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Entrepreneurship

16 October, 2008

SURJYA B. GOHAIN

Entrepreneur vs. Manager
Managers Primary Motives Time Orientation Activity Risk Status Entrepreneurs
Promotion, Independence, rewards/perks, viz. office, opportunity to create, staff, power money Survival and achieving Short-termShort-term-meeting budgets, weekly, monthly, 5 to 10 year growth of quarterly, annual planning business horizons Delegates & supervises Careful Concerned about status symbol Direct involvement Moderate risk-taker riskNo concern about status symbol

Entrepreneur vs. Manager
Managers Failure & Mistakes Decisions
Tries to avoid mistakes and surprises

Entrepreneurs
Deals with mistakes and failures

Usually agrees with those Follows dreams with in the upper management decisions positions Others for large organizations Self and customers Small business or professional background Transactions & deal making as basic relationship

Serves whom

Family History Family members worked Relationship with Others
Hierarchy as basic relationship

Entrepreneurial Feeling ‡ Entrepreneurs come from a variety of educational. family and work experience backgrounds ‡ Certain common denominators are ² Locus of control ² Need of independence ² Need for achievement ² Risk taking .

Locus of Control ‡ Whether a person is driven by an inner need to succeed and win ‡ Will she be able to sustain the drive and energy required ² to overcome the inertia in forming something new ² to manage the new enterprise and make it grow ‡ People with external locus of control may inhibit entrepreneurial tendencies ‡ Research is not conclusive about locus of control ² some studies indicated that entrepreneurial intentions were associated with internality ² other studies showed some entrepreneurs under stress shifted toward greater externality .

setting goals.Need for Independence & Achievement ‡ Being one·s own boss ² one of the strongest needs of an entrepreneur ² generally needs to do things in his/her own way ² has a difficult time working for someone else ‡ Need for achievement ² entrepreneurs have a strong desire to be recognized ² individual responsibility for problem solving. not chance ² knowledge of results of decision/task accomplishment . and reaching these goals through their own effort ² moderate risk taking as a function of skill.

or psychological.Risk Taking ‡ Risk taking whether financial. is part of the entrepreneurial process ‡ Many studies of risk taking in entrepreneurship have focused on the risk-taking propensity risk‡ However not yet empirically established that risk taking propensity is a distinguishing characteristic of entrepreneurs . social.

parents· occupation and social status. achievement and responsibility by parents establish the desirability of entrepreneurial activity . no firstborn.Entrepreneur Background ‡ Childhood Family Environment ² research conducted on birth order. established relationship with entrepreneurship so far ² being the firstborn or an only child is postulated to result in the child receiving special attention and thereby developing more selfselfconfidence ² strong evidence that entrepreneurs tend to have self-employed or selfentrepreneurial fathers ² independent nature and flexibility of self-employment exemplified selfby the father is ingrained at an early age ² encouragement for independence. and relationship with parents ² more female entrepreneurs are found to be firstborn.

strategic planning. marketing and management ² ability to deal with people and communication skills (verbal & written) are also important ‡ Personal Values ² studies indicate that an entrepreneur has a different set of attitudes about the nature of the management process and business ² nature of the enterprise. opportunism. institution and individuality of the entrepreneur makes him/her different from manager ² ethics and ethical behaviour on the part of the entrepreneur as well as stock holders are also important .Entrepreneur Background ‡ Education ² research indicates that education related to the field of the venture helps the entrepreneur to confront problems ² education useful in the areas of finance.

Entrepreneur Background ‡ Age ² there is difference between entrepreneurial age (the age of the entrepreneur reflected in the experience) and chronologic age ² most entrepreneurs initiate their entrepreneurial careers between the ages of 22 and 45 ² an entrepreneur requires ‡ experience ‡ financial support ‡ and a high energy level in order to launch and manage a new venture successfully .

manufacturing.Entrepreneur Background ‡ Work History ² may be a negative displacement in the decision to launch a new entrepreneurial venture ² previous work in the areas of finance. product or service development. development of distribution channels and preparation of a marketing plan is important ² in an established venture managerial experience and skills become important ² as venture increases entrepreneurs are exposed to more new venture opportunities .

