiest way to do that is to cut down operations is seasons of low demand. By design some seasonal businesses have low installed capacities but create additional capacities for the season. E.g. restaurants putting in additional seats during a festive occasion are common sight in all major cities.
Many businesses which close down during the off season depend on temporary labour and sometimes even the infrastructure is leased for a short time only. Clothes exhibitions that spring up in temporary shamianas (tent) are also another familiar sight in all cities.
The off season is a very good time to carry out routine maintenance and repair work.
In case the business is doing very well, the off season is a good time to plan and execute expansion plans.
In case the goods can be stocked, the fallow time in the off season can be use to smoothen out the production schedule. So the entire year can be used to plan out production, which is ultimately sol within a short time.
HUMAN RESOURCE MANAGEMENT CHAPTER 11 ENTREPRENEURSHIP
To discuss the process of hiring an employee
To describe the interview process
To discuss the induction process
To understand the ways of motivating employees
To discuss the important aspects of salary and perks
To list the ways of providing training to employees
To understand the process of firing an employee
Elements of a job description
Details of the job responsibilities
The qualifications desired
The kind of experience the candidate should possess
Salaries and other benefits to be given
People you know personally can be good employees.
A referral is the next best thing to knowing the candidate personally.
Advertisements in local newspapers
Posting on online job sites
Accessing listed resumes
Tapping a placement agency
Signing of joining papers
Narration about the company
A tour of the facilities
Employees seek the following from their jobs:
Recognition for good work done by them
Meaningful participation in the venture’s endeavours
A feeling of belonging and of sharing in the success of the organization
Opportunities for growth in accordance with their competence and experience
Security in their job as long as they perform according to expectations
Monetary reward for performance in their job
Benefits relating to medical expenses and insurance
How employees measure their salary:
The salary is comparable to salaries of others in similar jobs in other companies within the industry
The salary being paid should be comparable to what the employee is likely to get in some other job.
The salary should compare with salaries of others with similar responsibilities within the company
The salary should be comparable to the salaries of his friends and peers outside the industry
Components of a Salary
The fixed component
Medical insurance and a life insurance cover. Additionally, a medical reimbursement can be provided for incidental medical expenses.
Annual bonus based on salaries or on performance.
Employee stock option plan (ESOP)
Work related awards and competitions
Recreation room in the office
An annual picnic or excursion
Recognising achievements of employees and their family members in other spheres
Employees can be encouraged to attend seminars, workshops and short term courses.
Free or subsidised lunch in the office
Discounts to employees on company products
Involving employees in a joint social cause
Employees can be allowed to work from home on selected days
Bonus can be given to some or all employees.
Gifts like a watch or a household appliance on some important occasions
To look at the marketing constraints of entrepreneurial firms
To list the characteristics of entrepreneurial marketing
To tabulate market research practices in entrepreneurial firms
To discuss the concepts of segmentation, targeting and positioning and their relevance to entrepreneurial marketing
To understand the process of brand building in entrepreneurial firms
To explore pricing in entrepreneurial marketing
To look at the distribution function in small firms
To explore non-traditional advertising in entrepreneurial firms
To tabulate different types of promotional campaigns
Characteristics of Entrepreneurial Firms
Low cost field surveys:
Good Market Research
The researcher understands decision alternatives and the information required
The relationship between results and the decision is understood by the entrepreneur and the researcher
The results are communicated well.
Poor research design and poor planning can delay the research or can result in erroneous conclusions.
There is no fudging of data
Define the total market
Divide total demand into distinct market segments
Forecast drivers of demand in each segment
Match with own product to come up with possible sales of own product in that segment
Total the forecasted sales in the segments that can be profitably targeted
Conduct sensitivity analysis to understand assumptions
Attractiveness of a Segment
Is your product able to deliver the value sought by a segment, better than the competition?
Can the segment be easily identified?
Is the segment big enough in terms of potential revenue?
How easy is it to reach the segment with the positioning communication and with the product?
Strategic brand building
Identity-building brand exposure
Involve the customer in the brand building experience
Borrow practices from across industries
Pilot test novel ideas
Have a ‘brand manager’
Do not outsource
According to Aaker, the following are the difficulties in branding:
Pressure to compete on price
Proliferation of competitors
Fragmentation of media and markets
Bias towards changing strategy
Bias against innovation
Pressure to invest elsewhere
Short term pressures
Costs and Pricing
Producers costs indicate a floor price
Customers cost indicates price sensitivity
Competitor’s costs indicate their strength
Assess what value customers place on the product.
Look for variations in the way customers value the product.
Identify a pricing structure.
Consider competitor’s reactions.
