Entrepreneurship and Business Management

Mega Bucks Workshop Indian Institute of Technology Kanpur

Prof Parameshwar P Iyer Indian Institute of Science 1

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

Prof Parameshwar P Iyer Indian Institute of Science

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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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
Prof Parameshwar P Iyer Indian Institute of Science

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

Prof Parameshwar P Iyer Indian Institute of Science

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Marketing Management
Decision Variables: Product characteristics and pricing Distribution and personal selling Advertising policies Mostly under the control of the entrepreneur
Prof Parameshwar P Iyer Indian Institute of Science

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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.

Prof Parameshwar P Iyer Indian Institute of Science

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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.

Prof Parameshwar P Iyer Indian Institute of Science

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

Prof Parameshwar P Iyer Indian Institute of Science

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Financial Management
1. Effective utilization of the assetscurrent(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.
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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

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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
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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
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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
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Organizational Management and Control

Formation and Growth

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

Purchase of a small company- identify, screen, evaluate, negotiate, and structure payments Consolidation of a new companyintense conservation of cash, firm limitations on expenses, continual examination of companys strategy.
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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
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