Start-up and New Venture Management Unit No.1 Notes

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Startup and New Venture Management Presented By Dr. V. R. Malkar

Prepared by Dr. V. R. Malkar

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Unit No.1 1.1 Concept and definitions : Entrepreneur & Entrepreneurship, Entrepreneurship and Economic Development, A Typology of Entrepreneurs. 1.2 Entrepreneurial Competencies: The Entrepreneurs Role, Task and Personality, Entrepreneurial Skills, Creativity, Problem Solving, Decision Making, Communication, leadership quality, Mc clelland N-Ach theory, Self analysis, Personal efficacy, culture and values, risk taking behavior, Technology backup. Prepared by Dr. V. R. Malkar

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Unit No.1 Contd… 1.3 Factors affecting Entrepreneurial Growth : Economic and non economic factors, EDP programmers, Entrepreneurial Training. 1.4 Traits and qualities of entrepreneur: Entrepreneur ; Manager Vs. Entrepreneur, The early career dilemmas of entrepreneur, Defining survival and success, Entrepreneur as a style of Management, The Entrepreneurial venture and the Entrepreneurial organization, Entrepreneurial Process. 1.5 Steps of Entrepreneurial Process: DecidingDeveloping – Moving - Recognizing Prepared by Dr. V. R. Malkar

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Who is an Entrepreneur One who creates a new business in the face of risk on uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the resources to capitalize on those opportunities.

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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)

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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).

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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

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The World of the Entrepreneur • A new business is born every 11 seconds in the United States • Study of influential Americans – the defining issue of the 21st Century: Entrepreneurship! • One of 12 Americans is actively involved in trying to start a new business.

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Chronologically Entrepreneur Concept 1734: Richard Cantillon—Non-fixed income earners who pay known costs of production but earn uncertain incomes 1803: Jean-Baptiste Say—An economic agent who unites all means of production- land, labour and capital to produce a product or service. Product sales pay rent, wages, interest and what remains is profit. He shifts economic resources from an area of lower to an area of higher productivity. 1934: Joseph Schumpeter—Innovators who change the status quo to set up new products and new services. 1961: David McClelland—A person with a high need for achievement [N-Ach] who is energetic and a moderate risk taker. Prepared by Dr. V. R. Malkar

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1964: Peter Drucker—One who searches for change, responds to it and exploits opportunities. Innovation is a specific tool of an entrepreneur hence an effective entrepreneur converts a source into a resource. 1971: Peter Kilby—Imitative entrepreneurs do not innovate, but bring technologies innovated by others into another context. 1975: Howard H. Stevenson—The pursuit of opportunity without regard to resources currently controlled. 1975: Albert Shapero—Those who take initiative, accept risk of failure and have an internal locus of control. 2013: Ronald May—Someone who commercializes his or her innovation.

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Entrepreneurial Activity Across the Globe Percentage of Adult Population Working to Start a New Business 8.5%

Unit ed St at es 6.8%

Canada 5.4%

Country

Israel 3.4%

It aly

3.3%

Great Brit ain 2.2%

Germany

2.0%

Denmark France Japan Finland

0.0%

1.8% 1.6% 1.4%

2.0%

4.0%

6.0%

8.0%

10.0%

Percent

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Entrepreneurship Concept • The word entrepreneurship is derived from French root which means, ‘to undertake’. Today, it is known by various names, e.g. ‘adventurism’, ‘risk taking’, ‘thrill seeking’, ‘innovating’, etc.

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Entrepreneurship • Author like Joseph Schmpter (1950-60) advocates, “Entrepreneurial activity as essentially a creative activity. It consists in doing such things which are generally not done in the ordinary course of business. • An entrepreneur is one who innovates….” He further states that, “Entrepreneur is specially motivated and talented class of people….”

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A Few Definitions Entrepreneur: Person whose goal is to create or capitalize on new economic opportunities through innovation

Entrepreneurship: Process through which entrepreneurs create and grow enterprises

Entrepreneurial Community: Community where significant economic and social entrepreneurial activity exists within an effective system of public and private support

Entrepreneurship Development: Policies and practices (public and private) that foster entrepreneurship

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Identifying Entrepreneurs People with underused talent Small businesses

Social entrepreneurs

Unemployed

Entrepreneurship

Youth

High-growth businesses

Innovators Self- employed Prepared by Dr. V. R. Malkar

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ENTREPRENEURSHIP AND Economic Development • • • • •

