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ENTREPRENEURSHIP
Contents
Part 1 : The Entrepreneurial Perspective
1.
Entrepreneurship and the Entrepreneurial Mindset
2.
Entrepreneurial Strategy : Generating & Exploiting New Entries
Cases / Exercises
Part 2 : From Idea to the Opportunity
3. Creativity and the Business Idea
4. Identifying and Analyzing Domestic and International Opportunities
5. Legal issues
Cases / Exercises
Part 3 : From the Opportunity to the Business Plan
6.
The Business Plan :
Cases / Exercises
How to write a Business Plan its Components
Part 3 : Socialization Process
7.
8.
Negotiation skills
Networking – How to build networks
Part 4 : From the Business Plan to Funding the venture
9.
Sources of Capital
10. Informal Risk Capital, Venture Capital, and Going Public
Cases / Exercises
Part 5 : From Funding the Venture to Launching & Growing
11. Strategies for Growth and Managing the Implications
12. Accessing Resources for Growth from External Sources
Cases / Exercises
ENTREPRENEURSHIP
Chapter 1
Entrepreneurship and the
Entrepreneurial Mind-Set
Entrepreneurship and the
Entrepreneurial Mind-Set
Entrepreneurship - Define:
Entrepreneurship is the process of creating something
new with value by devoting the necessary time and
effort; assuming the accompanying financial, psychic
and social risks and uncertainties; and receiving the
resulting rewards of monetary and personal satisfaction.
Entrepreneurship and the
Entrepreneurial Mind-Set
Entrepreneurship - Define:
This definition stresses four basic aspects of being an
entrepreneur.
1. First, entrepreneurship involves the creation process –
creating something new of value. The creation has to
have value to be entrepreneur and value to the audience
for which it is developed. This audience can be :
• Market of organizational buyers for business innovation,
• The hospital’s administration for a new admitting
procedure and software,
• Prospective students for a new course or even college of
entrepreneurship, or
• The constituency for a new service provided by a
nonprofit agency.
Entrepreneurship and the
Entrepreneurial Mind-Set
Entrepreneurship - Define:
This definition stresses four basic aspects of being an
entrepreneur.
2. Second, entrepreneurship requires the devotion of the
necessary time and effort. Only those going through the
entrepreneurial process appreciate the significant amount
of time and effort it takes to create something new and
make it operational.
As one new entrepreneur so succinctly stated,
“While I may have worked many hours in the office while
I was in industry, as an entrepreneur I never stop thinking
about the business.”
Entrepreneurship and the
Entrepreneurial Mind-Set
Entrepreneurship - Define:
This definition stresses four basic aspects of being an
entrepreneur.
3. The third part of the definition involves the rewards of
being an entrepreneur. The most important of these
rewards is independence, followed by personal
satisfaction, but monetary reward also comes into play.
For some entrepreneurs, money becomes the indicator of
the degree of success achieved.
Entrepreneurship and the
Entrepreneurial Mind-Set
Entrepreneurship - Define:
This definition stresses four basic aspects of being an
entrepreneur.
4. Assuming the necessary risks and uncertainties is the
final aspect of entrepreneurship. Because action takes
place over time, and the future is unknowable, action is
inherently uncertain. This uncertainty is further enhanced
by the novelty intrinsic to entrepreneurial action, such as
the creation of new products, new services, and new
ventures.
Therefore, entrepreneurs respond to, and create, change
through their entrepreneurial actions, where
entrepreneurial action refers to behavior in response to a
judgmental decision under uncertainty about a possible
opportunity for profit.
Entrepreneurship and the
Entrepreneurial Mind-Set
The Entrepreneurial Process:
The process of pursuing a new venture is embodied in the
entrepreneurial process.
