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Entrepreneurship and Small Business Management

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Unit I: As per the syllabus of MAM 2nd semester of Jiwaji University, Gwalior.

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Entrepreneurship and Small Business Management

  1. 1. Entrepreneurship and Small Business Management Dr. Rahul Pratap Singh Kaurav Asst. Professor (Marketing) Prestige Institute of Management, Gwalior MAM 2nd T-204
  2. 2. Entrepreneurs—Challenging the Unknown • Entrepreneurs • Recognize opportunities where others see chaos or confusion • Are aggressive catalysts for change within the marketplace • Challenge the unknown and continuously create the future
  3. 3. Entrepreneurs versus Small Business Owners: A Distinction • Small Businesses Owners • Manage their businesses by expecting stable sales, profits, and growth • Entrepreneurs • Focus their efforts on innovation, profitability and sustainable growth
  4. 4. Entrepreneurship: A Mindset • Entrepreneurship is more than the mere creation of business: • Seeking opportunities • Taking risks beyond security • Having the tenacity to push an idea through to reality • Entrepreneurship is an integrated concept that permeates an individual’s business in an innovative manner.
  5. 5. The Evolution of Entrepreneurship • Entrepreneur is derived from the French entreprendre, meaning “to undertake.” • First coined by Richard Cantillon (1755) • The entrepreneur is one who undertakes to organize, manage, and assume the risks of a business. • Although no single definition of entrepreneur exists and no one profile can represent today’s entrepreneur, research is providing an increasingly sharper focus on the subject. In Malaysia, the term “usahawan” is used to mean entrepreneur.
  6. 6. A Summary Description of Entrepreneurship • Entrepreneurship (Robert C. Ronstadt) • The dynamic process of creating incremental wealth. • This wealth is created by individuals who assume major risks in terms of equity, time, and/or career commitment of providing value for a product or service. • The product or service itself may or may not be new or unique but the entrepreneur must somehow infuse value by securing and allocating the necessary skills and resources.
  7. 7. An Integrated Definition • Entrepreneurship • A dynamic process of vision, change, and creation. • Requires an application of energy and passion towards the creation and implementation of new ideas and creative solutions. • Essential ingredients include: • The willingness to take calculated risks—in terms of time, equity, or career. • The ability to formulate an effective venture team; the creative skill to marshal needed resources. • The fundamental skills of building a solid business plan. • The vision to recognize opportunity where others see chaos, contradiction, and confusion.
  8. 8. The Myths of Entrepreneurship • Myth 1: Entrepreneurs Are Doers, Not Thinkers • Myth 2: Entrepreneurs Are Born, Not Made • Myth 3: Entrepreneurs Are Always Inventors • Myth 4: Entrepreneurs Are Academic and Social Misfits • Myth 5: Entrepreneurs Must Fit the “Profile” • Myth 6: All Entrepreneurs Need Is Money • Myth 7: All Entrepreneurs Need Is Luck • Myth 8: Ignorance Is Bliss For Entrepreneurs • Myth 9: Entrepreneurs Seek Success But Experience high Failure Rates • Myth 10: Entrepreneurs Are Extreme Risk Takers (Gamblers)
  9. 9. Entrepreneurial Schools-of-thought Approach
  10. 10. Macro View: External Locus of Control • The Environmental School of Thought • Considers the external factors that affect a potential entrepreneur’s lifestyle. • The Financial/Capital School of Thought • Based on the capital-seeking process—the search for seed and growth capital. • The Displacement School of Thought • Alienation drives entrepreneurial pursuits • Political displacement (laws, policies, and regulations) • Cultural displacement (preclusion of social groups) • Economic displacement (economic variations)
  11. 11. Micro View: Internal Locus of Control (cont’d) • The Entrepreneurial Trait School of Thought • Focuses on identifying traits common to successful entrepreneurs. • Achievement, creativity, determination, and technical knowledge • The Venture Opportunity School of Thought • Focuses on the opportunity aspect of venture development— the search for idea sources, the development of concepts, and the implementation of venture opportunities. • Corridor principle: New pathways or opportunities will arise that lead entrepreneurs in different directions.
  12. 12. Micro View… (cont’d) • The Strategic Formulation School of Thought • Emphasizes the planning process in successful venture development. • Ronstadt’s View • Strategic formulation is a leveraging of unique elements: • Unique Markets—mountain gap strategies • Unique People—great chef strategies • Unique Products—better widget strategies • Unique Resources—water well strategies
  13. 13. Key Concepts • Entrepreneurship • A process of innovation and new-venture creation through four major dimensions—individual, organizational, environmental, process—that is aided by collaborative networks in government, education, and institutions. • Entrepreneur • A catalyst for economic change who uses purposeful searching, careful planning, and sound judgment when carrying out the entrepreneurial process.
  14. 14. Key Concepts • Entrepreneurial Management • The discipline of entrepreneurial management: • Entrepreneurship is based upon the same principles. • It matters not who or what that the entrepreneur is—an existing large institution or an individual, for-profit business or a public-service organization, a governmental or non- governmental institution. • The rules are much the same: things that work and those that don’t are much the same, and so are innovations and where to look for them.
