ENTREPRENEURSHIP

Entrepreneurship

Entrepreneurship is defined as an activity that involves the discovery, evaluation and exploitation of
opportunities to introduce new goods and services, ways of organizing, markets, processes and raw
materials through organizing efforts that previously had not existed. Entrepreneurship, like an
entrepreneur, has no single definition.

Entrepreneurship is the process of creating something different with value by devoting the necessary
time and effort, assuming the accompanying financial, psychic and social risks, and receiving the
resulting rewards of monetary and personal satisfaction. This definition stresses on four basic aspects of
being an entrepreneur.
i. Entrepreneurship involves creating something new value.
ii. Entrepreneurship requires the devotion of the necessary time and effort though 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.
iii. Entrepreneurship assumes risk in the form of financial lose, psychological tension and social
problems.
iv. Entrepreneurship also involves rewards of independence, followed by personal satisfaction and
money.

Entrepreneur is a person while entrepreneurship is a process.

Etymological meaning

The word ‘entrepreneur’ is derived from the French verb entreprendre. It means “to undertake”. In the
early 16th century, the Frenchmen who organized and led military expeditions were referred to as
“entrepreneurs”. Around 1700 A.D., the term was used for architects and contractors of public works.
The term “entrepreneur” was applied to business initially by the French economist, Cantillon, in the 18 th
century; designate a dealer who purchases the means of production for combining them into marketable
products. Another Frenchman, J.B. Say, expanded Cantillon’s ideas and conceptualized the entrepreneur
as an organizer of a business firm, central to its distributive and production functions. Beyond stressing
the entrepreneur’s importance to the business, Say did little with his entrepreneurial analysis.
According to J.B. Say, an entrepreneur is the economic agent who unties all means of production, the
labour force of the one and the capital or land of the other and who finds in the value of the products his
results from their employment, the reconstitution of the entire capital that he utilizes and the value of the
wages, the interest and the rent which he pays as well as profit belonging to himself. He emphasized the
functions of co- ordination, organization and supervision. Further, it can be said that the entrepreneur is
an organizer and speculator of a business enterprise. The entrepreneur lifts economic resources out of an
area of lower into an area of higher productivity and greater.

The New Encyclopedia Britannica considers an entrepreneur as “an individual who bears the risk of
operating a business in the face of uncertainty about the future condition.

As professor Jan Tin Bergen points out, “The best entrepreneur in any developing country is not
necessarily the man who uses much capital, but rather the man who knows how to organize the
employment and training of his employees. Whoever concentrates on this is rendering a much more
important service to his country than the man who uses huge capital.
Joseph A. Schumpeter thus writes “ The entrepreneur in an advanced economy is an individual who
introduces something new in the economy- a method of production not yet tested by experience in the
branch of manufacture concerned, a product with which consumers are not yet familiar, a new source of
raw material or of new markets and the like’

Briefly, an entrepreneur is one who innovates, raises money, assembles inputs, chooses managers and
sets the organization going with his ability to identify them. Innovation occurs through:
(1) The introduction of a new quality in a product
(2) A new product
(3) A discovery of a fresh demand and a fresh source of supply and
(4) By changes in the organization and management.

There is no single agreed definition of Entrepreneurship. It all depends on the focus of the one defining
it and from which perspective one looks at it. Some researchers look at entrepreneurship from the
economics view, sociology and psychology, others look at it from the management perspective, while
others look at it from the social perspective. Entrepreneurship is therefore a multidimensional concept.

The concept of entrepreneurship was first established in the 1700s, and the meaning has evolved ever
since. Many simply equate it with starting one’s own business. Most economists believe it is more than
that. To some economists, the entrepreneur is one who is willing to bear the risk of a new venture if
there is a significant chance for profit. Others emphasize the entrepreneur’s role as an innovator who
markets his innovation. Still other economists say that entrepreneurs develop new goods or processes
that the market demands and are not currently being supplied.

In the 20th century, economist Joseph Schumpeter (1883-1950) focused on how the entrepreneur’s drive
for innovation and improvement creates upheaval and change. Schumpeter viewed entrepreneurship as a
force of “creative destruction.” The entrepreneur carries out “new combinations,” thereby helping render
old industries obsolete. Established ways of doing business are destroyed by the creation of new and bet-
ter ways to do them.
Schumpeter places emphasis on Innovation, such as: New products, new production methods, new
markets and new forms of organization. Wealth is created when such innovation results in new demand.
From this viewpoint, one can define the function of the entrepreneur as one of combining various input
factors in an innovative manner to generate value to the consumer with the hope that this will exceed the
cost of the input factors, thus generating superior returns that result in the creation of wealth.

Business expert Peter Drucker (1909-2005) took this idea further, describing the entrepreneur as some-
one who actually searches for change, responds to it, and exploits change as an opportunity. A quick
look at changes in communications—from typewriters to personal computers to the Internet—illustrates
these ideas.

Entrepreneurship is defined as the application of enterprise skills specifically to creating and growing
organizations in order to identify and build on opportunities. Enterprise is defined here as the application
of creative ideas and innovations to practical situations. This is a generic concept that can be applied
across all areas of education. It combines creativity, ideas development and problem solving with
expression, communication and practical action. This definition is distinct from the generic use of the
word in reference to a project or business venture.
Entrepreneur

An entrepreneur is a person who has possession of an enterprise, or venture, and assumes significant
accountability for the inherent risks and the outcome. It is an ambitious leader who combines land,
labour, and capital to create and market new goods or services.
It is the argent who purchases the means of production for combination into marketable products.
It is the one who develops new profitable business opportunities by combining resources in a new way.
Entrepreneurs are men of action who possess the ability to inspire others and do not accept the
boundaries of structured situations. Is an individual who owns and manages a business for principle
purpose of profit and growth. The entrepreneur is characterized principally by innovative behaviour and
will employ strategic management practices in the business. An entrepreneur takes initiative, organizes
some socio-economic mechanisms, and accepts risks of failure.

Etymological Definition: The word "entrepreneur" is a loanword from French. In French the verb
"entreprendre" means "to undertake," with "entre" coming from the Latin word meaning "between," and
"prendre” means "to take." In French a person who performs a verb, has the ending of the verb changed
to "eur," comparable to the "er" ending in English. The word entrepreneur is French and, literally
translated, means “between taker” or “go between”. Entrepreneur is actually a French word that means
“undertake”.

Characteristics of Entrepreneurs

It is clear that the definitions of entrepreneur are not similar. However, there are certain qualities and/or
functions which explicitly or implicitly feature in most of them. As Hisrich and Peters (1995) noted,
each definition contains similar notions, such as newness, organizing, creating, wealth and risk taking,
despite viewing the entrepreneur from a slightly different perspective. Failing to agree on a single
definition, entrepreneurship specialists have resorted to drawing up lists of qualities and /or functions
which typify the entrepreneur. Invariably, these lists include a combination of the following
characteristics:

Innovation: Innovativeness relates to perceiving and acting on business activities in new and unique
ways. As suggested by Schumpeter (1934) and Mitton (1989), innovativeness is the focal point of
entrepreneurship and an essential entrepreneurial characteristic. According to Lumpkin and Erdogan
(1999), innovativeness, especially product innovativeness, may be positively influenced by risk-taking
propensity. Product innovativeness requires a certain degree of tolerance for taking risks because
innovativeness benefits from the willingness to take risks and tolerate failures. So, higher inclination
towards innovativeness leads to greater entrepreneurial inclination.
Entrepreneurs must do something new (or there would be no point in their entering a market).
Innovation can mean a lot more than a new product or technology. It encompasses:
 Any new way of doing something so that value is created.
 A new product or service
 A new way of delivering an existing product or service
 New methods of informing the consumer about a product and promoting it to them
 New ways of organizing the company
 New approaches to managing relationships with other organisations
In short, innovation is simply doing something in a way which is new, different and better. The
entrepreneur’s task goes beyond simply inventing something new. It also includes bringing that
innovation to the market place and using it to deliver value to consumers.
Entrepreneurs have a passionate desire to do things better and to improve their products or service. They
are constantly looking for ways to improve. They're creative, innovative and resourceful. Demonstrate
how the idea applied outperforms current practice.

Innovation vs Invention
Invention: Can be defined as the creation of a product or introduction of a
process for the first time. It is invention if it involves the formulation of new
ideas for products or processes.
Invention is the creation of something that has never been made before and is
recognized as the product of some unique insight.

Innovation occurs if someone improves on or makes a significant contribution

to an existing product, process or service.
Innovation is all about the practical application of new inventions into
marketable products or services.
Innovation is the implementation of something new.

Continuous Learner: Constantly exploring and evolving to do best practice. True entrepreneurs are
resourceful, passionate and driven to succeed and improve. They're pioneers and are comfortable
fighting on the frontline. The great ones are ready to be laughed at and criticized in the beginning
because they can see their path ahead and are too busy working towards their dream. . “How many
people are completely successful in every department of life? Not one. The most successful people are
the ones who learn from their mistakes and turn their failures into opportunities1.”

Opportunistic: An opportunity is a gap in a market where the potential exist to do something better and
thereby to create value. Identification of new opportunities is the key task of entrepreneurs. They must
constantly scan the business landscape watching for the gaps left by existing players in the market place.
New opportunities exist all the time, but they do not necessarily present themselves or suddenly appear,
but rather result from an entrepreneur’s alertness to possibilities or, in some cases, the establishment of
mechanisms that identify potential mechanisms. If they are to be exploited they must be actively sought
out. Opportunity identification and evaluation is a very difficult task. “Opportunity is missed by most
people because it is dressed in overalls and looks like work”2.

Ideas people: An individual who is motivated by the entrepreneurial option because it offers them a
platform to develop and market an innovation they have created and to achieve the satisfaction of seeing
it become reality

1
Zig Ziglar (American author, salesman, and motivational speaker.
2
Thomas Edison, did many innovations of electrical devices.
Proactive: Ending to initiate change rather than reacting to events; Acting in advance to deal with an
expected difficulty; anticipatory.

Need for autonomy (independence): an entrepreneur does not like to be under anybody. It is the need for
autonomy which drives a person to be an entrepreneur.

Imaginative: Having the ability of forming mental images, sensations and concepts, in a moment when
they are not perceived through sight, hearing or other senses. (Imagination is the work of the mind that
helps create. Imagination helps provide meaning to experience and understanding to knowledge; it is a
fundamental facility through which people make sense of the world, and it also plays a key role in the
learning process). Malcolm Forbes once said, “When you cease to dream you cease to live”.

Change makers: Entrepreneurs are managers of change. Entrepreneur does not leave the world in the
same state as they found it. They bring people, money, ideas and resources together to build new
organisations and to change existing ones.

Inner Drive to succeed/ Need for Achievement: McClelland’s (1961) linked the need for achievement
trait and entrepreneurial activity. The need for achievement is defined as a tendency to choose and
persist at activities that hold a moderate chance of success or a maximum opportunity of personal
achievement satisfaction without the undue risk of failure. He posited that needs are learned and
therefore culturally, not biologically determined; and some cultures produced more entrepreneurs
because of the socialization process that creates a high need for achievement.
A number of studies suggest that need for achievement is higher in company founders, compared to
managers. It is also related to company growth. Such findings that relate the level of need for
achievement of the founders and the financial growth of the organization may come from a relationship
between the psychological traits of founders and the levels of entrepreneurial orientation they exhibit.