The process has four distinct phases :
1. Identification and evaluation of the opportunity;
2. Development of the Business Plan;
3. Determination of the required resources; and
4. Management of the resulting enterprise.
Entrepreneurship and the
Entrepreneurial Mind-Set
The Entrepreneurial Process:
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Identification and evaluation of the opportunity :
Opportunity assessment;
Creation and length of opportunity;
Real and perceived value of opportunity;
Risks and returns of opportunity;
Opportunity vs. personal skills and goals;
Competitive environment
Entrepreneurship and the
Entrepreneurial Mind-Set
The Entrepreneurial Process:
2.
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Develop Business Plan :
Title Page;
Table of contents;
Executive summary;
Major section :
Description of business;
Description of industry;
Technology Plan;
Marketing plan;
Financial plan;
Production plan;
Organisation plan;
Operational plan;
Summary;
Appendixes (Exhibits)
Entrepreneurship and the
Entrepreneurial Mind-Set
The Entrepreneurial Process:
3.
Resources Required :
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Determine resources needed;
Determine existing resources;
Identify resource gaps and available suppliers
Develop access to needed resources.
Entrepreneurship and the
Entrepreneurial Mind-Set
The Entrepreneurial Process:
4.
Manage the Enterprise :
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Develop Management style;
Understand key variables for success;
Identify problems and potential problems;
Implement control systems;
Develop growth strategy
Entrepreneurship and the
Entrepreneurial Mind-Set
Entrepreneurial Thinking Process:
Entrepreneurs think differently than nonentrepreneurs.
Entrepreneurs must often make decisions in highly uncertain
environments where the stake are high, time pressures are
immense, and there is considerable emotional investment.
Given the entrepreneur’s decision-making environment, he
or she must sometimes:
1. Effectuate;
2. Be Cognitively adaptable; and
3. Learn from failure.
We now discuss thought process behind each of these
requirements.
Entrepreneurship and the
Entrepreneurial Mind-Set
Entrepreneurial Thinking Process:
1. Effectuation :
Causal process : A process that starts with a desired
outcome and focuses on the means to generate that
outcome.
Effectuation process : A process that start with what
one has (who they are, what they know, and whom they
know) and selects among possible outcomes.
Entrepreneurship and the
Entrepreneurial Mind-Set
Entrepreneurial Thinking Process:
Prof. Saras is a great Cook, so it is not surprising that
her ex. of these thought processes revolve around
cooking.
Ex : Imagine a Chef assigned the task of cooking dinner. There
are two ways the task can be organized. In the first, the host
or client picks out a menu in advance. All the Chef needs to
do is list the ingredients needed, shop for them, and then
actually cook the meal. This is a process of causation. It
begins with a given menu and focuses on selecting between
effective ways to prepare the meal.
Entrepreneurship and the
Entrepreneurial Mind-Set
Entrepreneurial Thinking Process:
Ex : In the second case, the host asks the Chef to look through
the cupboards in the kitchen for possible ingredients and
utensils and then cook a meal. Here, the chef has to
imagine possible menus based on the given ingredients and
utensils, select the menu, and then prepare the meal. This
is a process of effectuation. It begins with given ingredients
and utensils and focuses on preparing one of many possible
desirable meals with them.
Entrepreneurship and the
Entrepreneurial Mind-Set
Entrepreneurial Thinking Process:
In a nutshell, the process of effectuation process allows the entrepreneur to
create one or more several possible effects irrespective of the generalized
end goal with which she started. The process not only enables the
realization of several possible effects (although generally one or only a few
are actually realized in the implementation), but it also allows a decision
maker to change his or her goals and even to shape and construct them
over time, making use of contingencies as they arise.
This entrepreneurial mind-set involves the ability to rapidly sense, act, and
mobilize, even under uncertain conditions.
In developing an entrepreneurial mind-set, individuals must attempt to make
sense of opportunities in the context of changing goals.
Ex : Effective entrepreneurs are thought to continuously “rethink current
strategic actions, organization structure, communication systems, corporate
culture, asset deployment, investment strategies, in short every aspect of a
firm’s operation and long-term health.”