Increase in Per Capita Income Capital formation Employment generation Balanced regional development Rural Development

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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

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A Typology of Entrepreneurs • Type of Business determines the Entrepreneurs : • Business Entrepreneur : Idea Generator • Trading Entrepreneur : Exchange of Goods & Svs , Mktg & Brand Building • Industrial Entrepreneur : Manufacturer first & Innovator Next • Corporate Entrepreneur : Plans, Organise,Develops & Manages Corporate • Agriculture Entrepreneur : Develops Agri Based Activities

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Technology Based : • Technical Entrepreneur : Highly Skilled in product Craft’s men. Focuses mainly on Product Design • Non- Technical Entrepreneur : Focuses on Mktg, Distribution& designing the cheaper product. • Professional Entrepreneur : Who creates new technology or idea & sells it to others for money & Moves to next level of creation Prepared by Dr. V. R. Malkar

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Motivational Based : • Pure Entrepreneur : Who creates jobs rather seek a job • Induced Entrepreneur : Who is encouraged by govt. bodies • Motivated Entrepreneur : Who creates jobs rather seek a job

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Entrepreneurial Competencies • • • • • • • • • •

Creativity , Problem solving, decision making, Communication, Leadership qualities Mc Clellands N-ach theory, Self analysis, Personal Efficacy, Culture and values, Risk Taking Behavior, Technology Back-up

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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 Prepared by Dr. V. R. Malkar

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Factors affecting Entrepreneurial Growth • Economic factors • • • •

• • • • • • •

Capital Labour Raw Materials Market

Non- Economic Factors Social – Legitimacy of Entrepreneurship Social Mobility – Marginality Security Psychological – Need Achievement – Withdrawal of Status Respect

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EDP • 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 • Training • Follow up and consultancy services

EDP Cycle Stimulatory Role • • • • • • • • • •

1. Registration of unit 2. Arranging finance 3. Prov iding land, shed, power, water etc. 4. Guidance for selecting and obtaining machinery 5. Supply of scarce raw materials. 6. Getting licences / import licences 7. Providing common facilities 8. Granting tax relief or other subsidy 9. Offering management consultancy 10. Help marketing product

Support Role 1. Entrepreneurial education. 2. Planned publicity for entrepreneurial opportun ities. 3. Identification of potential entrepreneurs through scientific methods. 4. Motivational training to new entrepreneurs. 5. Help and guide in selecting products and preparing project reports. 6. Making available techno-economic information and product profits. 7. Evolving locally suitable new products and processes. 8. Availability of local agencies with trained personnel for entrepreneurial counselling and promotions. 9. Organising entrepreneurial forum.

Sustaining Role 1. Help modernization 2. Help diversification/expansion / substitute production. 3. Additional financing for full capacity utilization 4. Deferring repayment/interest. 5. Diagnostic industrial extension/consultancy source. 6. Production units/ legislation/policy change 7. Product reservation / creating new avenues for marketing 8. Quality testing and improving services • 9. Need - based common facilities centre

Organizations providing EDP

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 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 • Activities undertaken: – – – –

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

Micro,Small &Medium Enterprises Development Commission (MSME DC) • 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

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 – Organise seminars, training programmes, workshops

• 1.4 Traits/ Qualities of Entrepreneur, Managers Vs. Entrepreneur, The early career dilemmas of Entrepreneur, Defining survival and success, • Entrepreneurship as a style of Management, Entrepreneurial Venture and Entrepreneurial Organization, Entrepreneurial Process

Qualities of a Successful Entrepreneur 1) Creative 2) Calculated risk taking 3) Goal Oriented 4) Hard Working 5) Persistent 6) Takes personal responsibilities 7) Desires feedback and learns from experience 8) Ability to exploit Opportunities. 9) Willing to learn

10)Self-confidence 11)Likes to excel in work Prepared by Dr. V. R. Malkar

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12)Decision making 13)Competitive 14)Dreamer 15)Family & Friends second to business 16)Time is important 17)Imaginative

18)Realistic 19)Courageous 20)Self Starter

21)Innovative 22)Good communication Prepared by Dr. V. R. Malkar

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Difference between Entrepreneur and Manager •

Motive: The main motive of an entrepreneur is to start a venture by setting up an enterprise. He understands the venture for his personal gratification. But, the main motive of a manager is to render his services in an enterprise already set up by someone else.

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Status: An entrepreneur is the owner of the enterprise. A manager is the servant in the enterprise owned by the entrepreneur.

