Entrepreneurship

Lecture 42

Top most strategies used for the growth of small-scale enterprise

 Expansion: enlargement or increase in the same line of activity.
 Diversification: an approach to growth by adding new products to the
existing product line.
 Joint Venture: A joint venture is an arrangement between two or more
people or companies to work together for a particular purpose.
 Mergers and Acquisitions: A merger occurs when two separate entities
combine forces to create a new, joint organization
 Sub-Contracting: employ a firm or person outside one's company to do
(work) as part of a larger project.
 Franchising: A franchise is an authority that is given by an organization
to someone, allowing them to sell its goods or services

1. Expansion:
Types of Expansion:
a) Expansion through Market Penetration:
It means the enterprise increases the sales of its existing product by enlarging
the existing market.
b) Expansion through Market Development:
Exploring new markets for the existing product. In order to increase the sale of
existing product, the enterprise makes searches for new customers.
c) Expansion through Product Development and/or Modification:
It implies developing or modifying the existing product to meet the
requirements of the customers.
Expansion advantages:
 Growth through expansion is natural and gradual.
 Enterprise grows without making major changes in its organizational
structure.
 Expansion makes possible the effective utilization of existing resources
of an enterprise.
 Gradual growth of enterprise becomes easily manageable by the
enterprise.
 Expansion results in economies of large-scale operations.
Disadvantages:
 Growth being gradual is time consuming.
 Expansion in the same line of product delimits enterprise growth making
enterprise unable to take advantages from new business opportunities.
 The use of modem technology is limited due to the limited resources at
the disposal of enterprise. It weakens the competitive strength of the
enterprise.
2. Diversification:
A process of adding more products/markets/services to the existing one.
According to product ‘lifecycle concept’, every product has a definite life
period. Like human beings, product also dies/disappears from the market.
Types of Diversification:
a) Horizontal Diversification
Company adds new product, not related to existing product, but, will appeal
existing customer. For example: a company that was making notebooks earlier
may enter into pen market with its new products.
b) Vertical Diversification
Associated with same product but not the same level of supply chain.
c) Concentric Diversification
An enterprise enters into the business related (close) to its present one in terms
of technology, marketing or both. Nestle, originally, a baby food producers
entered into related products like ‘Tomato Ketchup’ and ‘Maggi Noodles’.
d) Conglomerate Diversification
An enterprise diversifies into the business that is not related to its existing
business neither in terms of technology nor marketing.
3. Joint Venture:
In simple terms, joint venture is a restricted or a temporary partnership between
two or more firms to undertake jointly to complete a specific venture.
4. Mergers and Acquisitions
 External growth strategy
 Merger means a combination of two or more existing enterprises into one.
 For the enterprise which acquires another, it is called ‘acquisition.’ For
the enterprise which is acquired, it is called ‘merger.’
 5. Sub-Contracting:
A sub-contracting relationship exists when a company (called a contractor)
places an order with another company (called the sub-contractee) for the
production of parts, components, sub-assemblies or assemblies to be
incorporated into a product sold by the contractor.
6. Franchising:
 Franchising is a system for selectively distributing goods or services
through outlets owned by the retailer or dealer. Basically a franchise is a
patent or trademark license, entitling the holder to market particular
products or services under a brand name or trademark according to pre-
determined terms and conditions.
 The buyer is called the ‘Franchisee’ the company that sells rights to its
business concept is called ‘Franchiser.’
Lecture 40 and 41

Risk Management:
 Risk management encompasses the identification, analysis, and response
to risk factors that form part of the life of a business.
 Effective risk management offers the potential to reduce both
 The possibility of a risk occurring
 Its potential impact.
Risk Management Process:
1) Risk Identification: Identify risk.
2) Risk Analysis: Assess risk.
3) Risk Response Plan: Control risk.
4) Risk Monitoring and Control: Review controls.
Risk Analysis Process:
1) Identify existing risks.
2) Identify what caused the risk (assess the risk).
3) Develop an appropriate response.
4) Develop preventive mechanisms for identified risks.
Response to Risks:
1) Avoidance: getting rid of risk cause.
2) Mitigation: reduce the impacts and risks of hazards through proactive
measures.
3) Acceptance: accepting the risk of any reason. Or forcefully.
4 Ways Can Entrepreneurs Can Manage Risk:
1. Understand that risk is opportunity
2. Trust the process
3. Turn risk on its head
4. Avoid complacency
Lecture 39