Entrepreneurship and the
Entrepreneurial Mind-Set
Cognitive Adaptability
Describes the extent to which entrepreneurs are dynamic, flexible, selfregulating, and engaged in the process of generating multiple decision
frameworks focused on sensing and processing changes in their
environments and then acting on them.
Specifically, metacognition describes a higher-order cognitive process
that serves to organize what individuals know and recognize about
themselves, tasks, situations, and their environments to promote
effective and adaptable cognitive functioning in the face of feedback from
complex and dynamic environments.
Entrepreneurship and the
Entrepreneurial Mind-Set
Cognitive Adaptability
How cognitively adaptable are you?
To answer this question, we should ask ourselves a series of
questions that relate to (1) comprehension, (2) connection, (3)
strategy, and (4) reflection.
1. Comprehension questions are designed to increase
entrepreneurs’ understanding of the nature of the
environment. Understanding arises from recognition that a
problem or opportunity exists, the nature of that situation,
and its implications. In general, the questions that
stimulate individuals to think about comprehension include:
What is the problem all about? What is the question/ What
are the meanings of the key concepts? What are the key
elements to effectively pursuing this opportunity?
Entrepreneurship and the
Entrepreneurial Mind-Set
Cognitive Adaptability
How cognitively adaptable are you?
To answer this question, we should ask ourselves a series of
questions that relate to (1) comprehension, (2) connection, (3)
strategy, and (4) reflection.
2. Connection tasks are designed to stimulate entrepreneurs
to think about the current situation in terms of similarities to
and differences from situations previously faced and solved.
Generally, connection tasks focus on questions like : How
is this problem similar to problems I have already solved?
Why? How is this problem different from what I have
already solved? Why?
Entrepreneurship and the
Entrepreneurial Mind-Set
Cognitive Adaptability
How cognitively adaptable are you?
To answer this question, we should ask ourselves a series of
questions that relate to (1) comprehension, (2) connection, (3)
strategy, and (4) reflection.
3. Strategic tasks are designed to stimulate entrepreneurs to
think about which strategies are appropriate for solving the
problems (and why) or pursuing the opportunity (and how).
These tasks prompt them to think about the what, why, and
how of their approach to the situation. Generally, these
questions include : What strategy/principle can I use to
solve this problem? Why is the strategy/principle the most
appropriate one? How can I organize the information to
solve the problem? How can I implement the plan?
Entrepreneurship and the
Entrepreneurial Mind-Set
Cognitive Adaptability
How cognitively adaptable are you?
To answer this question, we should ask ourselves a series of
questions that relate to (1) comprehension, (2) connection, (3)
strategy, and (4) reflection.
4. Reflection tasks are designed to stimulate entrepreneurs to
think about their understanding and feelings as they
progress through the entrepreneurial process. Generally,
these questions include : What am I doing? Does it make
sense? What difficulties am I facing? How do I feel?
How can I verify the solution?
Entrepreneurship and the
Entrepreneurial Mind-Set
10-deadly mistakes of Entrepreneurship and how to
avoid them
1. Management mistakes ; In most small businesses, poor
management is the primary cause of business failure.
Sometimes, the manger of a small business does not have
the capacity to operate it successfully. The owner lacks the
leadership ability, sound judgement, and knowledge
necessary to make the business work.
2. Lack of experience : Small business managers need to
have experience in the field they want to enter. For
example, if an entrepreneur wants to open a retain clothing
business, he or she should first work in a retail clothing
store. This will provide practical exp. As well as knowledge
about the nature of the business.
Entrepreneurship and the
Entrepreneurial Mind-Set
10-deadly mistakes of Entrepreneurship and how to avoid
them
3. Poor financial control : Sound management is the key to a small
company’s success, and effective managers realize that any
successful business venture requires proper financial control.