Entrepreneurs are highly motivated and energetic, they are driven to succeed and expand their business.
They see the bigger picture and are often very ambitious. Entrepreneurs set massive goals for themselves
and stay committed to achieving them regardless of the obstacles that get in the way. “Have the end in
mind and every day make sure you’re working towards it”3. The Japanese proverb inspires us that “fall
seven times, stand up eight”4

Entrepreneurs are always on the move, they are driven to succeed and have an abundance of self
motivation. Napoleon Hill once said, “Most great people have attained their greatest success just one
step beyond their greatest failure”. Thomas Edison, the great scientist and inventor was asked when he
had done more that 10,000 tests of making a light bulb that, he has failed to make it why doesn’t he stop
doing more tests. He said “I have not failed but I’ve just found 10,000 ways that the bulb won’t work”. 5

Risk taker: Risk-taking propensity is defined as “the perceived probability of receiving rewards
associated with the success of a situation that is required by the individual before he will subject himself
to the consequences associated with failure, the alternative situation providing less reward as well as less
3
Ryan Allis
4
The Japanese proverb
5
Thomas Edison
severe consequences than the proposed situation. It is believed that entrepreneurs prefer to take
moderate risks in situations where they have some degree of control or skill in realizing a profit.
Situations which involve either extremes of risk or certainty are not preferred. Higher propensity to take
risk has a positive influence on entrepreneurial inclination.

Pursues the dream without all the resources lined up at the start and distributes the risk over a network of
capabilities. Entrepreneurs are risk takers, willing to roll the dice with their money or reputation on the
line in support of an idea or enterprise. They willingly assume responsibility for the success or failure of
a venture and are answerable for all its facets. “I can accept failure, everyone fails at something. But I
cannot accept not trying.”6. And Peter F. Drucker once said, “In every success story, you will find
someone who has made a courageous decision.”7

Strong Belief in them (internal locus of control): an entrepreneur believes in him his work. Successful
entrepreneurs have healthy opinions of themselves and often have a strong and confident personality.
They are focused and determined to achieve their goals and believe completely in their ability to achieve
them. Their self optimism can often been seen by others as flamboyance or arrogance but entrepreneurs
are just too focused to spend too much time thinking about un-constructive criticism.

Self-confidence: Given that an entrepreneur is generally regarded as one who prefers to own his own
business, it can be expected that the entrepreneur must believe that he is able to achieve the goals that
are set. In other words, an entrepreneur is expected to have a perceived sense of self-esteem and
competence in conjunction with his business affairs.

Openness to Change: If something is not working for them they simply change. Entrepreneurs know the
importance of keeping on top of their industry and the only way to being number one is to evolve and
change with the times. They're up to date with the latest technology or service techniques and are always
ready to change if they see a new opportunity arise. A big idea of how something can be better and
different. Change occurs frequently when you own your own business, the entrepreneur thrives on
changes and their business grows. An entrepreneur may need to change his/her plans in order to help the
business grow.

Competitive by Nature: Successful entrepreneurs thrive on competition. The only way to reach their
goals and live up to their self imposed high standards is to compete with other successful businesses.

Accepting of Constructive Criticism and Rejection: Innovative entrepreneurs are often at the forefront of
their industry so they hear the words "it can't be done" quite a bit. They readjust their path if the
criticism is constructive and useful to their overall plan, otherwise they will simply disregard the
comments as pessimism. Also, the best entrepreneurs know that rejection and obstacles are a part of any
leading business and they deal with them appropriately. “Keep away from people who try to belittle
your ambitions. Small people always do that, but the really great make you feel that you, too, can
become great”8.

6
Michael Jordan
7
Peter F. Drucker a consultant, educator and author, his writing contributed to the philosophical and practical foundations of
Business Corporation.
8
Mark Twain an entrepreneur
Strong leadership: Starting a new company can be a distressing experience full of uncertainty and risk.
Successfully bringing a small organization through these trying periods requires a lot of leadership skill.
Entrepreneurs are good planners, organizers, have good communication skills, good decision makers,
take initiatives to implement plans, and are results oriented.

Tolerance for Ambiguity: Budner (1962) defined tolerance for ambiguity as the “tendency to perceive
ambiguous situations as desirable,” whereas intolerance for ambiguity was defined as “the tendency to
perceive ambiguous situations as sources of threat”. An ambiguous situation is one in which the
individual is provided with information that is too complex, inadequate, or apparently contradictory. The
person with low tolerance of ambiguity experiences stress, reacts prematurely, and avoids ambiguous
stimuli. On the other hand, a person with high tolerance of ambiguity perceives ambiguous
situations/stimuli as desirable, challenging, and interesting and neither denies nor distorts their
complexity of incongruity.

Discipline: Successful entrepreneurs resist the temptation to do what is unimportant or the easiest but
have the ability to think through what is the most essential. Entrepreneurs are economically efficient, do
not like to waste time and they like to see work completed. They use discipline as a guide to their
destination.

Entrepreneurial managers are generally believed to tolerate more ambiguity than conservative managers
because entrepreneurial managers confront less-structured, more uncertain set of possibilities, and
actually bear the ultimate responsibility for the decision.

Theoretically, people who best tolerate ambiguity are those who obtain superior results if their strategic
objective is to pursue growth. Entrepreneurs who seek to increase market shares in their respective
industries face more uncertain phenomenon than those who seek to increase profitability. Because the
strategy utilized to implement increase in market share is based on conditions of uncertainty, which
requires a greater tolerance of ambiguity. Thompson (1967) stipulates that in a determinist world, the
higher the number of external dependencies faced by firms, the greater the degree of uncertainty.
Creativity and innovativeness requires a certain degree of tolerance for ambiguity. The ability to tolerate
ambiguous situations may also be positively related to the risk-taking behavior of the entrepreneur.
Risk-taking requires a certain degree of tolerance for ambiguity

Various uses of the word entrepreneurship

The usage of the term entrepreneurship may be categorized in three broad connotations;
i. Entrepreneurs as owner-managers.
ii. Entrepreneurs as a particular category of owner-managers.
iii. Entrepreneurs as people who display particular behaviours in any endeavour or organisation.

Entrepreneurs as owner-managers
In one sense, the term is used in reference to someone who sets up and/or independently runs his own
business. For the most part this is still the daily use of the term entrepreneur. Going by this definition
entrepreneurs are to be found principally in small firms, since businesses that develop beyond the owner
managed phase cease to be entrepreneurial firms (Hudson and McArthur 1994)
Entrepreneurs as a special category of owner-managers
Some people hold the view that most business owners are not entrepreneurial. They are simply cloning
an existing well proven form of enterprise and many people simply prefer to do their own job. Two
dimensions – the owner-managers’ motives and their behaviours have been used to make this
distinction. Entrepreneurs are seen as those owner managers whose motive for being in business is profit
and growth as opposed to mere survival or independence (Carland et al 1984; Hisrich and Peters 1995).

Entrepreneurs as people who display specific behaviours anywhere

In this sense, entrepreneurs are people who display the special (entrepreneurial) types of behaviours;
initiating, value creating, transforming, opportunism, strategic practices, innovation and pro-activeness
in any organization or field of endeavour. Schumpeter (1993) and McClelland (1961) defined it in
reference to any one who exercises control over production that is not just for personal consumption.
When exhibited by non-owner managers in either business or non-business organizations,
entrepreneurship as defined in this sense is also referred to as intrapreneurship (Pinchot 1985; Jennings
et al 1994; Hisrich and Peters 1995). As in the case with business entrepreneurs, it is agreed that all
people display some amount of these behaviours. Entrepreneurs tend to display more of these compared
to others.

Entrepreneurial Behaviour and the Corresponding Traits

The table below illustrates the entrepreneurial behaviour with the corresponding traits:

Behaviour Corresponding traits

Self-confidence Belief in own ability, independence, optimism
Strong will power Persistent, determination, perseverance,
Task/result-oriented Achievement oriented, hard worker, drive, energy, initiative
Risk-taker Risk assessment and judicious risk taking ability, likes
challenges
Leadership Good communicator, gets along well with people, responsive
to suggestions, concern for other people, develops other
people.
Originality Innovative, creative, flexible/open mind, resourceful,
versatile, knowledgeable
Future-oriented Foresight, vision, perceptiveness

Table 1.0: Behaviour and traits of entrepreneurs

Skills Enabling Entrepreneurs to Carry Out Entrepreneurial Activities

What skills do you need as an entrepreneur? If you want to start a business, it's essential to learn the
specific skills that underpin skills required in entrepreneurship for a particular business undertaking. It's
also important to develop entrepreneurial skills if you're in a job role where you're expected to develop a
business, or "take things forward" more generally. The skills required by entrepreneurs can be classified
into three main areas:
 i. Personal entrepreneurial skills,
ii. Business management skills,
iii. Technical skills

Some of the specific skills under each area are illustrated in the table below. Some people are more
gifted in this area than others, but you can learn and improve these skills.

Personal Entrepreneurial Business Management Technical Skills

skills Skills
 Inner control  Planning and goal  Writing
/disciplined setting
 Risk taker  Decision making  Oral communication
 Innovative  Human relations  Monitoring
environment
 Change oriented  Marketing  Technical business
management
 Persistent  Finance  Technology
 Visionary leader  Accounting  Interpersonal
 Ability to manage  Management  Listening
change  Control  Ability to organize
 Negotiation  Network building
 Venture launch  Management style
 Managing growth  Coaching
 Being a team player

Table 2.0: Important skills for entrepreneurs

Intrapreneurship

Intrapreneurship also known as corporate entrepreneurship and corporate venturing is the practice of
developing a new venture within an existing organization, to exploit a new opportunity and create
economic value. It is entrepreneurship within an existing organization. The organisation can be;
religious institution, corporate organisation, government, NGO, community, school,
home/family/`relationship, as a practicing consultant, etc). Intrapreneur is a term drawn from and closely
related to the entrepreneur. It refers to an individual who operates in an entrepreneurial way, from within
an established organization rather than by founding or building up his or her own firm. Intrapreneurs are
proactive individuals with a strong desire for action. They are ‘self-starters’ who do not have to be asked
to take an initiative. They usually do not even ask for permission, and may ignore disapproval and other
negative reactions from their environment about their ideas. Their proactive behaviour is focused on the
pursuit of an opportunity without regard to the resources they currently control. Somehow intrapreneurs
always seem to find a way. Intrapreneurs often pursue something that in some sense is ‘new’ or
‘innovative’, i.e. intrapreneurial behaviours and actions deviate from the status quo.
Existing businesses have the financial resources, business skills, and frequently the marketing and
distribution systems to commercialize innovation successfully; yet too often the bureaucratic structure,
the emphasis on short-term profits, and highly structured organization inhibit creativity and prevent new
products and business from being developed.

The guiding principles in a traditional corporate culture differ significantly from an intrapreneur culture.
The guiding principles in a traditional corporate culture are:
- Follow the instructions,
- Do not make any mistakes,
- Do not fail,
- Do not take initiative but wait for instructions,
- Stay within your turf and protect your backside.
This restrictive environment is of course not conducive to the guiding principles of intrapreneurs, which
are:
- Creativity,
- Flexibility,
- Independence and
- Risk taking.
The aspects of an entrepreneurial culture are quite different, that is:
- Develop visions;
- Goals and action plans;
- Be rewarded for actions taken;
- Suggest, try, and experiment;
- Create and develop regardless of the area;
- Take responsibility and ownership.
This environment supports individuals in their efforts to create something new in an established
organization. Corporations recognizing these inhibiting factors and the need for creativity and
innovation have attempted to establish an intrapreneurial spirit in their organizations. In the present era
of hyper-competition, the need for new products and the intrapreneurial spirit have become so great that,
more and more companies are developing an intrapreneurial environment; often in the form of strategic
business units (SBUs).