Lean Canvas:
 Lean Canvas is an adaptation of Business Model Canvas (by Alexander
Osterwalder).
 Created by Maurya created in the Lean Startup spirit (Fast, Concise and
Effective startup).
 Lean Canvas promises an actionable and entrepreneur-focused business
plan.
 It focuses on problems, solutions, key metrics and competitive
advantages.
 Three steps entrepreneurs can take to begin building a lean startup: Find,
Execute, and Validate.
 Lecture 20-23

Starting the Venture

Presenting the Plan:
 The entrepreneur is expected to “sell” the business concept.
 Focus on why this is a good opportunity.
 Provide an overview of the marketing program; sales and profits.
 Address risks and how to overcome them.
 Audience includes potential investors who may raise questions.
 Investors describe these presentations as elevator pitches.
Information Need:
 Before creating a business plan, the entrepreneur must undertake a
feasibility study.
 Information for a feasibility study should focus on marketing, finance,
and production.
 Feasible, well-defined goals and objectives need to be established.
 Based on this, strategy decisions can be established.
Operations Information Needs
 Location.
 Manufacturing operations.
 Raw materials.
 Equipment.
 Labor skills.
 Space.
 Overhead.
 Most of the information should be incorporated directly into the business
plan.
An Upside-Down Pyramid Approach to Gathering Market Information
 General environmental and demographic trends
 National food industry trends
 Local environmental and demographic trends
 Local food industry trends
 Local competition strengths and weaknesses
Financial Information Needs
The entrepreneur has to prepare a budget of all possible expenditures and
revenue sources, including sales and any external available funds.
The budget includes capital expenditures, direct operating expenses, and cash
expenditures for no expense items.
Using the Internet as a Resource Tool
The Internet can provide information for industry analysis, competitor analysis,
and measurement of market potential.

Business Plan
Executive Summary:
 An executive summary is a brief introduction to your business plan.
 It should be concise and appealing to the reader.+
 It describes:
 Your business.
 The problem that it solves.
 Your target market.
 Financial highlights.
Writing the Business Plan:
1) Introductory Page
 Name and address of the company.
 Name of the entrepreneur(s), telephone number, fax number, e-mail
address, and Web site address.
 Description of the company and nature of the business.
 Statement of financing needed.
 Statement of confidentiality of report.
2) Executive Summary
About two to three pages in length summarizing the complete business plan.
3) Environmental and Industry Analysis
 The environmental analysis assesses external uncontrollable variables
that may impact the business plan.
 Examples: Economy, culture, technology, legal concerns, etc.
 The industry analysis involves reviewing industry trends and competitive
strategies.
 Examples: Industry demand, competition, etc.
4) Operations Plan
 All businesses (manufacturing or nonmanufacturing) should include an
operations plan as part of the business plan.
 It goes beyond the manufacturing process.
 Describes the flow of goods and services from production to the
customer.
 The major distinction between services and manufactured goods is
services involve intangible performances.
5) Marketing Plan
 It describes market conditions and strategy related to how the
product/service will be distributed, priced, and promoted.
 Marketing research evidence to support any of the marketing decision
strategies as well as for forecasting sales should be described in this
section.
 Potential investors regard the marketing plan as critical to the success of
the new venture.
6) Assessment of Risk
 Identifies potential hazards and alternative strategies to meet goals and
objectives.
 The entrepreneur should indicate:
 Potential risks to the new venture.
 Impact of the risks.
 Strategy to prevent, minimize, or respond to the risk.
 Major risks could result from:
 Competitor’s reaction.
 Weaknesses in marketing/ production/ management team.
 New advances in technology.
7) Financial Plan
 It contains projections of key financial data that determine economic
feasibility and necessary financial investment commitment.
 It should contain:
 Summarized forecasted sales and appropriate expenses for at least
the first three years.
 Cash flow figures for three years.
 Projected balance sheet.
8) Appendix
 It contains any backup material that is not necessary in the text of the
document.
 It may include:
 Letters from customers, distributors, or subcontractors.
  Secondary data or primary research data used to support plan
decisions.
 Leases, contracts, or other types of agreements.
 Price lists from suppliers and competitors.