Business success also requires having a sufficient amount of
capital on hand at start-up. Most entrepreneurs believe that profit
is what matters most in a new venture, but cash is the most
important financial resource a company owns.
4. Weak marketing efforts : Sometimes entrepreneurs make the
classic “Field of Dreams mistake.” Building a growing base of
customers require a sustained, creative marketing effort.
Keeping them coming back requires providing them with value,
quality, convenience, service, and fun – and doing it all quickly.
Entrepreneurship and the
Entrepreneurial Mind-Set
10-deadly mistakes of Entrepreneurship and how to avoid
them
5. Failure to develop a Strategic Plan : Too many small business
managers neglect the process of strategic planning because they
think that it is something that benefits only large companies.
Failure to plan, however, usually results in failure to survive.
Without a clearly defined strategy, a business has no sustainable
basis for creating and maintaining a competitive edge in the
marketplace.
6. Uncontrolled growth : Growth is a natural, healthy, and desirable
part of any business enterprise, but it must be planned and
controlled. Management expert Peter Drucker says that start-up
companies can expect to outgrow their capital bases each time
sales increase 40 to 50 percent. As the business increases in
size and complexity, problems increase in magnitude, and the
entrepreneur must learn to deal with them.
Entrepreneurship and the
Entrepreneurial Mind-Set
10-deadly mistakes of Entrepreneurship and how to
avoid them
7. Improper inventory control : Normally, the largest
investment a small business owner makes is in inventory,
yet inventory control is one of the most neglected
managerial responsibilities. Insufficient inventory levels
result in shortages and stockouts, causing customers to
become disillusioned and leave.
8. Poor location : For any business choosing the right location
is partly an art and partly a science. Too often, business
locations are selected without proper study, investigation
and planning. Especially for retailers, the lifeblood of the
business – sales – is influenced heavily by choice of
location.
Entrepreneurship and the
Entrepreneurial Mind-Set
10-deadly mistakes of Entrepreneurship and how to avoid
them
9. Incorrect pricing : Establishing prices that will generate the
necessary profits means that business owners must understand
how much it costs to make, market, and deliver their products
and services. The first step in establishing accurate price is to
know what a product or service costs to make or to provide.
Then, business owners can establish prices that reflect the image
they want to create for their companies, always, of course, with
an eye on the competition.
10. Inability to make the “Entrepreneurial transition.” Making it over
the “entrepreneurial start-up hump” is no guarantee of business
success. After the start-up, growth usually requires a radically
different style of management, one that entrepreneurs are not
necessarily good at. Growth requires entrepreneurs to delegate
authority and to relinquish hands-on control of daily operations,
something many entrepreneurs simply cannot do.
Entrepreneurship and the
Entrepreneurial Mind-Set
Ethics and Social Responsibility of Entrepreneurs
Ethics refers to the “study of whatever is right and good for
humans.” business ethics concerns itself with the investigation
of business practices in light of human values.
A central question in business ethics is, “For whose benefit and
at whose expense should be firm be managed?” In addressing
this question we focus on means of ensuring that resources are
deployed fairly between the firm and its stakeholders – the
people who have a vested interest in the firm, including
employees, customers, suppliers, and society itself.
Entrepreneurial process acts as a mechanism to ensure a fair
and efficient system for redeploying the resources of a
“victimized” stakeholder to a use where value supplied and
received is equilibrated.
Entrepreneurship and the
Entrepreneurial Mind-Set
Role of Entrepreneurship in Economic Development
It involves more than just increasing per capita output and
income; it involves initiating and constituting change in the
structure of business and society. This change is accompanied
by growth and increased output, which allows more wealth to be
divided by the various participants. What in an area facilitates
the needed change and development?
One theory of economic growth depicts innovation as the key,
not only in developing new products (or services) for the market
but also in stimulating investment interest in the new ventures
being created. This new investment works on both the demand
and the supply sides of the growth equation.