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UNIT - I
Definition of Entrepreneur
“The entrepreneur, by definition, shifts resources from areas of low productivity and yield to areas of higher productivity and yield. Of course, there is a risk the entrepreneur may not succeed”.
environmental and process. The entrepreneurship process is aided by collaborative networks in government. organizational. .DEFINITION OF ENTREPRENEURSHIP It is more than mere creation of business Entrepreneurship is a process of innovation and new venture creation through four major dimensions – individual. education and institutions.
DEFINITION OF ENTREPRENEURS Functional definition of entrepreneurs offers the following definition: “Entrepreneurs are individuals who actively form or lead their own business and nurture them for growth and prosperity.” .
What is an Entrepreneur? An Entrepreneur (ahn’tra pra nur) is a person who organizes and manages a business undertaking. Any person (any age) who starts and operates a business is an entrepreneur. assuming the risk for the sake of profit. .
innovation. skill and passion while managing resources and risks! .Definition: Entrepreneurship “The Spirit of Creative Risk Taking” Entrepreneurship is the act of: Creating new ventures that generate and capture value by realizing opportunities through creativity. knowledge.
holistic in approach and leadership balanced for the purpose of wealth creation . or by exploiting new raw materials Schumpeter • Someone who perceives an opportunity and creates an organization to pursue it . by creating new forms of organization.What is entrepreneurship? • A person who destroys the existing economic order by introducing new products and services.Bygrave • Most current: A way of thinking and acting that is opportunity obsessed.Babson College .
Entrepreneurship Some advantages –You are your own boss –Enjoy the profits from you efforts –Sense of pride in your business –Flexibility in your work schedule .
) – May lose money . firing. etc.Entrepreneurship Some disadvantages – Will need to put in long hours – Need money to start – Have to keep up with government rules and regulations – May have to mark hard decisions (hiring.
Intrapreneurship defined Intrapreneurship is entrepreneurship by employees in existing organisations Source: Antoncic and Hirsh. 2003 .
or researchers) who work inside an existing organization and notice an opportunity for product improvements and are responsible for managing the product development process. . • Intrapreneurs frustrated with the lack of support or opportunity at their firm often leave and form their own new ventures.Entrepreneurship (cont’d) Intrapreneurs – Individuals (managers. scientists.
Entrepreneurship Vs Management • Entrepreneurship – Creating something new – New product. new method of production. new source of raw material – Challenges the ‘norm’ • Management – Protects – Stewardship of existing resources . new markets.
Why become an Entrepreneur? • • • • • • • Personal situation Resources Entrepreneurial skills Success stories Desire for independence Opportunity to exploit a gap Frustration .
Characteristics of an Entrepreneur • • • • • • • • • Drive Perseverance Ambition Leader Survivor status Competitive Interpersonal skills Innovative skills Ability to bounce back • • • • • • • • • Vision Motivation Self-confidence Self Satisfaction Extrovert Results orientated Committed Risk taker Sociable .
Psychological Characteristics of Entrepreneurs • Need for achievement • Locus of Control – Internal – External • Risk-taking Prosperity • Tolerance for ambiguity • Type A Behaviour – Impatient. time urgency. competitiveness • Need for Independence . driving ambition.
What is the Role of the Entrepreneur? • Opportunity recognition • Market uncertainties – Dealing with the future • Risk taking – Businesses. financial and personal • Resource gathering • Profits/Reward .
Co-ordinate tasks I can…. Organise and plan I can…. Co-operate with others I can….…Communicate I can. Sell I can…. Handle numbers I can…. Represent my opinion I can…. .Skills & Competencies (Birdthistle) • • • • • • • • • • • • • • I can.. Handle technical devices My literacy is ….. My interaction with people is …. Negotiate I can …. Develop alternative plans I can…. Present I can…. Hand tasks over to a 3rd party I can…..
enthusiasm and belief in the idea • Unsatisfied market demand • Managerial competence • Luck • Strong control systems • Sufficient capital . drive.Reasons for Entrepreneurial Success • Hard work and long hours • Dedication.