Using and Implementing the Business Plan

1) Measuring Plan Progress
Business plan projections are made on a 12-month schedule but the
entrepreneur should frequently check on:
 Profit and loss statement.
 Cash flow projections.
 Inventory control.
 Production control.
 Quality control.
 Sales control.
 Disbursements.
 Web site control.
2) Updating the Plan
 Entrepreneurs must be sensitive to changes in the company, industry, and
market.
 Determine what revisions are needed if changes are likely to affect the
business plan.
 This helps entrepreneurs to:
 Maintain reasonable targets and goals.
 Keep the new venture on a course to high probability of success.
 Lecture 24-26

Marketing Plan
Industry Analysis:
 It provides sufficient knowledge of the environment that can affect
marketing strategy decision making.
 Information can be gathered through secondary sources and market research.
 The entrepreneur can begin to understand competitors’ strengths and
weaknesses; provides insight into how to position products or services.
 Competitor Analysis
 Document current strategies of primary competitors.
 Information can be utilized to formulate the market positioning strategy.
 This analysis provides a solid basis for marketing decision making.
Marketing Research for the New Venture
1) Defining the Purpose or Objectives
Make a list of the information that will be needed to prepare the marketing plan.
2) Gathering Data from Secondary Sources
Secondary sources can include trade magazines, newspaper articles, libraries,
government agencies, the Internet, and commercial data.
3) Gathering Information from Primary Sources
 Data collection procedures - Observation, networking, interviewing,
focus groups, and experimentation.
 Data collection instrument - Questionnaire.
4) Analyzing and Interpreting the Results
 Results can be tabulated by hand or on a computer.
 Evaluated and interpreted should be based on research objectives.
 Cross-tabulated data can provide more focused results.
Understanding the Marketing Plan
Marketing plan
 A written statement of marketing objectives, strategies, and activities to
be followed in business plan.
 It is designed to provide answers to three basic questions:
 Where have we been?
 Where do we want to go (in the short term)?
 How do we get there?
Characteristics of a Marketing Plan
 A marketing plan should:
 Provide a strategy.
 Be based on facts/assumptions.
 Describe an organization for implementation.
 Provide for short-term and long-term continuity.
 Be simple and short.
 Be flexible.
 Specify criteria for control.
Marketing Mix:
A combination of product, price, promotion, and distribution and other
marketing activities needed to meet marketing objectives.
Steps in Preparing the Marketing Plan
1) Defining the Business Situation
• Situation analysis - Describes past and present business
achievements of new venture.
• In case of a new venture, information should relate to how and why
the product or service was developed.
• After a new venture has started up information should relate to:
 Present market conditions.
 Performance of the company’s goods and services.
 Future opportunities or prospects.
2) Defining the Target Market/ Opportunities and Threats
• The target market is specific group of potential customers toward
which the venture aims its marketing plan.
• Market segmentation - Dividing a market into definable and
measurable groups for purposes of targeting marketing strategy.
• Process of segmenting and targeting customers
 Decide on general market or industry to pursue.
 Divide market into smaller groups based on:
 Characteristics of the customer – Geographic,
demographic, and psychographic.
  Buying situation – Desired benefits, usage, buying
conditions, and awareness of buying intention.
 Select segment or segments to target.
 Develop a marketing plan integrating product, price,
distribution, and promotion.
• Consider the strengths and weaknesses in the target market.
 Establishing Goals and Objectives
 These are statements of level of performance desired by new
venture.
 Realistic and specific marketing goals and objectives
respond to the question: “Where do we want to go?”.
 Not all goals are quantifiable.
 Limit the number of goals or objectives to between six and
eight.
 Goals should represent key areas to ensure marketing
success.
3) Define Marketing Strategy:
Product or service
 May consider more than the physical characteristics.
 Involves packaging, brand name, price, warranty, image, service,
delivery time, features, style, and even the Web site.
 Pricing
 Costs - Material costs, labor costs, cost of goods from suppliers,
labor and overhead expenses, etc.
 Margins or markups - Expected to cover overhead costs and some
profit.
 Competition.
Distribution
 Provides utility to the consumer.
 Must also be consistent with other marketing mix variables.
Promotion
 To inform potential consumers about the product’s availability or
to educate the consumer.
  Methods include print, radio, or television advertising, Internet,
direct mail, trade magazines, or newspapers.
 The entrepreneur should considering both costs and effectiveness
of the medium in meeting the market objectives.
Marketing Strategy: Consumer versus Business-to-Business Markets
 Business-to-business markets involves selling of products or
services to another business.
o Usually aims at selling a large volume in one transaction.
o Involves a more direct channel of distribution.
o Use trade magazine advertising, direct sales, and trade
shows.
 Consumer markets involve sales to households for personal
consumption.
 Budgeting and Implementation
o Budgeting
 Costs should be reasonably clear.
 Assumptions, if necessary, should be clearly stated.
 Useful in preparing the financial plan.
o Implementation
 The plan is meant to be a commitment by the
entrepreneur to a specific strategy.
 Entrepreneur should ensure coordination and
implementation of the plan.
 Monitoring the Progress of Marketing Actions
o Involves tracking results of the marketing effort.
o Entrepreneur should prepare for contingencies.
o Minor adjustments in the plan are normal; significant
changes indicate a poorly prepared plan.
o Weaknesses in market planning may be due to:
 Poor analysis of the market and competitive strategy.
 Unrealistic goals and objectives.
 Poor implementation of the outlined plan actions.
 Unforeseen hazards like weather or war.
 Lecture 30-33