Intrapreneurs are found in all kinds of organizations. They are highly valued in the today’s world
because it calls for constant improvement, aggressiveness, vision, ability to assess risks and quickly take
action, etc. The intrapreneur’s role parallels that of the entrepreneur. In particular she/ he would be
responsible for:
o Developing and communicating organisation vision;
o Identifying new opportunities for the organisation;
o Generating innovative strategic options;
o Creating and offering an organisation-wide perspective;
o Facilitating and encouraging change within the organisation; and
o Challenging existing ways of doing things and breaking down bureaucratic inertia

Intrapreneurism enables employees of an organization to unleash their passion that often results in
generating new avenues for business growth or alternately provides radically different ways of doing
existing business. Every company requires new ideas to survive and grow profitably and, hence, it has to
find ways to tap the entrepreneurial potential inherent in its employees

Intrapreneurial activity can be directed at four levels within and outside the organisation. They differ in
impact they have on the organization and its surroundings, on the ventures stakeholders, the resources
they will require and the level of risk they entail.

The management of specific projects

All businesses engage in new project of some type. Projects such as product development, the
exploitation of a new market opportunity, the integration of new technology into the firm’s operations or
the acquiring of new funding are important for the entrepreneurial venture that wants to keep its
competitive edge. Such projects may be best managed in an entrepreneurial way that cuts across the
conventional organisational boundaries.

The setting up of new business units

The setting up of new business units is a demanding project. Not only must the structural and external
strategic issues be considered, but there are also the resourcing issues (e.g. human resource), and the
relation with the parent project to be taken into account. The entrepreneurial team may best manage this
sort project.

Reinvigorating the whole organisation

The success of entrepreneurial ventures is largely based on their flexibility and responsiveness to new
and unmet customer demands. Such flexibility can be lost as the business grows and its attention is
drawn to internal concerns. Reintroducing the inventive spirit back into the business may be a radical
process. Making the organisation entrepreneurial again is really an entrepreneurial project. An
intrapreneur must lead such a project with entrepreneurial vision for the organisations future, with an
entrepreneurial approach to using power, leadership and motivation and the ability to overcome
organisational resistance to change.

Reinventing the business industry

The world is not the same after they have built their venture. The most successful entrepreneur does not
just enter a market: they reinvent the industry in which they operate by reintroducing new technology,
delivering new products or operating in a new, more effective way. A business can win by playing to the
rules well; but it can also win by changing the rules to suit itself. Clearly though, such a project is wide
in its scope and challenging to implement. It demands an eye of the future, strategic vision, comfort with
risk and an ability to lead people forward. It is at this level that intrapreneurship meets up and becomes
entrepreneurship.

Common Challenges when Developing Intrapreneurship

Every company requires new ideas to survive and grow profitably and, hence, it has to find ways to tap
the entrepreneurial potential inherent in its employees. However it has been found out those companies
face obstacles in trying to develop intrapreneurial organizations. The potential for intrapreneurship is
limited by the following:
 o Existing managers’ comfort with rule-breaking intrapreneurs;
Allowing a role for intrapreneur to develop, demands that the existing senior managers must
create space for the intrapreneur to operate. In effect, allowing the intrapreneur to operate means
that senior manager must give up or at least share a part of their power at a core rather than a
peripheral level. That means letting go of some degree of control.

o Keeping the intrapreneur aligned with the organisation’s strategy and existing order;
To what extent the entrepreneur can be allowed to challenge existing decision making
procedures and to what extent they must be bound by them. A balance must be created between
allowing the entrepreneurs’ freedom to make their own moves and the need to keep the business
on a constant strategic path.
The intrapreneur must question the existing order and drive change within the organisation. Such
change will bring challenge to many individuals. As a result, the entrepreneur is likely to meet
resistance, both active and passive, to the ideas they bring along. An ability to predict and
understand resistance; and developing leadership skills necessary to overcome it, presents a
considerable challenge to the manager.

o The ability to provide the effective intrapreneur with sufficient rewards (financial and
development);
Can the organisation really offer the intrapreneur the rewards (economic, social, and
developmental) they might come to expect in return for using them? Or if some one is an
effective intrapreneur, how long will it be before the full temptation of the full-blown
entrepreneurship is felt and they move off to start a venture of their own?

Roles of Entrepreneurship

The entrepreneur who is a business leader looks for ideas and puts them into effect in fostering
economic growth and development. Entrepreneurship is one of the most important inputs in the
economic development of a country.

A developing country needs entrepreneurs who are competent to perceive new opportunities and are
willing to incur the necessary risk in exploiting them. A developing economy is required to be brought
out of the vicious circle of low income and poverty. Entrepreneur can break this vicious circle.
Entrepreneurs and helping government can change a developing economy in developed economy.

Countries all have their own sets of resources; these may include mining deposits, farmlands, orchards,
and fisheries. However, getting these resources (if they are not nationalized, or government-run) out into
the marketplaces (national and international) depends on the ideas and implementations of
entrepreneurs. These visionary business people do market research, create business plans, seek out
investors and financing, and then strive to create products and services that utilize a country's resources.

Without the actions of entrepreneurs, a country may not reach its full potential; after all, national
economic growth is dependent upon the proper ideas, innovations, and advancements. From technology
to food products to entertainment...entrepreneurs are the backbone of the national economy, sharing
space with established multinational corporations and government agencies. Entrepreneurs create jobs,
increase profits, and pay taxes that support a country's social programs, health care system (if public, not
private) and infrastructure (roadways, etc.). Without the tax of entrepreneurs, countries might not be able
to properly care for their citizens. Apart from the above specifically entrepreneurs play the following
roles:

Employment Generation: Entrepreneurs not only give employment to the entrepreneur but also a source
of direct and indirect employment for many people in a country. Unemployment is a chronic problem in
most of the developing and underdeveloped countries. Entrepreneurs play an effective role in reducing
the problem of unemployment in the country which in turn clears the path towards economic
development of the nation. Entrepreneurial development is looked at as a vehicle for employment
generation through promotion of small business.

Promotes Capital Formation: Entrepreneur mobilize the idle funds which lead to capital formation. The
funds which are used by entrepreneurs are a mix of their own and borrowed. This leads to creation of
wealth which is very essential for development of an economy.

Small Business Plan Dynamism: Great dynamism is one of the qualities of the small and medium
enterprises. This quality of dynamism originates in the inherent nature of the small business. The
structure of small and medium enterprises is less complex than that of large enterprises and therefore
facilitates quicker and smoother communication and decision- making. This allows for the greater
flexibility and mobility of small business management. Also, small enterprises, more often make it
possible for owners, who have a stronger entrepreneurial spirit than employed mangers, to undertake
risk and challenges.

Balanced Economic Development: Small business promotion needs relatively low investment and
therefore can be easily undertaken in rural and semi-urban areas. This in turn creates additional
employment in these areas and prevents migration of people from rural to urban areas. Since majority of
the people are living in the rural areas, therefore, more of our development efforts should be directed
towards this sector. Small enterprises use local resources and are best suited to rural and underdeveloped
sector

The growth of industries and business in these areas lead to a large number of public benefits like road
transport, health, education, entertainment, etc… Setting up of more industries leads to more
development of backward regions and thereby promotes balanced regional development.

Innovations in Enterprises: Business enterprises need to be innovative for survival and better
performance. It is believed that smaller firms have a relatively higher necessity and capability to
innovate. The smaller firms do not face the constraints imposed by large investment in existing
technology. Thus they are both free and compelled to innovate.

Better standards of living: Entrepreneurs play a vital role in achieving a higher rate of economic growth.
Entrepreneurs are able to produce goods at lower cost and supply quality goods at lower price to the
community according to their requirements. When the price of the commodes decreases the consumers
get the power to buy more goods for their satisfaction. In this way they can increase the standard of
living of the people.
Self-Reliance: Entrepreneurs are the corner stores of national self-reliance. They help to manufacture
indigenous substitutes to imported products which reduce the dependence on foreign countries. There is
also a possibility of exporting goods and services to earn foreign exchange for the country. Hence, the
import substitution and export promotion ensure economic independence and the country becomes self-
reliance.

Facilitates Overall Development: Entrepreneurs act as catalytic agent for change which results in chain
reaction, Once an enterprise is established, the process of industrialization is set in motion. This unit will
generate demand for various types of units required by it and there will be so many other units which
require the output of this unit. This leads to overall development of an area due to increase in demand
and setting up of more and more units. In this way, the entrepreneurs multiply their entrepreneurial
activities, thus creating an environment of enthusiasm and conveying an impetus for overall
development of the area.

National Income: National Income consists of the goods and services produced in the country and
imported. The goods and services produced are for consumption within the country as well as to meet
the demand of exports. The domestic demand increases with increase in population and increase in
standard of living. The export demand also increases to meet the needs of growing imports due to
various reasons. An increasing number of entrepreneurs are required to meet this increasing demand for
goods and services. Thus entrepreneurship increases the national income.

Who Is an Entrepreneur and Who is a Business Owner

It is helpful to make an additional distinction between entrepreneurs (or intrapreneurs) and owners (or
managers) of small businesses. These categories are not mutually exclusive, many business owners are
also entrepreneurs - but the concepts are distinctive.

An individual running his or her own business may wish to retain strong control and be resistant to
changing structures and approaches. An entrepreneur demonstrates enterprising approaches and
attributes, such as creativity, vision, responsiveness to opportunity, and ambition for business growth,
which are distinct from business skills and knowledge.

An intrapreneur may exhibit the same characteristics as the entrepreneur, exploiting opportunities on
behalf of the business owner or manager and helping to grow the business through application of
enterprise skills. Intrapreneur is a term applied to an entrepreneur operating entrepreneurially in the
already established business.

The job of an entrepreneur begins before even the business is created. An entrepreneur will perceive an
opportunity, assemble a team, locate resources for his new business idea, raise the needed capital and
start the business while the manager comes in only after the foundation has been laid and the business
established. What this mean in essence is that the job of a manager begins only after the entrepreneur
has done the ground work. Without entrepreneurs, the managers will have no business to manage.
Entrepreneurs are more concerned with the launching and sustainability of a business in the face of
uncertainty while managers are more concerned with the effective and efficient operation of an on-going
business.

Managers are specialists; business management specialist to be precise. They are focused on managing
and growing a business. On the other hand, entrepreneurs are generalist. They need to know a little
about everything. An entrepreneur must know a little about product development and design, business
law, accounting, communication and public speaking, investing, leadership, business systems, finance
and insurance, marketing and sales, raising capital and so on. An entrepreneur’s cup must never be full.
“A cup that is full is useless.” 9

Entrepreneurs are street smarts; they learn by trial and error, they learn from their own mistakes and the
business mistakes of others. An entrepreneur starts with whatever is on ground and learns the hard way.
That’s why most of the successful entrepreneurs of the world are school dropout billionaires. On the
other hand, managers are thoroughly trained in school in the area of business management. That’s why
they are referred to as MBAs. Entrepreneurs get their education from the streets. “Business and financial
intelligence are not picked up within the four walls of school. You pick them up on the streets. In school,
you are taught how to manage other people’s money. On the streets, you are taught how to make
money10.”

Financial freedom is the utmost priority of entrepreneurs. Freedom to do what they want, freedom to live
the kind of life they love and freedom to make a choice. To managers, security is the utmost priority.
Security comes in the form of a steady paycheck, pension, gratuity, pay raises, job titles, promotions,
bonuses and entitlements.

An entrepreneur owns the business; a manager is simply an employee that works in the entrepreneur’s
business. In essence, a manager owns a job. A manager is paid to run the entrepreneur’s business.