Monitor realised prices.
Assess customer’s emotional response to prices.
Pricing of a product should work towards maximising present worth
The unit for making decisions and for measuring return is the entire economic life of the product
Pricing begins before production commences and re-pricing continues for the entire life cycle
Different pricing strategies can be used in different segments
Price sensitivity is less if a third party bears the cost.
Sensitivity is high when the cost of the item is a significant portion of the individual’s total expenditure.
Price sensitivity is higher in the case of B2B buyers as the buyer is not end user.
When there is no differentiation between the products available, it becomes easy to compare products in the category and the price sensitivity of customers increase.
Price sensitivity is more when there is easy access to competing products.
Sensitivity decreases when there is a high cost of switching.
When a long term relationship with the seller is not important, price sensitivity is low.
Response to a Price Cut Is there a response that would cost less than the preventable sales loss? If you respond, is competitor willing and able to reestablish the price difference? Respond Does the value of the markets at risk justify the cost of response? Respond While the multiple responses required to match a competitor cost less than the preventable sales lose? Respond Accommodate or ignore Is your position in other markets of risk? Competitive price cut or” low cost” product No No No No No Yes Yes Yes Yes Yes
Go directly to the consumer
Go directly to the retailer: bypass distributor
Use sales agents
Participate in establisher channel structure
Set up your own intermediaries
Most recent studies show that word-of-mouth is 10 times more effective than other media
Media is getting fragmented and ad clutter is rising. Companies feel the need to stand apart
Traditional forms of media are rising in cost. A 30 second slot during a cricket match on a TV channel can cost over seven lakhs.
Too many marketers are making conflicting claims. The common man’s trust in ads is coming down.
Many new technologies provide the impetus for the acceleration of buzz marketing.
Strategies for Buzz
Give away valuable products or services
Take advantage of others’ resources
The proper transfer mechanism should be in place
Give people a story to tell
The entire self replicating communication should be scalable
Utilize existing communication networks rather than creating new ones
Objectives in a promotional campaign:
Increase in distribution outlets
Increase in shelf space
Increased in-store presence
Expand the selling season
Increase purchase frequency
Increase usage occasions
Increase average transaction size
Steps in Planning a Promotion
Planning a promotional campaign
Establish its objectives
Plan on strategies and tactics
Establish criteria for success
Create back-up plan
Review and test
Put controls in place
Types of Promotions
Point Of Purchase
Training of employees can be carried out by the following:
In House training
Reasons for termination of employment:
Process of Termination
An exit interview should be conducted and reasons for the termination should be honestly discussed.
A letter of recommendation should be promptly given to the exiting employee.
All terminal benefits and other payments due should be made promptly.
All documentation citing the reasons for termination should be organized.
NEW PRODUCT DEVELOPMENT CHAPTER 13 ENTREPRENEURSHIP
To understand the importance of having a NPD process
To list the types of new products
To study the various stages of the NPD process
To understand the adoption of new products
To tabulate the best practices in NPD
To look at various ways of involving customers in the NPD process
To list various barriers to NPD
To discuss the common mistakes in NPD
Types of New Products
New product lines
Additions to a product line
Improvements and revisions of existing products
Failure Rate of New Products “ Debugging” Stage Expected Product Life “ Wearout” Stage Time Number of failure
The NPD Process
Life Cycle Management
The Adoption Process
According to Rogers, the adopter groups are:
Entrepreneurship Adopter Categories 21/2% Innovators 131/2% Early adopters 34% Early majority 34% Late majority 16% Laggards Time of Adoption of Innovation
These five product characteristics influence product adoption:
Communicate with the customer
Tap employees for ideas
New product team
Involving the Customer
Lead user method
Mapping the consumption chain
Barriers to NPD
Shortage of funds
Limited scope in some product categories
Lack of time
Restrictive laws and regulations
Changing consumer preferences
Common Mistakes in NPD
No market research
Focus on product
Lack of communication
Pricing it high
Pricing it low
Success of Entrepreneur in Rural India PANKAJ KUMAR Rai Business School
Rural Enterprise :- Some Facts
Entrepreneurial Development Under TRYSEM
Risk taking Among Rural Entrepreneur
Development Strategy For Small Entrepreneur
Entrepreneurial Development In Backward Area
RURAL ENTERPRISES: SOME FACTS
Fair industrial activity in rural India.
There are 42.12 million enterprises in the country engaged in different economic activities other than crop production and plantation of which 25.81 million (61.30%) are in the rural areas.
The annual rate of growth of enterprises and employment in rural areas was 5.53% and 3.33% respectively as compared to 3.71% and 1.68% respectively in urban centers.