The Organizational Plan

Legal Forms of Business
Three basic legal forms of business:
• Proprietorship - Single owner, unlimited liability, controls all
decisions, and receives all profits.
• Partnership - Two or more individuals having unlimited liability
who have pooled resources to own a business.
• Corporation (C corporation) - Most common form of corporation;
regulated by statute; treated as a separate legal entity for liability
and tax purposes.
New forms of business formations:
• Limited liability Company (LLC).
• Limited liability partnership (LLP).
• S corporation.

Financial Planning Business Plan

Financial Planning:
 Financial planning is the task of determining how a business will afford
to achieve its strategic goals and objectives.
 The Financial Plan describes each of the activities, resources, equipment
and materials that are needed to achieve these objectives, as well as the
timeframes involved.
The Income Statement
An income statement is a financial statement that shows you the company's
income and expenditures. It also shows whether a company is making profit or
loss for a given period. The income statement, along with balance sheet and
cash flow statement, helps you understand the financial health of your business.
Balance Sheet
The balance sheet - also called the Statement of Financial Position - serves as a
snapshot, providing the most comprehensive picture of an organization's
financial situation. It reports on an organization's assets (what is owned),
liabilities (what is owed), equity (value of share), revenue and expenses.
Operational Plan
 An operational plan is a strategic document that outlines all the planning
related to daily operations and processes required for running a successful
business.
 The plan covers the what, who, when, and how much:
 What - the strategies and tasks to be achieved / completed
 Who - the individuals who have responsibility for each task strategy /
task
 When - the timeline for which the strategies/tasks must be completed
 How much – the financial resources available to complete a
strategy/task
4 Key Factors of a Complete Operational Plan
1. Required Human Resource
An operational plan must contain the details about the required skill set
and efficient staffs for working on the product development. It should
explain in detail, the roles and responsibilities of each team and the
employees under it.