Hurdles in starting up a a business • • • • • • • • Lack of the right business idea Complicated regulatory efforts Own financial risk Lack of courage Lack of right founding partner Lack of equity Lack of debt capital Know-how-deficit .
Hurdles in starting up a a business • • • • • • • Lack of contact clients/customers Economic cycle Business environment Fear of failure Support by family and friends Lack of time Lack of entrepreneurial skills .
a belief. .• Have you the ‘fire in your belly’? – Not indigestion but – a vision. a concept. in your future? • Have you the guts to take the rough with the smooth? – Sure rough times – but accept it and move on. • If you are entrepreneur – work is fun!! • Have some fun……………….
CATEGORIES OF ENTREPRENEURS .
friends.$200 • Debt structure. short payback period • Proven area for finance • Currently with limited financial support • Need USD $20K to $250K • Generally rely on personal funds.Entrepreneurship in India comes in three forms Types of Entrepreneurship Individual Entrepreneurship driven by instincts to survive • Vegetable vendor • Cattle rearing • Tea Stall Micro & Small Enterprises Small to medium businesses with scope and employment • 5-100 employees • Relies on internal business sense to succeed Large Markets Large businesses with large scope and employment • Typically run by highly educated managers • Exit markets well understood • The area of microfinance • Supported by small loans between USD $50 . family. and money lenders • Significant conventional venture capital support • Need USD millions in equity •Primarily service export or urban focused • Proven area for finance .
Factors that Shape Future Entrepreneurs Traits Environment Behavior .
Functions of an Entrepreneur • Job Creator • Risk Taker • Coordinator • Promoter • Value Creator • Profit Maximiser .
desires. control or explain the entrepreneurial behavior of human beings. aspirations or needs direct. drives. striving. .What is EM? Entrepreneurial motivation refers to the way in which urges.
Elements of EM • Motive • Behavior • Goal Goal Motive Behavior .
Behavior & Goal Effort Help (Assistance) Goal Barriers (Internal) Activity Intention (Motive) Barriers (External) Expectation (+ve/-ve) Feelings (+ve/-ve) .Relationship between Motive.
Sources of Entrepreneurial Motivation • Internal/Intrinsic – Personal goals – Need for achievement – Ambition • External/Extrinsic – – – – – Compulsion Support Successful entrepreneurs Access to capital Status .
Models of EM • • • • • Needs-based entrepreneurial motivation A general model of entrepreneurial motivation Entrepreneurial intentions model Enterprise formation model Model of entrepreneurial motivation and the entrepreneurial process .
David McClelland. Psychologist (1917-98) Needs-based Entrepreneurial Motivation .
David McClelland's Needs-Based Motivational Model • Need for achievement (n-ach) – attainment of realistic but challenging goals. effective and to make an impact . • Need for affiliation (n-aff) – friendly relationships and interaction with other people • Need for security/safety (n-sec) – Comfortable with secure employment and unwillingness to take higher risk .personal status and prestige. and a sense of accomplishment. Feedback as to achievement and progress. • Need for authority and power (n-pow) – influential. and advancement in the job.
. reward. • Security is not prime motivator. not an end in itself.Behavior of Achievement-Motivated People • Achievement is more important than material or financial • Achieving the aim or task gives greater personal • Financial reward is regarded as a measurement of satisfaction than receiving praise or recognition success. nor is status.
Behavior of Achievement-Motivated People • Feedback is essential. sales and business management. and entrepreneurial roles. i. not for reasons of praise or recognition. e. because it enables • Achievement-motivated people constantly seek improvements and ways of doing things better.e.. • Achievement-motivated people will logically favor jobs and responsibilities that naturally satisfy their needs. measurement of success. offer flexibility and opportunity to set and achieve goals.g. .