The reward of entrepreneurs come in the form of capital gains, asset acquisition, cash flow, and dividend
while the managers reward come in form of salaries, pay offs, promotion, job title, bonus and incentives.

Entrepreneurs thrive on risk and uncertainty. To entrepreneurs, risk and uncertainty are part of the game
of entrepreneurship; risk is what makes the game exciting. Managers on the other hand are conservative
and hate risk; they simply avoid it. “Without the element of uncertainty, the bringing off of even, the
greatest business triumph would be dull, routine and eminently unsatisfying.” 11. “You must take risks,
both with your own money or with borrowed money. Risk taking is essential to business growth.” 12

Entrepreneurs see mistakes as an avenue to learn something; they learn more from their business
mistakes. Managers avoid mistakes because it will cost them their job. Besides; that is why they are
being paid; to avoid mistakes. That is where the word “professionalism” comes in.

9
Chinese proverb
10
Ajaero Tony Martins
11
J. Paul Getty
12
Ibid
When entrepreneurs come together to pool resources or network, they form a team but when managers
who are usually employees come together to work towards a common goal, they form a union.

Entrepreneurs are primarily motivated by the need to build a business that solves a problem or provide a
need, while providing them cash flow and freedom. Managers on the other hand are motivated by the
next paycheck, bonus, incentive, pay off, job title and promotion.

Entrepreneurs are committed to the business from its inception till they achieve their goal. Managers on
the other hand are committed till the next paycheck; delay or cut their paycheck and they are gone.

What Makes an Entrepreneur?

What makes an entrepreneur is the combination of various facets that have enabled the personality
formation right from the childhood as also the psychological urge that exists intensively in the person.
These psychological processes which lead men to set up their own successful business enterprises begin
in the very early life and have cumulative effect. The influences of early childhood and other social roles
are determinant factors for the formation of that personality which motivates an individual towards
becoming an independent businessman or entrepreneur.

In the case of persons who take up jobs, it has always been found that they have secured success in the
established organizations. These people do not have a rejection towards the established institutions and
neither do they attempt to rebel against the traditional path to success. On the other hand, an
entrepreneur fails to achieve educational success through the established organizations and this is
because of the general rejection of the established organizations at all levels. People who tend to like
security and not uncertainty get more satisfied by taking up jobs which are less risk-oriented and hence
are not motivated towards building up their own industrial enterprise.

Men who establish new business are men who have right from the childhood faced a different
environment in their family school and other social situations. Research studies have indicated that
successful entrepreneurs identify a crisis before they venture into new Entrepreneurial activities. Even in
their childhood most of them had threatening non-supportive and disgusting adult figures that had much
say in their social and economic life. Most of these have a childhood of impoverishment and stress.
Economic deprivation also works as a motivational factor towards creating something on their own and
free one self from the clutches of oppressing forces which attempt to kill their spirit of individualism.

Thus it has been found that creating a successful new business is not due to an isolated incidence in the
life of an individual but it has been as a result of learned response to their total social, emotional and
economic environment.

The family plays an important role in developing the personality necessary for turning into an
entrepreneur later in life. In family situations where security and non-risk bearing activities are
encouraged right from childhood, the individual likes to be more security-oriented rather than attempt on
his own in areas where adventures and uncertainty conditions prevail. Also in families where deep
attachments and emotional relationship, are encouraged, it has been seen that the child growing under
such situations tends to take up activities, which are more security oriented than risk-oriented.

Since in most of the-middle class families attachment and security-oriented activities are encouraged
despite seeking academic excellence, it itself does not help the person to develop the urge to be
independent and create a framework required for enjoying autonomy. As a result of this many bright
graduates deviate from-placing themselves in open positions. On the contrary they choose to stay in the
established organizations because they have developed a favourable attitude towards the establishment.

On the other hand, the entrepreneurial personality would rather face the impersonal forces of the
economy than cope with interpersonal relations of the established organizations. Due to this
characteristic of an entrepreneur, they tend to shift from job to job till they have finally found a field of
activity in which they will ultimately have a say and also enjoy the happenings of events by their will,
determination and efforts.
While people who take up jobs prefer-to see success in the traditional and highly structured roles in the
established undertakings, entrepreneurs prefer to have a different approach toward success and be
unique in their own way. They find more satisfaction in their creative faculties getting an opportunity to
express themselves fully rather than submitting themselves to structured and rigid forces. The bright
graduates may very often, lack creativity and be unable to break through the undifferentiated mask of
circumstance and make something of their own.

Effectual reasoning vs Causal reasoning models of entrepreneurship

What are the characteristics, habits, and behaviors of the species entrepreneur? Is there a learnable and
teachable “core” to entrepreneurship? In 1997, Professor Saras D. Sarasvathy set out on a rather perilous
but exhilarating journey to investigate this question. Traveling across 17 states in the US over several
months, interviewing thirty different founders of companies came up with a models Effectual reasoning
vs Causal reasoning models of entrepreneurship.

According to Saras D. Sarasvathy the word “effectual” is the inverse of “causal”. Also according to
Sarasvathy, in general, in MBA programs across the world, students are taught causal or predictive
reasoning – in every functional area of business. Causal rationality begins with a pre-determined goal
and a given set of means, and seeks to identify the optimal – fastest, cheapest, most efficient, etc. –
alternative to achieve the given goal.

The make-vs.-buy decision in production, or choosing the target market with the highest potential return
in marketing, or picking a portfolio with the lowest risk in finance, or even hiring the best person for the
job in human resources management, are all examples of problems of causal reasoning.

Effectual reasoning, however, does not begin with a specific goal. Instead, it begins with a given set of
means and allows goals to emerge contingently over time from the varied imagination and diverse
aspirations of the founders and the people they interact with.
While causal thinkers are like great generals seeking to conquer fertile lands (Genghis Khan conquering
two thirds of the known world), effectual thinkers are like explorers setting out on voyages into
uncharted waters (Columbus discovering the new world).
It is important to point out though that the same person can use both causal and effectual reasoning at
different times depending on what the circumstances call for. In fact, the best entrepreneurs are capable
of both and do use both modes well. But they prefer effectual reasoning over causal reasoning in the
early stages of a new venture, and arguably, most entrepreneurs do not transition well into latter stages
requiring more causal reasoning.

Effectual reasoning – the process

All entrepreneurs begin with three categories of means: (1) Who they are – their traits, tastes and
abilities; (2) What they know – their education, training, expertise, and experience; and, (3) Whom they
know – their social and professional networks. Using these means, the entrepreneurs begin to imagine
and implement possible effects that can be created with them. Most often, they start very small with the
means that are closest at hand, and move almost directly into action without elaborate planning. Unlike
causal reasoning that comes to life through careful planning and subsequent execution, effectual
reasoning lives and breathes execution.

Plans are made and unmade and revised and recast through action and interaction with others on a daily
basis. Yet at any given moment, there is always a meaningful picture that keeps the team together, a
compelling story that brings in more stakeholders and a continuing journey that map out uncharted
territories. Through their actions, the effectual entrepreneurs’ set of means and consequently the set of
possible effects change and get reconfigured. Eventually, certain of the emerging effects coalesce into
clearly achievable and desirable goals -- landmarks that point to a discernible path beginning to emerge
in the wilderness.

Yet, in our classrooms, we teach potential entrepreneurs an extremely causal process – the sequential
progression from idea to market research, to financial projections, to team, to business plan, to
financing, to prototype, to market, to exit, with the caveat, of course, that surprises will happen along the
way. Seasoned entrepreneurs, however, know that surprises are not deviations from the path. Instead
they are the norm, the flora and fauna of the landscape, from which one learns to forge a path through
the jungle. The unexpected is the stuff of entrepreneurial experience and transforming the unpredictable
into the utterly mundane is the special domain of the expert entrepreneur.

What Makes Entrepreneurs Entrepreneurial?

Entrepreneurs are entrepreneurial, as differentiated from managerial or strategic, because they think
effectually; they believe in a yet-to-be-made future that can substantially be shaped by human action;
and they realize that to the extent that this human action can control the future, they need not expend
energies trying to predict it. In fact, to the extent that the future is shaped by human action, it is not
much use trying to predict it – it is much more useful to understand and work with the people who are
engaged in the decisions and actions that bring it into existence.
Types of Entrepreneurs

As we have seen, the definition of entrepreneurship is given under different views by scholars. Likewise
the classification of entrepreneurs is given under different views. Entrepreneurs can be classified
basing on their socio- cultural backgrounds, scale or potential of operations, or timing of venture
creation in relation to their professional lifespan.

Entrepreneurs can be classified on the basis of:

• Their socio- cultural backgrounds,
• Scale or potential of operations,
• Timing of venture creation in relation to their professional lifespan.

Classification basing on timing of venture creation

Basing on the venture creation entrepreneurs are classified as:

 Early starters
 Experienced
 And mature

Early starters
 An early starter is generally convinced of the great potential of his/her business idea, and
feels that the opportunity may cease to exist if s/he wait too long.
 Starts the venture with little or no full-time work experience.
 They are normally from business families.

Experienced
• They have spent a few years working in the family business or in some other large company.
• Usually the venture is related to the type of work the entrepreneur was previously engaged in.
• The entrepreneur brings a lot of experience, skills, and personal credibility into the venture.
Mature
• Some very senior professionals, some at the level of CEO, are quitting their jobs to start their
own ventures.
• This is probably because they have very high confidence in their abilities and have a desire to do
things in a way that may not be totally acceptable. To their erstwhile employers.

Classification basing on socio-cultural variable

First generation entrepreneurs

• This category consists of entrepreneurs whose parents or family had not been into business and
were into salaried service.
• A booming economy, deregulation, and change of mindset may lead to multitude of business
opportunities.

Entrepreneurs from business families

 • Entrepreneurship becomes easier for one from business family or from business community as
there is a solid support structure to help in times of need.
• But entrepreneurial success needs far more than just that.

Minority entrepreneurs
• These are entrepreneurs from ethnic groups which have not ventured into business.
• Low levels of entrepreneurial activity are witnessed among these tribes.

Women Entrepreneurs
• Women as entrepreneurs have been a recent phenomenon,
• The social norms in many ethnic groups made it difficult for women to have a professional life.

Classification basing on scale or potential of operation

Under scale or potential of operation of a venture, entrepreneurs are classified as:

A. Novice
B. Serial and
C. Portfolio entrepreneur

Novice entrepreneur
A novice is someone who has started his/her entrepreneurial venture with a lot of experience in the
industry. Experience can be acquired from employment works,

Serial entrepreneur
A serial entrepreneur is one who is devoted to one venture at a time but ultimately starts many. It is the
process of starting that excites the starter. Once the business is established, the serial entrepreneur may
lose interest and think of selling and moving on.

Portfolio entrepreneur
A portfolio entrepreneur starts and runs a number of businesses, it may be a strategy of spreading risk, or
it may be that the entrepreneur is excited by a variety of opportunities. Also, the entrepreneurs may see
some synergies between the ventures.

Other forms of classifying entrepreneurs

Basing on nature, Clarence Danhof classified entrepreneurs into four categories.

Innovative entrepreneurs: An innovative entrepreneur in one, who introduces new goods, inaugurates
new method of production, discovers new market and recognizes the enterprise. It is important to note
that such entrepreneurs can work only when a certain level of development is already achieved and
people look forward to change and improvement.

Imitative entrepreneurs: These types of entrepreneurs creatively imitate the innovative technical
achievement made by another firm. Imitative entrepreneurs are suitable for underdeveloped countries as
it is hard for them to bear the high cost of innovation.