2. Financial/Resource Requirements
 The capital requirements for building and testing your product, required
resources, and other highly essential business requirements must be added
to the operational plan. It should also contain the current financial
sources, potential sources of funding, and more.

3. Risk evaluation/management
Analyze the risk associated with your software product. Explore the risk
associated with building the product, like malfunctions in software;
business risks, like competition, losing the market value; and more.

4. Estimated timeline
How long is it going to take for entire software product development? If
you’re planning to exit the project at one stage, when will you do that?
How long will you be working on the development? Is it continuous
development or you’ll stall at one stage?
Lecture 13
Business Model Elements
1. Customer segments
Group customers into segments
2. Value propositions
Reason to convince customers buy to your product.
3. Channels
Medium of marketing/reaching customer.
4. Customer relationships
Firm relation with customers.
5. Revenue streams
Value of your product for customers.
6. Key resources

7. Key activities

8. Key partnerships
Suppliers, partners,etc.
9. Cost structure.

Lecture 14

Customer-Driven Marketing Strategy

Market Segmentation
Market segmentation is the process of dividing a target market into smaller,
more defined categories. It segments customers and audiences into groups that
share similar characteristics such as demographics, interests, needs, or location.
Market Targeting
Market targeting is a process of selecting the target market from the entire
market.
Differentiation and Positioning
 Differentiation is a process used by businesses to distinguish a product or
service from other similar ones available in the market.
 Positioning refers to the place that a brand occupies in the minds of the
customers and how it is distinguished from the products of the
competitors and different from the concept of brand awareness.
Market Segmentation
Demographic Segmentation
Dividing the market into groups based on variables such as age, gender, family
size, family life cycle, income, occupation, education, religion, race, generation,
and nationality
 Age: Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, 65+
 Gender: Male, female
 Family life cycle: Young, single; married, no children; married with
children; single parents, unmarried couples; older, married, no children
under 18; older, single; other
 Income: Under $20,000; $20,000-$30,000; $30,000-$50,000; $50,000-
$100,000; $100,000-$250,000; $250,000 and over
Psychographic Segmentation
Dividing a market into different groups based on social class, lifestyle, or
personality characteristics.
Examples
 Social class: Lower lowers, upper lowers, working class, middle class,
upper middles, lower uppers, upper uppers
 Lifestyle: Achievers, strivers, survivors
 Personality: Compulsive, gregarious, authoritarian, ambitious
Geographic Segmentation
Dividing a market into different geographical units such as nations, provinces,
regions, parishes, cities, or neighborhoods.
 World region or country: Western Europe, Middle East, Pacific Rim,
China, India, Canada, Mexico, North America
 Country region: East Asia, South Asia, North Asia
 Density: Urban, suburban, exurban, rural
Behavioral Segmentation
Dividing a market into groups based on consumer knowledge, attitudes, uses, or
responses to a product.
Examples
 Occasions: Regular occasion; special occasion; holidays; seasonal
 Benefits: Quality, service, economy, convenience, speed
 User status: Nonuser, ex-user, potential user, first-time user, regular user
 User rates: Light user, medium user, heavy user
Inter-Market Segmentation
Intermarket segmentation = Forming segments of consumers who have similar
needs and buying behavior even though they are located in different countries.

Why to Use Multiple Segmentation Base?

It can help companies to identify and better understand key customer segments,
target them more efficiently, and tailor market offerings and messages to their
specific needs.