Average annual growth in employment is higher in rural areas (3.33%) than in urban India (1.68%).
Towards enabling Rural Areas…. Agriculture
Information Technology Development
Use of Village Internet kiosk and mobile phones for
Obtaining market-prices in different Markets
Transaction and deal-closing from villages
Booking of transport
Direct payment through banks and loan repayment
Skill Improvement Trainings
Entrepreneurial Development Programmers ( EDPs )
Agriculture and Animal Husbandry
Training on DTP Fashion Designing
Entrepreneurial Development Under TRYSEM
Component of TRYSEM
Identification of entrepreneurial Quality.
Identification of entrepreneurial opportunity.
Training in motivation and skills.
Provision of credit facilities.
Risk sharing by providing investment subsidy.
Help in developing new materials and Market.
Constant monitoring and follow-up.
Risk taking Among Rural Entrepreneur
Environmental Risk Social Risk Economic Risk Technical Risk Types of Risk Types of Risk
Training and Entrepreneurship Development Programme in India Importance of training Methods of training EDP- Need and importance Phases of EDP Selection of entrepreneurs for EDP Training programme - Course contents Pre requisites of EDP Organisations providing EDP
Importance of Training
Ensures availability of skilled manpower at all management levels
Enhancing abilities, potential among entrepreneurs
Maintain and enhance product quality
Minimise wastages in production process
Minimise accidents on the job
Reduce fatigue and increase speed of work
Standardisation in industry and internal processes
Methods of Training
Written instruction method
Designed with an aim of encouraging self employment
Imparts training and motivates potential and existing entrepreneurs to start new business or diversify and expand the existing one
Helps employment and wealth creation among educated unemployed youth
Well equipped to face risks and challenges as an entrepreneur
Government needs considerable human and material resource, importance to detailed planning & implementation
Phases of EDP
Select area from existing government policy guidelines/socio-economic reports
Techno-economic survey of the selected area; feasibility study
Identify potential and existing entrepreneurs interested in starting new business/expansion/diversification
Follow up and consultancy services
Selection of entrepreneurs for EDP
The programme is well publicised and promoted to attract maximum applications for screening
Selection of top 25 to 30 applicants only
Applications screened for:
Demographics and socio cultural data – age, education, work exp, financial resources, type of business etc
Motivation factors – pull factors, source of encouragement, credibility, endurance, concreteness of plans
Psychological test results- traits like risk taking, need for achievement
Training – Course contents
Introduction to entrepreneurship
Essentials of management
Fundamentals of project feasibility study
Organising the business
Pre requisites of EDP
Selection of entrepreneurs
Inputs for EDP
Organisations providing EDP
National Institute for entrepreneurship and Small Business Development (NIESBUD)
Established by Government of India in 1983
An apex body for coordination and supervision on activities of various institutes engaged in entrepreneurial development
Helps evolution of EDP, model syllabi, effective training strategies, methodology, manuals and tools
Organise and conduct training programmes
Coordinate training activities of various agencies/institutes
Provide affiliation to such institutes
Hold examinations and confer certificates to trainers and trainees
Small Industries Service Institutes (SISI)
Three months part time evening courses in management
4-6 weeks part time courses in intensive training in functional areas (marketing, finance)
Special courses in quality control, HR, production planning, product development etc
Mobile workshops imparting training on correct usage of tools and equipment
Helps with preparation of plant layouts
Helps individual firms on specific problems faced
Small Industries Development Organisation (SIDO)
Runs EDP in collaboration with financial institutes, directorate of industries
Gives on the job training on shop floor (carpentry, electrical devices)
Sends its officials/trainers to organisations to update their knowledge
National Small Industries Corporation (NSIC)
Provides apprenticeship for 2 years
Training supervisory staff of SSI up to 2 years
Training to engineers up to 2 years
Training workmen for 12 months
Training to set up own venture
Advice on machinery and components
Production of technologically advanced machines
Entrepreneurship Development Institute of India (EDII)
Develops programmes for entrepreneurial training and development
Develops innovative training techniques for trainers
Focused attention on women entrepreneurs with first such EDP in 1988
EDP for rural entrepreneurship development in U.P and Orissa
Famous for organising camps on entrepreneurship
Condusted EDP in Sri Lanka, Nepal, Ghana, Kenya etc
National Alliance of Young Entrepreneurs (NAYE)
Contribution in encouraging women entrepreneurship
Set up women’s wing in 1975
This wing assists women in:
Getting better access to resources, infrastructure, markets
Identify investment opportunities
Attending to problems of individual industries
Sponsor participation in trade fairs, exhibitions, conferences