Fabian entrepreneurs: Fabian entrepreneurs are characterized by very great caution and skepticism to
experiment any change in their enterprises. They usually do not take any new challenge. They imitate
only when it becomes perfectly clear that failure to do not so would result in a loss of the relative
position in the enterprise.

Drone entrepreneurs: They are characterized by a refusal to adopt any change even at cost of severely
reduction of profit.

Barriers of Entrepreneurial Activities

A large number of entrepreneurs particularly in the small enterprises fail due to several problems and
barriers as illustrated below:
• Lack of a viable business concept.
• Lack of market knowledge
• Lack of technical skills
• Lack of seed capital
• Lack of business know-how
• Complacency (gratification )- lack of motivation
• Social stigma
• Time presences and distractions
• Legal constraints and regulations
• Monopoly and protectionism
• Inhibitions due to patents

Causes of Success and Failure of Entrepreneurs

An entrepreneur may sometime become successful and sometime fail. There are some causes of such
success and failure. For business success the entrepreneur has to observe the following:

Selection of business: It is an important aspect. That means an entrepreneur has to determine what type
business he is going to start. Form various points of view the feasibility of the business should be tested.

Proper planning: Proper planning is also important. For planning, apart from internal issues, planning
should also consider issues like political, economic, social dimensions as they will also determine the
operations and success of your business. The steps of planning should be followed properly.

Initial capital: if the initial capitals are not an optimal level the organization would fall. So whether the
enterprise is big or small the initial capital should be sufficient enough.

Determination of market demand: Through research the demand in the market should be identified. Both
for long term and short term it should be considered.
Marketing of product: If the promotion policy, channels of distribution, transportation is not good the
enterprise would fail.

Education and experience: One of the important tasks of the entrepreneurs is to select right person for
the right post because the success of an enterprise depends on the right selection of employees.

Joint initiative: One may have much money and another may have more merit. Through joint initiative it
can be balanced. But sometime for joint initiative misunderstanding arise, or sometimes corruption
occur which may result in failing of enterprise.

Employment: Recruitment and appointment should be properly done. Those who have specialized skill
should be appointed to that specialized job. Inefficient, corrupted employees may be responsible for
failing of business.

Location of business: Site selection is an important factor. While starting a new business, an
entrepreneur should think about the location of the business. In this case, many factors should be
considered such as availability of raw materials, proper communication system, availability of labor,
marketing facilities and so on.

Qualities of management: The management must have a minimum quality to as the business requires
otherwise it would fail.

BUSINESS IDEA

Business Idea
There is a big difference between a business idea and a business opportunity. An idea is an opportunity
only if it has a chance to succeed.

Making a decision to be your own boss is the first step to being in business. Then you must identify your
business opportunity. You may already have many business ideas and options you want to explore. The
following methods of generating ideas may also be helpful to you:

Assess your own personal skills and strengths

What interests or hobbies do you have that could be turned into a business opportunity? Your greatest
business strength will come from doing something you enjoy and doing it well.

Be aware of market trends and product needs

Changing trends in demographics, lifestyles and buying patterns can provide opportunities to fill a need
in your community. By adding value to existing products and services or identifying local needs that
have been overlooked, you can develop successful business ventures.
Research business publications
Reviewing business magazines, periodicals and publications can plant many seeds for new business
ideas.

It is important to take extra care in exploring and testing your business ideas’ chances of success before
you act. A poor idea can fail even when the best business skills are available to support it. And
remember, it will always cost you less to examine an idea thoroughly in advance than to incur the
expenses of a business failure.

Ongoing business success is often linked to the ability to produce ideas on a continuing basis. Successful
businesses keep in touch with changing markets and needs, testing new ideas to determine their
suitability and adopting those that prove viable. Through this process, a business takes advantage of real
opportunities in the marketplace.

New Business Idea

Though a new or revolutionary business idea is not essential for new venture success, it helps. A new
business idea greatly enhances the chances of success. It is much more desirable to spend time in
devising a viable business plan around a new idea than to go about trying to do the same kind of
business others are engaged in.

Business owners who watch for possible new products, services, procedures and processes keep their
businesses healthy. Without growth and new ideas, a business has little chance of long-term success.
Every business owner should make an effort to generate more and better ideas, thereby finding new
business opportunities. Identifying business opportunities requires an approach that combines analysis
with creativity.

It is argued that entrepreneurship is building a business around a new way of doing things. One can be
creative by thinking differently about existing problems and situations. A creative approach will
ultimately lead us to new ideas. The idea has to be fundamentally sound and economically viable. The
first mover in a market has a number of advantages but those following the first mover have a lot of
advantages too.

Being the first mover with new ideas has great advantages, but also some disadvantages:

First mover’s advantages

- Has technological leadership. It can also lead to coast advantages and economies of scale.
- Can obtain and secure scarce resources before crowding.
- Can impose switching costs on buyers.

First mover’s disadvantages

- The underlying business concept can be revealed,
- Others can try different resource combinations,
- Investment in resolving problems, others can benefit from learning.
- Inertia makes it difficult to abandon the strategy that is no longer effective.
A lot many entrepreneurs have succeeded by not being the first but by doing it better.

Idea Pre – Selection Process

Personal traits for business undertaking

The kind of person you are will go a long way in determining which business is likely to suit you. A
successful entrepreneur is suppose to be intelligent, hard working, organized, charismatic, gregarious,
risk taking, and above all a leader. There are very few entrepreneurs who are all of the above and in fact
many would be well below average on most of the above characteristics.

Identifying aspects of your personality is important to determine which sort of business or activity is
more suitable for you rather than to determine whether you are likely to be a successful entrepreneur or
not.
Some of the important aspects you should be looking for are shown below:

i. How much do you enjoy meeting other people? A number of businesses require people to be in
touch with clients, suppliers and others for a long period of time. e.g. event management, training,
broking, etc.
ii. Ability to work in an unstructured environment. Many entrepreneurial ventures may involve
working in highly unstructured scenarios. Many of us had situations laid out for us for most of our
lives and we have operated only ion our domain with the rest of things being taken care of by
others.
iii. Ability to organize and structure. This has to do with paying attention to detail, ability to meet
deadlines and liking to have a sense of completion.
iv. Leadership qualities. Leadership qualities do not have too much to do with seniority in an
organization, even though a position of responsibility can impart a limited set of leadership skills.
v. Ability to take risk. Businesses vary in terms of the risk the entrepreneur has to take. The
entrepreneur has to select the business that matches his/her willingness to undertake risks.
vi. Superior analytical skills characterized by ability to come up with deeper understanding of
situations than most. They are more likely to make better predictions about future trends and
events.
vii. Energy levels of individuals. Some are more comfortable with work that requires few periods of
concentrated, exhaustive, high energy effort, where as others are at home with situations that need
sustained periods of moderately grueling work.
viii. There are those who prefer to concentrate their efforts on one particular job and are very thorough
in its execution. On the other hand, there are those who do not wait for an activity to end before
embarking on a new project. There are entrepreneurial opportunities suitable for both kinds of
individuals.

Sources of Business Idea

Business ideas are all around us. There are many places to start searching for ideas. Sometimes it is an
ongoing process where one is generally on the lookout for great new ideas. You may end up recording a
number of good business ideas while going about your day-to-day life. You can then evaluate these
ideas and when the time is ripe, these ideas can be taken further. Some good sources for ideas are as
follows.

Past work experience.

If you have been working somewhere for the past few years you have obviously been doing something
right for the job. During this time you have:
- Gained experience in your field,
- Professionally exposed to various other fields,
- Developed contacts both within your company and also elsewhere in the industry,
- Have picked up skills and may also received training in a specialized subject,
Figure out what have you learnt and how does that help you to choose good business to start. Analyze
what did you do within the company and will you be get paid to apply the same skills and know how
independently outside the company.

Hobbies and interests

Taking a good look at what you enjoy doing during your leisure time is a good way to look for business
ideas. Hobbies are a means to avoid boredom and dissatisfaction at work. Explore both formal hobbies
(stamp collection, badminton, classical music, etc) and informal leisure activities (walking, yoga,
cooking, etc).

Strengths and abilities

Be sure to allow your business to exploit your strengths and abilities and to steer clear of your
weaknesses. List your strengths and weaknesses. You may surprisingly find out that you are good at
compiling information or negotiating or working with animals. Look at what you enjoy and what you
are good at, and try combining them in the business you are going to start.

Friends and family

Consulting friends and family members can be a great idea to look for ideas. Those close to you might
have also thought of starting a business. You can take advantage of their work experience and interests
to generate ideas and they would be useful in the analysis of these ideas. An interesting way to know
their thought is to get them together in a focus group.

Distribution channels
Most retailers and distributors deal with a wide variety of products so their experience may be across
industries. They are the people closest to the consumer. They will be able to tell you which products are
doing well in the market and what are various problems in various industries. The retailer will be in a
position to give you a first-hand report on consumer behavior.

Travel
Ideas may develop when you travel to different parts of the country or to different countries and see
different ways of doing things or products that may work at home. Travel makes you aware of the
alternatives. If you are from a small town you can come across some new business ideas when travelling
to big towns.

Books and magazines

You pick up a lot from business publications and periodicals. They write on current trends in industry,
best practices, legal issues, and general business environment.

Current trends
It is important to keep abreast of the current trends. Look at the world around you and see where it is
headed. What new opportunity does this trend throw up?

Research Organisations
Some research organizations develop new technologies and commercialize them. You can buy new
technology and make business out of it.

The web
Use the search engine effectively and visit relevant sites. Get information in the virtual world and use it
in conjunction with what you can gather in the real world.

BUSINESS OPPORTUNITY

Making a decision to be your own boss is the first step to being in business. Then you must identify your
business opportunity. A good business opportunity is that which is a techno-economically and
commercially viable and feasible and environmentally sustainable proposition. Every entrepreneur needs
to identify a sound opportunity. An opportunity may be absolutely viable but may not be feasible if it is
mismatched. Therefore, one needs to consider the following facts before deciding upon an opportunity:

• One’s Education • Availability of Required

• Experience Infrastructure
• Economic Background • Project Cost
• Investment Capacity • Export Potential
• Family Background • Life-cycle of the Product and Future
• Managerial Capabilities Growth of the Product
• Market Competition with other • Shelf-life of the Product (highly
Producers/Size of Market perishable like milk or long-term like
• Location of the Unit capital goods or consumer durables,
• Availability of Technology and etc,)
Process Know-how • Profitability of the Product
• Availability of Raw Material • Degree of Risk
• Availability of Skilled Workforce • Gestation Period
• Government Policy
Find a Need and Create an Opportunity

How can you find a need and create an opportunity out of it?
Invent a New Product or Service
Inventing a product or service that meets an existing but unaddressed demand can create an excellent
business opportunity.

How to do it

o Concentrating on products and processes that are familiar to you, try to think of ideas for products,
processes or services that would enhance or improve existing situations.
o Observe products or services that could be made more effective to save time, effort or money.
o Look for products and services that people are requesting, but do not exist.
o Examine current products and services from various perspectives to see if they could be improved by
adding, subtracting, changing or combining elements.
o Read newspaper columns and magazine sections devoted to consumer topics, including people’s
ideas about products and services they would like to see offered or invented.
o Use creative thinking to come up with an entirely new product or service.
o Before proceeding with an invention, seek professional advice.

Pool small groups of consumers with specialized needs

Rather than offering products or services to large groups of customers, many successful businesses can
be built by meeting the unique needs of smaller groups. While your customers are fewer, they are often
prepared to pay more for the specialized offerings. Unique needs often arise from specific lifestyles or
demographics.