Motivation ‡ ‡ ‡ ‡ ‡ ‡ Independence ² not working for anybody else Money Job satisfaction Achievement Opportunity Work and family situation as well as the role model of the entrepreneur are also important .

level and reciprocity of the relationship .Role Model ‡ Individuals influence an entrepreneur·s career choice and style ‡ Role models support as mentors during and after the launch of a new venture ‡ An entrepreneur must establish connections to support resources early in the new venture formation process ‡ Networking between entrepreneur and other individuals depend on frequency.

Support Systems ‡ Moral Support Network ² cheering squad of family and friends ‡ Professional Support Network ² Entrepreneur needs advice and counsel throughout the establishment of the new venture ² Advice can be obtained from ‡ a mentor ‡ business associates ² self-employed individuals with experience selfstarting a business. sporting events. civic involvements and school alumni groups . experts such as consultants. clubs. clients. or buyers of the venture·s product/ service. lawyers or accountants and the venture·s suppliers ‡ trade associations ‡ personnel affiliations ² though hobbies.

The New Business Idea .

Consumers -informal monitoring informal -formal forum -market size Existing Companies -establish formal method for monitoring & evaluating competitive Ps & Ss Sources of New Ideas Distribution Channels -have ideas/familiarity with customer needs -can help in marketing R&D -helps conceptualize & develop new ideas Government -patent office -govt. regulations .

Problem Inventory Analysis Focus Groups Brainstorming Methods for Generating Ideas .

² freewheeling . greater the likelihood of useful ideas emerging ² combinations and improvements of ideas are encouraged .Idea Generating Methods ‡ Focus Groups ² a moderator leads a group of people (8-14) through an open. no negative comments allowed. 14) in-depth discussion in- ‡ Brainstorming ² based on the fact that people can be stimulated to greater creativity by meeting with others and participating in organised group experiences ² no criticism allowed.the wilder the idea the better ² greater the number of ideas.

Idea Generating Methods ‡ Problem Inventory Analysis ² consumers are provided with a list of problems in a general product category ² they are asked to identify and discuss products in that category that have the particular problem ² known products can be related to the suggested problems ² new product idea can be generated for further evaluation .

CREATIVE PROBLEM SOLVING .

creative ideas and innovations generated by using various problemproblemsolving techniques .Creative Problem Solving ‡ A method for obtaining new ideas focusing on the parameters ‡ Creativity is an important attribute of a successful entrepreneur ² declines with age. education and lack of use ² stifled by perceptual. emotional and organizational factors ‡ Creativity can be unlocked. cultural.

Creative Problem Solving Techniques ‡ Brainstorming ‡ Reverse Brainstorming ² similar to brainstorming but criticism is allowed ² involves identification of everything wrong with an idea ² followed by a discussion of ways to overcome those problems .

a concept is developed.Creative Problem Solving Techniques ‡ Gordon Method ² begins with group members not knowing the exact nature of the problem ² entrepreneur starts by mentioning a general concept associated with the problem ² group responds by giving ideas. followed by related concepts. through guidance by the entrepreneur ² actual problem revealed and group makes suggestions for implementation or improvement of the final solution .

Creative Problem Solving Techniques ‡ Checklist Method ² a new idea is developed through a list of related issues or suggestions ² a list of questions or statements can be used to guide the direction of developing a new idea ‡ Free Association ² a word or phrase related to the problem is written down ² then another and another. with each new word attempting to add something new to the ongoing thought processes ² chain of ideas end with a new product idea emerging .

along with any suggestion . a list of the best ideas is developed. possible solutions to a problem at least once but preferably 3 times a day ² at the end of the month.Creative Problem Solving Techniques ‡ Scientific Method ² defining the problem ² analysing the problem ² gathering and analysing data ² developing and testing potential solutions ² choosing the best solution ‡ Collective Notebook Method ² group members regularly record ideas.