  15. 15. Evolutionary Definitions Period and Personality Opinion on Entrepreneur 17th Century-General Concept Person bearing risks of profits (loss) in a fixed price contract with Govt. 1725: Richard Cantillon Person bearing risks is different from one supplying capital. 1797: Beaudeau Person bearing risk, planning, supervising, organising and owning. 1803: Jean Baptiste Say Separate profile of entrepreneur from profits of capital. 1934: Joseph Schumpeter An entrepreneur is an innovator and develops untried technology.
  16. 16. Evolutionary Definitions Period and Personality Opinion on Entrepreneur 1964: Peter Drucker Entrepreneur maximizes opportunities through systematic innovations. 1975: Albert Sharpero Entrepreneur takes initiatives, organizes some socio- economic mechanism, and accepts risk of failure. 1980: Karl Vesper Entrepreneur seen differently by economist, psychologist, businesspersons, and politicians. 1985: Robert Hisrich Entrepreneurship is the process of creating something different with value by devoting the necessary time and effort, assuming the social risks and receiving the results- rewards of monetary and personal satisfaction.
  17. 17. Entrepreneurship in India • Pre-independence period • Post-independence period Founder Year Shiv Narayan Birla 1863 Nusserwanji Tata 1868 Ramdutt Goenka 1863 Lakshmanrao Kashipath Kirloskar 1902 Gaganbhai Mafatlal 1905 Karamchand Thapar 1922 Jamnalal Bajaj 1932 Gujarmal Modi 1939 Founder Year KC Mahindra 1956 Dhirubhai Ambani 1958 Nemnath Jain ****
  18. 18. Importance and Contribution of Entrepreneur • Develop new markets • Discover new sources of material • Mobilize capital resources • Introduce • New technologies, • New industries, and • New product. • Create employment Need of entrepreneurship development?
  19. 19. Advantages of being entrepreneur • Your are your own boss and have control over your future. • Feel of decision maker not follower. • Opportunities to fully utilize your talents, skills, knowledge, and creativity • Financial rewards (profit). • Job security (own employment). • Self-satisfaction, personal achievement, and recognition.
  20. 20. Disadvantages of being entrepreneur • Chance of business failure. • Time-consuming (need more hours). • Not secured and stable income • Pressure to succeed. • Financial risk and stress. • Responsibilities and sacrifices.
  21. 21. Characteristics of successful entrepreneur • An especially skillful person. • An innovator, • Providing completeness to the factor of production, • Decision-making person, • A man of creative personality, • A basic-plan maker, • Dynamic leader, • Creator of wealth, • Self-confident and ambitious, • Risk-bearer • Adventurer
  22. 22. Innovation • “Innovation is the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth” • - Peter F. Drucker • Process of doing something new.
  23. 23. Process of Innovation Commercial Application Implementat ion Resource Planning Analytical Planning Transformation of creative ideas into useful application
  24. 24. Invention • Some new creations, which did not have any existence before. • Creation of new product, • Technology, • Theory, • Formula etc. Invention Development of new ideas Results in new knowledge creation Innovation The conversion of an idea or resources into real life application Results in new product, process or services
  25. 25. Creativity • Any form of any thing which has not been seen or thought Creating the Future Creativity Entrepreneurship Invention Innovation
  26. 26. Opportunity through change • The potential for change, improvement or advantage arising from our action in the circumstances may defined as opportunity. • Here are few types of opportunity: • gap in the market • a mismatch between supply and demand • a future possibility which can be recognised or created • a more effective or efficient business process, system or model • a new or existing technology or approach which has not yet been applied • a commodity or experience people would desire or find useful if they knew about it.
  27. 27. Opportunity centered entrepreneurship
  28. 28. What are the Lessons? 1.Who sells the largest number of cameras in India? 2. Who has the biggest revenue from music business in India? 3. Who gained the most when business of British Airways was affected due to the 2008 recession? 28
  29. 29. Answers to the Lessons? Ans 1: Samsung (whose main line of business is NOT cameras but cell phones) Ans 2: Airtel (which is not in music business)- by selling caller tunes makes more money than HMV etc Ans 3: videoconferencing and telepresence services of HP and Cisco. 29
  30. 30. What are the Lessons? • Nokia missed the Smartphone bus. Apple's I phone and Google's Android are making life difficult for Nokia. • But Google is not a mobile company • Nokia is a global behemoth, with 35% of the world’s handset market. 30
  31. 31. What are the Lessons? • Products have vanished from the market in the past 20 years: • Black & white TVs • Fountain pens • Type writers • Alarm Clocks • Audio cassettes • And many others… 31
  32. 32. What are the Lessons? • Lessons by the Managerial economist: • Today's competitor is obvious. Tomorrow's is not- Think beyond conventional framework; think beyond the obvious • Need to identify competition (present) • Need to foresee competition (Future) • Need to beat competition (Strategies) 32

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