How to Do It
o Identify some of the difficulties people encounter in starting or doing business in your community,
as well as services or products they need but cannot access.
o Explore whether any of these provide business opportunities for you.
o Talk to your local Chamber of Commerce to determine what services or products are lacking in your
area. Find out why. Are there obstacles you could overcome that would allow these businesses to
start up locally?
o Based on your own experiences identify a business where you have encountered difficulty making
local purchases or accessing services locally. Look around to find other individuals who have the
same specialized needs. Develop a business cooperative that meets these needs.

Create a Market Demand

Sometimes you can create a market demand for a product or service by magnifying the popularity and
image of a special person, group, enterprise, event or idea.

How to Do It
o Look for an event, person, group, enterprise or idea that has the potential to be magnified through
careful publicity or promotion. Consider whether the object to be magnified has the ability to capture
people’s imagination. Either focus on an existing object or create a situation yourself as the basis for
magnification. Opportunities could be provided by:
 • Athletes, entertainers, politicians, business speakers;
• Special features of an area such as mountains, rivers or industries;
• Newsworthy events;
• Performances of special feats by extraordinary people; or
• Imaginary people and things.

o Devise a promotional and publicity strategy for the object you have chosen, and think of off-shoot
products and services you could market.
o Investigate and get professional advice on contracts, patents and licences.
o Contact everyone who would be involved in your planned promotion and make a proposal to see if
they’re interested and have ideas.
o In the case of an event, begin to organize it.
o For an object being promoted by someone else, explore related products and services you could
provide as part of the overall promotional plan.

Become a Supplier
A supplier produces a product or service that is then used by someone else as part of a larger product or
service. A supplier may provide a single specialized part or a large number of simple parts. Sometimes
there is an opportunity to become a secondary supplier, when the larger producer does not want to rely
on a single source of supply for critical parts.

Find Uses for Waste Materials

Sometimes uses can be found for waste materials-by-products, left-over materials or other resources
discarded by individuals or companies. These materials can often be obtained free or at a very low cost
and then processed to produce useful goods.

Target a Small Part of a Large Market

Sometimes it is possible to enter a large volume market, with the goal of servicing just a small piece of
it. This type of venture can succeed only when the market is large enough that a small portion of it will
be profitable.

How to Do It
o Identify large-volume markets in B.C. by examining economic reports, trade association figures
and marketing studies.
o Select a market in which you feel you could capture a small percentage.
o Develop a plan that will allow you to compete effectively. Seek to gain an advantage through
your location, type of facility, personal reputation, level of service, selection of goods, price,
business concept or advertising.
o Avoid highly competitive markets in which large organizations are battling for each single
percentage point.
o Talk with potential customers to find out whether they would buy the product or service you
want to provide.

Different career choices in different regions and area can be attributed to different combinations of these
factors. For example some agrarian areas tend to be sparsely populated and peasant farmers create few
jobs outside of their families. Although intensive industrial farming technology does create various types
of jobs and related activities such as food processing and distribution, in general, jobs are more
numerous and more varied in large urban populations and industrial agglomerations.

Employment opportunities

Many big employers are to be found in the public sector-government bureaucracies (ministries and
regional offices), public services (such as health and education), public utilities (such as water, waste
disposal, power, road and bridge building), and state enterprises (such as telecommunications, postal
services). Traditionally, these provide large number of intellectual, administrative, management, clerical,
technician, and skilled and unskilled jobs.

Important demographic factors include the way population is distributed in regions and urban centers
and the size of the population. Natural resources and key industrial activities in a region or suburban
areas can vary and affect the type of jobs that are available. Populations wherever they are, tend to want
and need certain types of services (for example, local government administration; public utilities such as
water, electricity and waste disposal; health, education, transport and other personal services;
distribution and sales of food and other consumer goods; business-to-business services). These all
provide job opportunities but change the geography of the labour markets.

Developments in new technologies, new materials and design have transformed production methods,
communications and logistics of distribution, and they have transformed business activities and markets.
Automated equipment is taking the place of traditional labour in production and the balance in industrial
profiles is shifting towards service sectors. All of this has changed the politics of economics.

Economic transition is transferring the control and management of large enterprises from the state of
public sector to the private sector. This leads to down-sizing (retrenchment) and loss of jobs in public
sector bureaucracies and enterprises. One result is rising rates of redundancy and unemployment
amongst public sector executives and administrators. There is a time delay between the shrinkage of
public sector employment and the growth of public sector employment so that there is a net loss of jobs
in the country and increased competition for those that are available.

The policy of liberalization (the opposite of state control) has varied effects on economic activity. For
example, entrepreneurs are free to invest both in new enterprises and in the growth of existing ones, but
they probably have different investment policies and strategies from government investors and they will
therefore develop different areas of industry and commerce. This can affect trends in the type of jobs
that are available. On the other hand, investors will look at unexploited natural resources (such as
tourism-related resources) and consider increasing their investment in them, which should lead to more
jobs.

In its present, post-industrial era of development, the world is remarkable for its rapid pace of change
and development driven by key factors such as:

o Globalization of business o Cultural changes

o Political changes o Natural resources
o Demographic changes o Technological changes
 o Development of physical infrastructure
o Development of institutional
infrastructure
o The legal and regulatory environment
for private enterprise
o The labour market, public sector
employment trends and private sector
employment trends

Enterprise opportunities
With liberalisation, there are few political restrictions on persons wanting to engage in private
enterprise, so the whole field of activities is open to those persons who are sufficiently enterprising. The
basic requirements for a sustainable business enterprise are that there should be customers who are able
and willing to pay for a product or service that an enterprising person can supply to them. If customers
exist, there are three different types of opportunity:
o Where there is a need for a new producer or service that is not yet being supplied to the market.
o Where the demand for the existing products or services is not being met, which leaves room for
new suppliers to enter the market.
o Where, because of their prices, quality or profits, existing suppliers are vulnerable to competition
from better performers in the market.

Consumer goods and services

The demand for consumer goods and services is linked to disposable income and its distribution in the
population in urban and rural areas. In many countries, the population consists of a large proportion of
subsistence farmers with little disposable income. Many of those who live in urban centers may also be
poor.

Imported goods and services

Many of the goods that can be seen in shops and on the streets are imported. In many cases they are
made from simple materials, using low technology, and there are people with adequate know how with
the necessary financial resources who could easily produce import replacements.

Natural resources
The country is full of natural features, beauty and resources; for example, open spaces, warm climate, a
long coastline, exotic butterflies and blossoms, fertile soil, a wide range of tropical plants and fruits,
natural parks and animals, all for which are potential opportunities for enterprise.

Business-to-business
Where there is business, there is an opportunity of business- to-business activities. Common ones
includes training, consultancy, accounting services, supplies of stationary and office equipment, and
advertising and sales agencies. A simple example is the supply of hotels of detergents by micro
enterprises that make them, meat and vegetables to the hotel kitchen, and the supply of printed materials
such as menus and brochures.

There is a tendency for large firms to attract around them clusters of smaller ones as their suppliers and
sub-contractors. This process may be encouraged by the government’s privatization and liberalisation
policies. Government procurement contracts are also often open to tender by small firms.
When assessing both enterprise and employment opportunities, it will be helpful to know more about a
country or regional profile of enterprise, industry and commercial activities.

ENTREPRENEURIAL PROCESS

The process of starting a new venture is embodied in the entrepreneurial process, which involves more
than just problem solving in a typical management position. An entrepreneur must find, evaluate, and
develop an opportunity by overcoming the forces that resist the creation of something new. 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.

Although these phases proceed progressively, no one stage is dealt with in isolation or is totally
completed before work on other phases occurs. For example, to successfully identify and evaluate an
opportunity (phase 1), an entrepreneur must have in mind the type of business desired (phase 4).

Identify and Evaluate the Opportunity

Opportunity identification and evaluation is a very difficult task. Most good business opportunities do
not suddenly appear, but rather result from an entrepreneur’s alertness to possibilities, or in some case,
the establishment of mechanisms that identify potential opportunities. For example, one entrepreneur
asks at every cocktail party whether anyone is using a product that does not adequately fulfill its
intended purpose. This person is constantly looking for a need and an opportunity to create a better
product. Another entrepreneur always monitors the play habits and toys of her nieces and nephews.
This is her way of looking for any unique toy product niche for a new venture.

Although most entrepreneurs do not have formal mechanisms or identifying business opportunities,
some sources are often fruitful: consumers and business associates, members of the distribution system,
and technical people.

Often, consumers are the best source of ideas for a new venture. How many times have you heard
someone comment, “If only there was a product that would…” This comment can result in the creation
of new business. One entrepreneur’s evaluation of why so many business executives were complaining
about the lack of good technical writing and word-processing services resulted in the creation of her own
business venture to fill this need. Her technical writing service grew to 10 employees in two years.

Due to their close contact with the end user, channel members in the distribution system also see product
needs. One entrepreneur started a college bookstore after haring all the students complain about the
high cost of books and the lack of service provided by the only bookstore on campus. Many other
entrepreneurs have identified business opportunities through a discussion with a retailer, wholesaler, or
manufacturer’s representative.
Finally, technically oriented individuals often conceptualize business opportunities when working on
other projects. One entrepreneur’s business resulted from seeing the application of a plastic resin
compound in developing and manufacturing a new type of pallet while developing the resin application
in another totally unrelated area—casket moldings.

Whether the opportunity is identified by using input from consumers, business associates, channel
members, or technical people, each opportunity must be carefully screened and evaluated. This
evaluation of the opportunity is perhaps the most critical element of the entrepreneurial process, as it
allows the entrepreneur to assess whether the specific product or service has the returns needed
compared to the resources required. This evaluation process involves looking at the length of the
opportunity, its real and perceived value, its risks and returns, its fit with the personal skills and goals of
the entrepreneur, and its uniqueness or differential advantage in its competitive environment.

The market size and the length of the window of opportunity are the primary basis for determining the
risks and rewards. These risks reflect the market, competition, technology, and amount of capital
involved. The amount of capital needed provides the basis for the return and rewards. The
methodology for evaluating risks and rewards frequently indicates that an opportunity offers neither a
financial nor a personal reward commensurate with the risks involved. One company that delivered bark
mulch to residential and commercial users for decoration around the base of trees and shrubs added loam
and shells to its product line. These products were sold to the same customer base using the same
distribution (delivery) system. Follow-on products are important for a company expanding or
diversifying in a particular channel.

Finally, the opportunity must fit the personal skills and goals of the entrepreneur. It is particularly
important that the entrepreneur be able to put forth the necessary time and effort required to make the
venture succeed. Although many entrepreneurs feel that the desire can be developed along the venture,
typically it does not materialize. An entrepreneur must believe in the opportunity so much that he or she
will make the necessary sacrifices to develop the opportunity and manage the resulting organization.

Opportunity analysis, or what is frequently called an opportunity assessment plan, is one method for
evaluating an opportunity. It is not a business plan. Compared to a business plan, it should be shorter;
focus on the opportunity, not the entire venture; and provide the basis for making the decision of
whether or not to act on the opportunity.

An opportunity assessment plan includes the following:

- A description of the product or service,
- An assessment of the opportunity,
- An assessment of the entrepreneur and the team,
- Specifications of all the activities and resources needed to translate the opportunity into a viable
business venture, and
- The source of capital to finance the initial venture as well as its growth.

The assessment of the opportunity requires answering the following questions:

 What market need does it fill?

 What personal observations have you experienced or recorded with regard to that market need?
  What social condition underlies this market need?
 What market research data can be marshaled to describe this market need?
 What patents might be available to fulfill this need?
 What competition exists in this market? How would you describe the behavior of this
competition?
 What does the international market look like?
 What does the international competition look like?
 Where is the money to be made in this activity?

