Entrepreneurship and Business Management Mega Bucks Workshop Indian Institute of Technology Kanpur

What is Entrepreneurship? Capacity to take risks Ability to own and organize Desire and capability to innovate and diversify (Stepanek, 1962)

Capacity to take risks

Ability to own and organize

Desire and capability to innovate and diversify (Stepanek, 1962)

Who is an entrepreneur? Person conducting own business (Webster) Person who sets up business deals in order to make profits (Collins Cobuild) Organizer of an economic venture, one who owns, organizes, manages, and assumes the risks of the business (Chandrashekhar)

Person conducting own business (Webster)

Person who sets up business deals in order to make profits (Collins Cobuild)

Organizer of an economic venture, one who owns, organizes, manages, and assumes the risks of the business (Chandrashekhar)

Why entrepreneurship? Process of creating something different, with value, by devoting necessary time and effort, by assuming the accompanying financial, psychological, and social risks, and receiving the resulting rewards of monetary and personal satisfaction (Bowen and Hisrich, 1986).

Process of creating something different, with value, by devoting necessary time and effort, by assuming the accompanying financial, psychological, and social risks, and receiving the resulting rewards of monetary and personal satisfaction (Bowen and Hisrich, 1986).

Role of the Entrepreneur An innovator who combines technical innovations and financial finesses. Important role in producing competitive products, processes, and services. Generation of new employment Local and regional economic development Improved allocation of resources and transfer of technologies

An innovator who combines technical innovations and financial finesses.

Important role in producing competitive products, processes, and services.

Generation of new employment

Local and regional economic development

Improved allocation of resources and transfer of technologies

Entrepreneur as an Economic Pioneer Introduction of new goods and products Introduction of new processes and methods of production Opening up of new markets Opening up of new sources of supply Industrial re-organization

Introduction of new goods and products

Introduction of new processes and methods of production

Opening up of new markets

Opening up of new sources of supply

Industrial re-organization

Strategic Importance of the Small-Scale Sector Significant contributions to national income, employment, and export earnings Value of output over Rs. 5,70,000 crores Employment of over 17.5 million (> twice the private sector; almost as much as all public sector employment) Exports of over Rs. 54,000 crores (> 35 per cent of all exports) (2000-01 figures)

Significant contributions to national income, employment, and export earnings

Value of output over Rs. 5,70,000 crores

Employment of over 17.5 million (> twice the private sector; almost as much as all public sector employment)

Exports of over Rs. 54,000 crores (> 35 per cent of all exports) (2000-01 figures)

Entrepreneurship and Small Businesses Entrepreneurship is especially critical in small businesses because: Important sources of competition for large firms; challenge their economic power Offer a wide range of choice to consumers Sources of innovation and creativity Good career opportunities to work in an unstructured environment of a small company

Entrepreneurship is especially critical in small businesses because:

Important sources of competition for large firms; challenge their economic power

Offer a wide range of choice to consumers

Sources of innovation and creativity

Good career opportunities to work in an unstructured environment of a small company

Marketing Management Demand variables: Demographic, social, economic, political, and competitive factors in market environment Psychological, social, and economic patterns in customer motivations All autonomous factors

Demand variables:

Demographic, social, economic, political, and competitive factors in market environment

Psychological, social, and economic patterns in customer motivations

All autonomous factors

Marketing Management Semi-demand variables: Market segmentation Customer behavior Only partially under the control of the entrepreneur

Semi-demand variables:

Market segmentation

Customer behavior

Only partially under the control of the entrepreneur

Marketing Management Decision Variables: Product characteristics and pricing Distribution and personal selling Advertising policies Mostly under the control of the entrepreneur

Decision Variables:

Product characteristics and pricing

Distribution and personal selling

Advertising policies

Mostly under the control of the entrepreneur

Marketing Management The essential entrepreneurial function in marketing management is to design an integrated marketing plan, where the demand and semi-demand variables of the market are related to the product and decision variables of the firm.

The essential entrepreneurial function in marketing management is to design an integrated marketing plan, where the demand and semi-demand variables of the market are related to the product and decision variables of the firm.