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Risk-bearing: An entrepreneur being the owner of the enterprise assumes all risks and uncertainty involved in running the enterprise. A manager as a servant does not bear any risk involved in the enterprise.

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Objectives: An entrepreneur and a manager differ in their objectives. Entrepreneur’s objective is to innovate and create and he acts as a change agent. where as a manager’s objective is to supervise and create routines. He implements the entrepreneur’s plans and ideas.

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Rewards: The rewards an entrepreneur gets for bearing risks involved in the enterprise is profit which is highly uncertain. A manager gets salary as rewards for the services rendered by him in the enterprise. Salary of a manager is certain and fixed.

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Fraudulent behavior: An entrepreneur is not induced to involve in fraudulent behavior where as a manger does. A manager may cheat by not working hard because his income is not tied up to the performance of the organization

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Innovation: Entrepreneur himself thinks over what and how to produce goods to meet the changing demands of the customers. Hence, he acts as an innovator also called ‘change agent’. But, what a manager does is simply to execute the plans prepared by the entrepreneur. Thus, a manager simply translates the entrepreneur’s ideas into practice.

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Qualification: An entrepreneur needs to posses qualities and qualifications like high achievement motive, originality in thinking, risk-bearing ability and so on. On the contrary, a manager needs to posses distinct qualifications in terms of sound knowledge in management theory and practice.

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“An entrepreneur could be a manager but a manager cannot be an entrepreneur”. An entrepreneur is intensely dedicated to develop business through constant innovation. He may employ a manager in order to perform some of his functions such as setting objectives, policies, rules etc. A manager cannot replace an entrepreneur in spite of performing the allotted duties because a manager has to work as per the guidelines laid down by the entrepreneur. On the downside, typical manager brings professionalism into working of an organization. They bring fresh perspectives, ideas and approach to trouble shooting which can be invaluable.

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Rewards of Being an Entrepreneur o High degree of independence— from constraints

freedom

o Get to use a variety of skills and talents o Freedom to make decisions o Accountable to only yourself o Opportunity to tackle challenges

o Feeling of achievement and pride o Potential for greater financial rewards Prepared by Dr. V. R. Malkar

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Feeding the Entrepreneurial Fire • • • • • • •

Entrepreneurs as heroes Entrepreneurial education Demographic and economic factors Shift to a service economy Technological advancements Independent lifestyles E-Commerce and the World Wide Web • International opportunities

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Challenges of Being an Entrepreneur o Must be comfortable with change and uncertainty o Must make a bewildering number of decisions

o May face tough economic choices o Must be comfortable with taking risks o Need many different skills and talents o Must be comfortable with the potential for failure Prepared by Dr. V. R. Malkar

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Steps of Entrepreneurial Process I.

II. III. IV. V.

DecidingDevelopingMovingManagingRecognizing

The Entrepreneurial Process Starting the Venture: Researching Feasibility Planning the Venture

Exploring the Entrepreneurial Context

Identifying Opportunities/Possible Competitive Advantage

Organizing the Venture Launching the Venture

Managing the Venture:

Managing Processes Managing People Managing Growth Special Issues

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18 STEPS FOR SUCCESS AS ENTREPRENEUR

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18. PROFIT 17. REPAYMENT

16. SALES 15. PERMANENT REGN. 14. PRODUCTION 13. MANPOWER NEEDS 12. GET STATUTORY LICENCE 11. RAW MATERIAL 10. ELECTRICITY CONNECTION 9. PURCHASE OF MACHINERY 8. LOCAL BODY 7. FIXING WORK PLACE 6. GETTING FINANCE 5. PROJECT REPORT 4. LOCATION OF THE UNIT 3. REGISTRATION OF THE UNIT 2. PRODUCT SELECTION Prepared by Dr. V. R. Malkar DECISION TO BE AN ENTREPRENEUR

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Benefit of Entrepreneurship Opportunity to make a difference Opportunity to reach your full potential

Benefit of Entrepreneurship

Opportunity to get unlimited profits Opportunity to do what you enjoy doing

Opportunity to gain control over your own destiny

Opportunity to contribute to society and be recognized for your efforts

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Assignment Questions Q.1 Entrepreneur and Entrepreneurship are catalyst in the process of economic development of the country, Explain with example Q.2 Describe with examples the salient characteristics of successful Entrepreneur. Q.3 What factors do influence the emergence and development of entrepreneurship.

Thank you

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