Business planning

Business Plan: A business plan is a written summary of your proposed business. It includes information
about the plans, operations and financial details, its marked opportunities and strategies, as well as the
entrepreneur’s personal background.

A business plan is a document used to summarise an entrepreneur’s business aspirations, secure legal
authority and mobilise resources to launch the business. Just as you need a map to help you find the
route to an unknown destination, you need a plan to help you determine in which direction to go to get
your business up and running. Written document explains your overall strategy and objectives in words
and numbers. Your first plan should estimate your goals, your expenses, and how much you plan to
charge for your services. It should also show how you plan to attract and keep customers. After you
actually begin your business, you will find that the plan needs to be reviewed on an on-going basis. A
business plan is a changing, dynamic document. There are no guarantees that your business will succeed
but a well-written and well-researched business plan plays an important role in a business’s success

Why business planning is necessary

 Business plans show you if the business can expect to make a profit in the future. It shows what
money to expect to come into and out of the business. For instance, if your costs are expected to
be high, there would be need to increase prices.
 A plan will be able to identify parts of the business that require improvement. In so doing, one
will be forced to think about every part of the business. To work out a plan, one must therefore
think carefully about everything that affects the business
 A business plan makes it possible to access a bank loan because most banks are interested in
knowing the expected sales, costs and anticipated profits as well as cash flows before offering a
loan.
 It forces you to think deeply and plan every detail properly before you start you business.
 It helps you to determine the direction you want to move in.
 A business plan serves as a map against which you can determine your process.
 A business plan provides details of resources required and can be given to potential
investors/financiers.
 A business plan indicates chances for success and potential critical points.
Developing a Business Plan

A good business plan must be developed in order to exploit the defined opportunity. This is a very time-
consuming phase of the entrepreneurial process. An entrepreneur usually has not prepared a business
plan before and does not have the resources available to do a good job. A good business plan is
essential to developing the opportunity and determining the resources required, obtaining those
resources, and successfully managing the resulting venture.

Determine the Resources Required

The resources needed for addressing the opportunity must also be determined. This process starts with
an appraisal of the entrepreneur’s present resources. Any resources that are critical need to be
differentiated from those that are just helpful. Care must be taken not to underestimate the amount of
variety of resources needed. The downside risks associated with insufficient or inappropriate resources
should also be assessed.

Acquiring the needed resources in a timely manner while giving up as little control as possible is the
next step in the entrepreneurial process. An entrepreneur should strive to maintain as large an
ownership position as possible, particularly in the start-up stage. As the business develops, more funds
will probably be needed to finance the growth of the venture, requiring more ownership to be
relinquished. Alternative suppliers of these resources, along with their needs and desires, need to be
identified. By understanding resource supplier needs, the entrepreneur can structure a deal that enables
the recourses to be acquired at the lowest possible cost and the least loss of control.

Manage the Enterprise

After resources are acquired, the entrepreneur must use them to implement the business plan. The
operational problems of the growing enterprise must also be examined. This involves implementing a
management style and structure, as well as determining the key variables for success. A control system
must be established, so that any problem areas can be quickly identified and resolved. Some
entrepreneurs have difficulty managing and growing the venture they created.

STRUCTURE OF A GENERIC BUSINESS PLAN

Executive summary
Explain the following in the executive summary
- Business description
- Products and services
- The market
- Competition
- Operations
- Management team
- Risk/ opportunity
 - Financial summary capital
- Requirements

Business description
Brief description of the company you have or are about to found. Give the reader an idea of where you
are, how you have gotten there and where you foresee your business in the future.
The business description should include the following sub sections:
 Industry overview: provide current situation of the industry and the future of the industry.
Where possible provide information on all the markets in the industry.

 Company description: legal name of the business and legal form. Explain the actual business
(describe the manufacturing, provision and delivery of service, and so on). State the location,
and any other facility that your business will operate and then the reasons for that specific
location.
Mission statement – Be sure that your mission statement is concise, content rich, and that it
excites your readers.
 History and current status: Summarize the history and current status of your company. If the
company is just starting, explain how you came up with the idea to start your business.
 Goals and Objectives: explain in simple terms the objectives of your business in a single
paragraph.
 Critical success factors:
o The critical success factors identify what needs to be in place or managed in
order to accomplish the objectives.
 Company ownership: identify the owners of the business by addressing the following: Who
are the owners? How much of the shares do they own? Who are the people in the
management team? List the name of the individual and the position held. Describe the
owners’ plan for succession. Who takes owner after you retire?
 Exit strategy: Explain to investors how they will get their money back, what you are
anticipating they will recover in excess of their investment and in what time frame.

Products / services
Give a detailed description of the products and/ or services you will be selling or providing. The reader
may not be familiar with your product / service, make sure you explain and describe it carefully. Sell
your idea by generating excitement about it. Be honest about capabilities. When potential investors have
finished learning about your product / service, they should be enthusiastic about reading the marketing
and financial details of your venture.
Describe the benefits of your goods and services from a customer’s perspective. Include the technical
specifications, drawings, photos, sales brochures, and other items that you deem appropriate in the
appendix.
This section should include these sub sections:
Product / Service description
Start by stating your company name and the product or service you provide. List all products /or services
in their order of highest to lowest sales, or importance of product line. If possible try to refer the reader
to patents, diagrams, product displays, or other supporting material. For each product / service, describe
the main features and benefits.

Existing products:
How is your product different from the competitors? Compare capabilities, strengths/ weaknesses, and
characteristics of your product to that of competitors.
Are your products currently up to date? If not, how and when do you plan to update them? Include the
sales price, costs and profit margin to each product line. Who are your current customers? Describe the
current status of the product or service.

Unique features or proprietary aspects of your products/ services

Show how your product/service is unique (begin by stating why your business is unique - eg patent,
secret ingredient, new production process, unmatched know-how). Explain the unique value added
characteristics of your product line or service and how these value added characteristics will in turn give
your business a competitive advantage. Explain how the competition may provide a similar product/
service but provide the reasons why your business is able to differentiate itself in the market. Point out
your lead product/ service and demonstrate how it addresses customer needs and benefits.

Production
Give more details on how your product/service is manufactured/ delivered. List the critical factors in the
production of your product. Specify and explain capital equipment, material, and labour requirements.

Product
List the critical factors in the production of your product. Specify and explain capital equipment,
material, and labour requirements.

Service
List the critical factors for the delivery of the service. Specify if there will be a particular service level
that has to be maintained and how you will maintain these levels.

New and flow-on products/ services

As your business expands, there will come a time to launch new products and services. If you already
have new products in mind, point them out in this section. Specify whether they will be an extension of
an existing product or completely new products. Show when and how you will launch the product/
service (e.g. at major trade shows, industry events, contests, etc). Provide a target introduction date for
the product/ service.
Market comparison: Position your new product or service in its market place.
The Market
The section should be broken down into sub sections for industry analysis, market analysis, and
competitor analysis:

Industry analysis
Objectively describe the industry in which you will compete. Illustrate the dynamics, problems, and
opportunities driving your industry.

Market analysis
Describe the specific market in which you will be competing. If it is a locally based business, you need
to evaluate the demand for your products/ services. Identify and segment the customers in your market
place. Show if you sell a consumer product, but sell it through a channel of distributors, wholesalers and
retailers. Identify the most important customer groups. Show the market size and trends, market needs
and market growth.

Competitor analysis
It is important to know your competitors, what they have accomplished, and the challenges you have
before you. Your competitors preceded you in the market. The success of your business depends on your
company’s ability to take market share away from these competitors or to address a segment of the
market that is not currently being addressed.

Marketing Strategies and Sales

State the market segments you wish to penetrate, how you plan to achieve this and the period for
capturing a specific percentage of the market share.

Market segmentation strategy: explain your strategy for each segment. Describe the unmet needs of your
target consumers that your products /services fulfill or the problem it solves.

Targeting strategy: identify the targeting strategy to implement.

Positioning strategy: illustrate the strategy you will use to position your product against competitors.

Product/ Service strategy: Describe how your product /service has been designed and tailored to meet
the needs of your target customer and how it will compete in your target market.

Pricing strategy: Your pricing strategy is a marketing technique that is part of your overall marketing/
positioning strategy. Explain your pricing strategy and why it will be effective with your target
customers. Explain how you arrived at your pricing strategy ( eg, based on cost, gross margin objectives,
market prices, perceived value). Point out how your pricing strategy compares to the competition.

Distribution channels: describe your distribution strategy and explain why it is the best for your market
place. Then point out the distribution channels used by your competition and the reasons why your
choice of distribution channels is advantageous for you.
Promotion and advertising strategy: Explain your advertising and promotion strategy. Show how you
will educate your target market about your product or service, inform about its availability, and regularly
communicate your benefits to that market. Show how you will generate awareness of your product or
services among potential customers. Indicate the promotional activities you will use.

Sales strategy: illustrate the sales strategies for your product / service.

Sales forecast: Prepare a month by month sales forecast for a projected twelve month period. The
forecast should be based upon your historical sales, the marketing strategies that you have just
described; market research, and industry data if available.

Development

Development section is a road map of how you are going to get from where you are now to where you
want to be in the future. The development section should include:
Development strategy, under which you have to show the work that remains to launch your business/
product, requirements for the concept to work, the risks threatening the successful implementation of
your development plan, technological risks, cost risks, competitive risks, and how to mitigate these
risks.

Development timeline: illustrate the timetable for launching your company and your products.
Development expenses: it is important to include a description of the development costs and
assumptions that appear in your financial statements.

Management
Show to the reader of your business plan that you have a great management team to complement a great
business concept. Highlight your great accomplishments and your capabilities while mitigating any
obvious short comings or weaknesses.

Company organization
Show how your company / business will be organized. Show the ownership structure of your company/
business, include the organization chart.

Management team: Describe the founders and principal managers who will run your business. You can
include the biographies of the management team.

Management structure and style: Describe the company’s key management style. Include any unusual
aspects of management style that would affect growth or give a competitive advantage.

Ownership: list the majority owners of the business. List down the number of shares held by each, and
percentage of ownership of each stakeholder.
Operations
This section outlines how you will run your business and deliver value to your customers. Operation
processes include manufacturing, transportation, logistics, travel, printing, consulting, after sales
services, etc.

The operation section should include the following sub sections:

Operations strategy: How will you use operations to add value for customers in your target market? How
will you win in the market place on the dimensions of cost, quality, timeliness, customer service and
flexibility? Which dimensions will you stress and which ones will be less significant?

Scope of operations: what will you buy in-house and what will you purchase (make vs buy)? Why does
this make sense for your business? What will be your relationship with vendors, suppliers, partners, and
associates? What kind of people will you need to hire?

Ongoing operations: how will your company operate on an ongoing basis?

Location: state where your primary office will be located as well as any other facility where your
business will operate and then explain the reasons for those locations. Describe locations of production,
sales, storage areas, and buildings
Describe access to buildings (walk in, parking, freeways, air ports, shipping)

Personnel
The right mix of personnel will be most valuable asset any business has. This section should be broken
down to include: Number of employees, Type of labour (skilled, unskilled, professional), Quality of
existing staff, Pay structure, Procedures for acquiring new employees, Training methods and
requirements

Production
Explain your methods of production or how you deliver your service, Production techniques and costs,
Quality control, and Customer services.

Operations expenses
Give the description of the operating costs and assumptions that appear in your financial statement. Most
expenses are often referred to as overhead expenses (overhead expenses are all the non-labour expenses
required to operate the business).
Overhead expenses normally include any or all of the following: travel, maintenance and repair,
equipment leases, rent, advertising and promotion, utilities, depreciation, etc.