Requirements for Effective Segmentation:

1. Measurable:
Not too hard to identify and measure
2. Accessible
Effectively reached and served
3. Substantial
Large or profitable enough to serve
4. Differentiable
Worthy to separate segments
5. Actionable
Possible to develop separate marketing programs

Evaluating Market Segment

 Segment size and growth
 Segment structural attractiveness: competitors, substitute products, power
of buyers, powerful suppliers
 Company objectives and resources

Selecting Target Market Segments

 Company must decide which and how many segments it will target.
 Target selection strategies:
1. Undifferentiated (mass) marketing
The strategy here is to focus on common characteristics rather than on
differences.
2. Differentiated (segmented) marketing
Differentiated marketing is a strategy that involves a company
creating marketing campaigns that appeal to two or more segments of
their target audience.
 3. Concentrated (niche) marketing
A niche market is a segment of a larger market that can be defined by
its own unique needs, preferences, or identity that makes it different
from the market at large. For example, within the market for women's
shoes are many different segments or niches.
4. Micromarketing
Micromarketing is an approach to advertising that tends to target a
specific group of people in a niche market. With micromarketing,
products or services are marketed directly to a targeted group of
customers.

Factors Company should consider when choosing a market-targeting

strategy:
 Company resources
 Product availability
 Product life-cycle stage
 Market variability
 Competitors’ marketing strategies
Lecture 17

Copyrights
Right given to prevent others from printing, copying, or publishing any original
works of authorship.

Trade Secrets
Provides protection against others revealing or disclosing information that could
be damaging to business.

Licensing
A contractual agreement giving rights to others to use intellectual property in
return for a royalty or fee.
Types of licensing:
1. Patent license agreements
Specify how the licensee would have access to the patent.
2. Trademark license agreements
Involve a franchising agreement.
 3. Copyright license agreements
Involve rights to use or copy books, software, music, photographs, plays,
etc.

Product Safety and Liability

It is the responsibility of a company to meet any legal specifications regarding a
new product covered by the Consumer Product Safety Act.
Insurance
 It provides a means of managing risk in the new business.
 Insurance is a means of protection from financial loss.
 Some insurances are required by law and cannot be avoided while others
are may be necessary to protect the financial net worth of the venture.
Types on insurance:
1. Property
The property insurance is the insurance that protects the physical goods and the
equipment of the business or home against any loss from theft, fire, etc.
2. Life
Insurance that pays out a sum of money either on the death of the insured
person or after a set period.
3. Causality
Casualty insurance is a broad category of coverage against loss of property,
damage or other liabilities. This includes workers' compensation.
4. Worker’s Compensation:
Workers' compensation insurance is a type of business insurance that provides
benefits to employees who suffer work-related injuries or illnesses. Specifically,
this insurance helps pay for medical care, wages from lost work time and more.
5. Bonding
Bond insurance, also known as "financial guaranty insurance", is a type of
insurance whereby an insurance company guarantees scheduled payments of
interest and principal on a bond or other security in the event of a payment
default by the issuer of the bond or security.
 Lecture 18

Types of Business Ownership

 Sole Proprietorship
 Partnership
 General
 LLP
 Corporation
 C-Corp
 S-Corp
 LLC
Types of Partners
1. General partner
A person who assumes full or shared responsibility for operating a business
2. Limited partner
A person who contributes capital to a business but has no management
responsibility or liability for losses beyond the amount he or she invested in
the partnership
Corporations
A corporation is a business entity that is owned by its shareholder(s), who elect
a board of directors to oversee the organization's activities.
Corporate ownership
 Stock
The shares of ownership of a corporation
 Stockholder
A person who owns a corporation’s stock
 Closed corporation
A corporation whose stock is owned by relatively few people and is not sold to
the general public
 Open Corporation
A corporation whose stock is bought and sold on security exchanges and can be
purchased by any individual
Hierarchy of Corporate Structure
1. Stockholders
2. Board of directors
3. Officers
4. Employees

Special Types of Business Ownership

Limited-liability Company (LLC)
An LLC is a business structure legally separating itself from its owner(s) (referred to as “members”)

S Corporation:
An S corporation is a special kind of tax status that corporations or limited liability companies can
select.

Government-owned corporations
A corporation owned and operated by a local, state, or federal government

Not-for-profit corporations
Corporations organized to provide social, educational, religious, or other services, rather than to
earn a profit.