Market Research Marketing success depends on design of a distinctive marketing plan A small entrepreneur should not try to compete on a product-to-product basis with large firms (same goods to same customers thru same channels at same prices !!) Instead, try to do “something different”.

Marketing success depends on design of a distinctive marketing plan

A small entrepreneur should not try to compete on a product-to-product basis with large firms (same goods to same customers thru same channels at same prices !!)

Instead, try to do “something different”.

Operations Management Process of designing and utilizing the physical resources of the firm to maximize the operational capabilities of the company Product/ service design Process design Job design Job standards

Process of designing and utilizing the physical resources of the firm to maximize the operational capabilities of the company

Product/ service design

Process design

Job design

Job standards

Operations Management The entrepreneur’s smaller firm generally has to provide specialized, few-of-a-kind products and personalized services, without the benefits of mass production and mass distribution

The entrepreneur’s smaller firm generally has to provide specialized, few-of-a-kind products and personalized services, without the benefits of mass production and mass distribution

Financial Management 1. Effective utilization of the assets- current(short-term) and capital (long-term) 2. Provision of funds to support those assets 3. Use of current liabilities, intermediate loans, and capital debt or equity 4. Difficult for smaller companies to compete, in finance, with larger firms, simply because they lack money.

1. Effective utilization of the assets- current(short-term) and capital (long-term)

2. Provision of funds to support those assets

3. Use of current liabilities, intermediate loans, and capital debt or equity

4. Difficult for smaller companies to compete, in finance, with larger firms, simply because they lack money.

Financial Management Finances needed for: 1. New investments in product development 2. Expansion of markets 3. Process improvements, etc. Conserve available funds by preparing detailed financial plans, e.g. cash budgets, capital investment analysis, short-term plans

Finances needed for:

1. New investments in product development

2. Expansion of markets

3. Process improvements, etc.

Conserve available funds by preparing detailed financial plans, e.g. cash budgets, capital investment analysis, short-term plans

Financial Management Finding additional funds from sources as 1. Current liabilities 2. Bank loans 3. Equity investments 4. Retained earnings 5. Venture capital proposals 6. Angel funding proposals

Finding additional funds from sources as

1. Current liabilities

2. Bank loans

3. Equity investments

4. Retained earnings

5. Venture capital proposals

6. Angel funding proposals

Product Development Improvements in design of existing product Inventions of new products Lack resources for full R&D facility Must use available capabilities efficiently Outsourcing of R&D and innovation Technical feasibility, market feasibility, development time and cost, manufacturing capability, and strategic fit

Improvements in design of existing product

Inventions of new products

Lack resources for full R&D facility

Must use available capabilities efficiently

Outsourcing of R&D and innovation

Technical feasibility, market feasibility, development time and cost, manufacturing capability, and strategic fit

Organizational Management and Control Smaller companies go thru identifiable stages of growth Increased specializations in tasks of staff Increased delegation on part of founder Increased systematization and formalization of information reporting and accounting procedures

Smaller companies go thru identifiable stages of growth

Increased specializations in tasks of staff

Increased delegation on part of founder

Increased systematization and formalization of information reporting and accounting procedures

Formation and Growth Formal and legal procedures of formation- memoranda and articles of association Sole proprietorship Partnership Private limited Public listing Cooperative

Formal and legal procedures of formation- memoranda and articles of association

Sole proprietorship

Partnership

Private limited

Public listing

Cooperative

Formation and Growth Purchase of a small company- identify, screen, evaluate, negotiate, and structure payments Consolidation of a new company- intense conservation of cash, firm limitations on expenses, continual examination of company’s strategy.

Purchase of a small company- identify, screen, evaluate, negotiate, and structure payments

Consolidation of a new company- intense conservation of cash, firm limitations on expenses, continual examination of company’s strategy.

Conclusions Entrepreneurship is a challenging and rewarding profession Need to concentrate on market analysis, financial resources, and technology management Cannot compete directly with the “big guys”, so need to be ingenious and innovative in all entrepreneurial functions

Entrepreneurship is a challenging and rewarding profession

Need to concentrate on market analysis, financial resources, and technology management

Cannot compete directly with the “big guys”, so need to be ingenious and innovative in all entrepreneurial functions