Administrative and financial controls

Describe the bookkeeping systems and policies (payments, billing), Accounting systems (report
intervals), and Sales systems.

Inventory
Explain how you will manage your inventory. Give the details on: the kind of inventory kept: raw
materials, supplies, finished goods, average value in stock, what is your inventory investment? Rate of
turnover and how this compares to industry average,

Suppliers
Identify the suppliers you will use for your products and services.

Financials

The financial section of the business plan will cover the following:

Start up funds
Identify all the costs associated with starting the business, expanding as current business, taking over a
business, sources of investment capital. Include start up budget or estimate to account of the initial cost
of the business.

Financial history and analysis (this is done for the current business)

Current financial position (current, take over or franchise business only)

Operating forecast: Provide an estimate of the sales and expenses your business will incur for a twelve
months period.

Break even analysis: provide a calculation for a breakeven point. Include all assumptions upon which
your break even calculation is based. (A break even determines sales volume at a given price, required
to recover total costs).

Balance sheet: a pro forma balance sheet shows how things will be in future under given conditions,
rather than how they are now.

Income statement: Indicate the pro forma income statement

Cash flow: use the income statement as the starting point. Your cash flow will show you whether your
working capital is adequate.

Funding Requests

Capital requirements
State the capital needed to start or expand your business. Describe why you need the funds and how both
parties will benefit from the opportunity. Investors and loan officers want to know when they will get
their money back. Explain when and how you will repay the investment or loan. Also specify the source
of collateral.
Risk / Opportunity
Show to the potential investors and loan officers that you have taken into consideration the risks
involved in starting or expanding your venture. Illustrate the market, pricing, product and management
risks as well as how you plan to cope with them.

Valuation of business
What is the value of your company? How do you calculate this value?

Exit strategy
A good business plan include a section that lays out the strategy you will follow should investors decide
or need to cash out (end their involvement and recoup their investment).

For bankers
If you intended on using this to present to lenders, include: Amount of loan, How the funds will be used,
what will this accomplish? How will it make the business stronger? Requested repayment terms (number
of years to repay), Collateral offered and list of all existing liens against collateral.

For investors
Investors are looking for dramatic growth, and they expect to share in the rewards.

Manufacturing business:
Provide product on levels; Provide levels of direct production costs and indirect costs; Gross profit
margin, overall and for each product line; Production / capacity limits of existing physical plants or of
expanded plant; Production / capacity limits of existing equipment or of new equipment; Potential
production efficiency increases; Prices per product line; Purchasing and inventory management
procedures; Anticipated modifications or improvements to existing products; New products under
development or anticipated.

Service business
They are usually flexible, they have higher labour costs and generally very little in fixed assets.
Depending on the business, the following can be included in the plan:
o Prices, methods used to set prices
o System of production management
o Quality control procedures
o Industry averages or accepted quality standards
o How is labour productivity measured?
o What percentage of total available hours is actually billed to customers?
o Break-even billable hours
o Percent of work subcontracted to other firms
 o Credit, payment, and collection policies and procedures
o Strategy for keeping client base, strategy for attracting new clients

Appendix
The appendix is where you should provide all the documentation that supports the body of your business
plan. Include those documents that are required (e.g. financial projections).

Resource mobilization
To mobilise resources effectively, consideration must be given to three elements, which together are
referred to as a resource mobilization framework. The three elements of the framework are ‘resources’,
‘mechanisms’ and ‘resource providers’. If necessary, define each of these three and clarify their meaning
by providing some examples.
• Resources - Money is one of the key resources that all projects need to be able to function and
carry out their work. However, there are other resources that are also useful to starting a
business. Examples include skills training, staff, inputs (e.g. seeds, tools, land etc).
• Resource mechanisms - Resource mobilisation mechanisms are the ways that resources can be
mobilised from resource providers. Mechanisms are the actual processes of requesting or getting
resources – for example, writing proposals, holding fundraising events, selling services, Selling
products, face-to-face meetings, etc.
• Resource providers – Resource providers are the sources of funds and include banks, microcredit
agencies, government agencies, and charitable organisations.

Sources of Funds
Entrepreneurs can get funds through any of the following processes:
Gifts - offers from family, friends
Own resources - from saving, sale of assets
Loans - from family, friends, informal association, savings and credit groups, banks
Credit- from supplier

A new entrepreneur should investigate as many sources of funding as possible in order to secure the best
terms and conditions of repayment. The most important types of start-up funding are owner’s equity,
loans (personal or from a lending programme) and grants.

Owner’s Equity
This is the private money one puts into the business. It is sometimes called risk capital because if the
business fails, you lose this money. Investing your own money in a business is risky; however it puts
less pressure on the business rather than borrowing. Investing your own capital may be risky but it
shows that you have faith in your business idea. This can encourage others to invest with you. If you
don’t have enough capital you can try and find a partner who may be interested in the same business
idea. A partner may or may not be working in the business but can invest money in it. Ensure you have
clearly defined terms of partnership to avoid unnecessary misunderstanding later.
Loans
A loan for start-up capital refers to borrowed money which you will pay back at a later date with
interest. The loan may be paid back in full in one or several installments depending on the agreement. A
loan inherently puts significant pressure on the business due to the requirement to pay it back. The more
you borrow the more you pay in terms of interest and installments.
You may borrow money for:
• Land and buildings.
• Equipment.
• Working capital.

These are some of the possible requirements when applying for a loan:
• A thorough business plan with a business idea that the lending institution believes in.
• Some kind of collateral may be required. Collateral means security that the lending institution
has for the repayment of your loan. This may be your business if you own one, your home,
machinery and any other equipment.
• Being an account holder or member of a bank, credit institution or association and having
operated an account successfully for some time,
• Having a certain percentage (part) of the total loan as security in your account,
• Information on yourself/yourselves and your ability to repay the loan,
• Having a minimum age (mostly 18 or above),
• Referees, guarantors (honest people with a good reputation).

When is it useful to get a loan?

• When there is a justifiable financing gap in your business funding plans,
• When other options such as saving and group-financing are not possible,
• When there is the need to take up an urgent opportunity that could lead to quick profit.

Where can you borrow?

• Banks and financial institutions
• Societies and associations
• Friends, relatives, family members
• Suppliers
• Government
• Savings and Credit Cooperatives

Types of loans
• Group loans
• Loans with formal banking institutions
• Individual loans
• Loans with informal savings groups and associations

Before one borrows money, they should consider these factors seriously.
• Develop a solid business plan including total funding requirements and running costs for the first
few months,
• Develop a financing plan including identifying funding sources,
 • Identify and approach financial institutions in your area,
• Obtain the terms and conditions for the loan to be availed,
• Compare them with those of other financial institutions around,
• Check your business plan to establish the implications of such a loan (monthly repayment and
interest rates will affect your income/profits). Check if your business can cope with these
implications,
• Initiate further discussions with the financial institution or association.

Grants
A grant is an allowance that a government or organization gives to support small business creations in
the country. Government and non-governmental organizations sometimes give grants to potential
entrepreneurs to support them in starting small businesses. Further information on accessing funding
through grants is covered in a later session.

BUSINESS ENVIRONMENT
Donor Committee for Enterprise Development defines the business environment as a complex of policy,
legal, institutional, and regulatory conditions that govern business activities.
Entrepreneurship environment refers to the various facets within which enterprises- big, medium, small
and other have to operate. The environment therefore, influences the enterprise. An environment
created by political, social, economic, national, legal forces, etc influences entrepreneurship.

Entrepreneurial environment is broadly classified into six important segments, namely Political,
Economic, Social, Technological, Legal, and Cultural environment.

o Political environment includes - Political Atmosphere, Quality of Leadership;

o Economic environment - Economic Policies, Labour, Trade, Tariffs, Incentives, Subsidies;
o Social environment - Consumers, Labour, Attitudes, Opinions, Motives;
o Technological environment - Competition and Risk, Efficiency, Productivity, Profitability;
o Legal environment – Rules and Regulations;
o Cultural environment - Structure, Aspirations and Values; and
o Institutional environment - unwritten rules of society (social norms, business culture and local
expectations).

Conducive business environment is one of the pre-requisites for economic growth and poverty
reduction. In many developing and transition countries, the business environment is hostile to market-
led growth; private enterprises suffer excessive regulatory barriers and in most respects regulatory costs
are higher than in developed economies. Poor business environments are also more likely to have a
disproportional negative impact on women-owned businesses, which are more likely to remain informal.
However, it is recognized that good regulations are necessary to secure benefits, protect workers,
consumers and the environment, to promote the rule of law and for the efficient functioning of market
economies.
A healthy business environment is essential for growth and poverty reduction. Business environment
reform is needed where inappropriate regulation, excessive taxation, lack of fair competition, lack of
voice and an unstable policy environment restrict investment and the development of markets, stifle
entrepreneurship and force many businesses to operate in the informal economy. Good regulations are
necessary to secure benefits, protect workers, consumers and the environment, to promote the rule of
law and for the efficient functioning of market economies. Poor business environments provide
incentives for firms to operate informally or extra-legally. Thus, improvements to the business
environment can contribute to reducing the size of the informal economy. The following are important
areas to be improved in business environment for informal and small businesses successful operations:
o Simplifying business registration and licensing procedures;
o Improving tax policies and administration;
o Enabling better access to finance;
o Improving labour laws and administration; (e.g. employee benefits and rights)
o Improving the overall quality of regulatory governance;
o Improving land titles, registers and administration; acquisition of land, site development,
obtaining utility connections, environmental laws, etc
o Simplifying and speeding up access to commercial courts and to g. alternative dispute-resolution
mechanisms;
o Broadening public-private dialogue processes with a particular h. focus on including informal
operators, especially women; and
o Improving access to market information.

The law requires any business of any size in Tanzania, prior to operation, to obtain a business license, a
process which is meant to ensure that the proposed business will:
- Take place in authorized areas;
- Operate on premises at which the authorities can reach the entrepreneur for inspection and at
which legal standards of safety, hygiene, employment and production are respected; and
- Ensure that the enterprise will return to the collective body part of the returns it makes from it, in
order to sustain the basic physical and social infrastructure of which the enterprise benefits.
BIBLIOGRAPHY

1. Sander J. J,Wennekers, and Zoetermeer (2008): Intrapreneurship; Conceptualizing

entrepreneurial employee Behaviour, May 2008.

2. Seshadri D. V. R, and Tripathy A. (2006): Innovation through Intrapreneurship,

The Road Less Travelled; Vikalpa Volume 31 No 1 January - March 2006

3. Parker, Simon C. (2009) : Intrapreneurship or entrepreneurship?, IZA discussion papers, No.

4195, http://nbn-resolving.de/urn:nbn:de:101:1-20090615104

4. Okhomina, D; Entrepreneurial orientation and psychological traits: the moderating influence of

supportive environment: Journal of Behavioral Studies in Business, Fayetteville State University

5. Yusof M, Sandhu M, S, Jain, K. K (2007): Relationship Between Psychological Characteristics

And Entrepreneurial Inclination: A Case Study Of Students At University Tun Abdul Razak
(Unitar), Journal of Asia Entrepreneurship and Sustainability, Volume III, Issue 2, September
2007

6. UK (2012): Enterprise and entrepreneurship education: Guidance for UK higher education

providers, September 2012.

7. Sarasvathy, S. D: What makes entrepreneurs entrepreneurial? The Darden Graduate School of

Business Administration; University of Virginia

8. Solutions for Small Business (2002): Exploring business opportunities a guide for entrepreneurs:
Ministry of Competition, Science and Enterprise; Western Economic Diversification: Canada;
Revised March 2002