PRODUCT PLANNING & DEVELOPMENT PROCESS .

Product Planning & Development ‡ Once ideas emerge. they need further development and refinement into the final product or service ‡ The product planning and development process results in the start of the product lifecycle ² the stages each product goes through from introduction to decline .

INTRODUCTION GROWTH P R O D U C T L I F E C Y C L E MATURITY DECLINE .

Product Planning & Development ‡ Criteria should be developed to evaluate the new product in terms of ² market opportunity ² competition ² the marketing system ² financial factors ² production factors ‡ A market opportunity in the form of a new or current need for the product idea must exist .

prices.Product Planning & Development ‡ Assessment of the market opportunity and size needs to take into account such factors as ² characteristics and attitudes of consumers ² market size in dollars and cents ² nature of the market wrt stage in the lifecycle ² the share of the market the product could capture ‡ Current competing producers. marketing policies should also be evaluated .

sales & adv expense/unit. amount of capital and inventory required .Product Planning & Development ‡ The new product should ² have some unique differential advantage based on an evaluation of all competitive products filling the same consumer needs ² be compatible with existing management capabilities and marketing strategies ² be able to be supported by and contribute to the company·s financial structure ² be evaluated by estimating manufacturing cost/unit.

Product Planning & Development ‡ The break-event point and the long-term profit breaklongoutlook for the product need to be determined ‡ Compatibility of the new product·s production requirements with ² existing plant & machinery ² personnel should be determined ‡ Legal and ethical issues has also to be considered .

IDEA STAGE PRO DUCT PLAN NING CONCEPT STAGE A N D DEVE LOP MENT S T A G E PRODUCT DEVELOPMENT STAGE TEST MARKETING STAGE COMMERCIALISATION STAGE .

merits. cash inflow.Product Planning & Development ‡ Idea Stage ² promising ideas compatible with the market·s values can be further developed ² systematic market evaluation checklist method expresses each new idea in terms of its chief values. ROI needs to be evaluated . contribution to profit. and benefits ² the new product should also have value to the company ² cash outflow.

Value Considerations ‡ Cash outflow ² R&D costs ² Marketing costs ² Capital equipment costs ² Other costs ‡ Cash inflow ² Sales of new product ² Effect on additional sales of existing products ‡ Profit ² From new product ² Affecting additional sales of existing products ‡ Relative return ² ROI ² PV ² DCF ² ROE ‡ Compared to other investments .

if any .Product Planning & Development ‡ Concept Stage ² the refined product idea is tested to determine consumer acceptance with out necessarily incurring the cost of manufacturing ² initial reactions to the concept are obtained from potential customers or members of the distribution channel ² selected respondents are exposed to statements that reflect the physical characteristics and attributes of the product area ² compare the primary features with existing or competing products.

Product Planning & Development ‡ Concept Stage ² favourable as well as unfavourable product features can be uncovered from analysing consumers· responses ² features. and promotion should be evaluated for the product concept ² R&D can be directed to develop a more marketable product . price.

can be used to determine consumer preference . risk analysis. is used to determine consumer reaction to the physical product ² a group of potential consumers is given product sample ² participants keep a record of their use of the product and comment on its virtues and deficiencies ² one or more competitive products can also be given simultaneously ² multiple brand comparisons.Product Planning & Development ‡ Product Development Stage ² tools like the consumer panel. level of repeat purchases.

Product Planning & Development ‡ Test Marketing Stage ² final stage before commercialisation of the new product ² a market test can be done to increase the certainty of successful commercialisation ² it provides actual sales results. which indicate the acceptance level of consumers ² positive test results indicate the degree of probability of a successful product launch and company formation .