Behavior of Achievement-Motivated People • Capacity to set high personal but • obtainable goals Concern for personal achievement rather than the rewards of success (How well am I doing?) rather than for attitudinal feedback (How well do you like me?) • The desire for job-relevant feedback .
A Model of Entrepreneurial Motivation PC PE PG Internal Expectation/ Outcome Comparison Intrinsic/Extrinsic Rewards Decision to behave Entrepreneurially Entrepreneurial Strategy Entrepreneurial Management Firm Outcomes Implementation/ Outcome Perception PC = Personal Characteristics PE = Personal Environment PG = Personal Goals BE = Business Environment BE IDEA Internal/External .
Entrepreneurial Intentions Model Perceived net desirability of self-employment (NDSE) Tolerance for risk (TR) Perceived feasibility (self-efficacy) of selfemployment (SE) Self-employment intentions .
Factors Critical to Start-Up & Reasons for Not Starting-Up .
A Model of Enterprise Formation PERSONAL BACKGROUND: Age Gender Previous employment Family and ethnic group Education DECISION: START (Triggers > Barriers) ENVIRONMENT: Industry Social Economic Political Infrastructure development INTENTIONALITY DECISION: ABANDON (Triggers < Barriers) .
realise a dream) • Autonomy (work own hours. super. redundancy. be one’s own boss) • Status (follow example of a person I admire. maintain family tradition) • Market Opportunity (saw one) • Money (make more. increase status/prestige. keep more RM) 41 . earn a better salary) • Creativity (take advantage of own talents. way to personal savings. own location. have an interesting job.Triggers to start up • Invest (need a job. create something new.
problems finding suitable labour • Hard reality . lack of management/financial expertise. compliance with government regulation.high taxes and fees. lack of information. uncertainty and fear of failure .lack of marketing skills.assessment that risks are greater than expected.Barriers to start up • Lack of resources . difficulty in obtaining finance • Compliance costs .
(2003) . et.Entrepreneurial Motivation & Entrepreneurship Process Source: Shane.al.
Entrepreneurial Behavior & Favorable Business Outcome .
Pull Factors Religious Values – A lot of bounties in business – Follow the teachings of the religion – Duty to lead a prosperous life Psychological – Doesn’t like to be controlled – Want freedom .
Pull Factors Riches and Power – Rich and famous – Sophisticated life-style Service to the Society – Corporate social responsibility – Philanthropic activities Entrepreneurial Culture – Entrepreneurial mindset – Business succession .
Push Factors Frustration – Limited job mobility – VSS and “retrenchment” – Dissatisfaction Necessity – No jobs – Need to support family – Lack educational qualifications .
Barriers to Entrepreneurship • • • • • “Too much to lose” “Personal inadequacy” “Fear of Competition” “Lack of Capital” “Lack of Opportunity” .
Factors in Entrepreneurial Success • • • • • • • • • Achievement Oriented Personality Entrepreneurial Attitudes Belief in Self and Ability Social Context Precipitation Event Intention to Start a Venture Opportunity Recognition Controlling Resources Timing .
Classification of Entrepreneurship • Contextual Basis • Novelty Basis • Intention Basis .
Contextual Basis • Entrepreneurship (stand alone start up) • Corporate entrepreneurship (new ventures within large established organizations) • Co-preneurship (a working professional starts a business and runs it alongside his / her job) • Technology Entrepreneurship (start-ups witjh product and process which are technology based) • Service Entrepreneurship (start-ups in the services domain of activity) • E-entrepreneurship (start-ups wherein business is on internet platform) .
new methods of production. It is also called Schumpeterian Entrepreneurship. • Imitative Entrepreneurship This is the type of entrepreneurship wherein the entrepreneur is poised to adopt successful innovations which are already in the market .Novelty Basis • Innovating Entrepreneurship Innovating Entrepreneurship involves introduction of new goods. discovers new market and reorganizes the enterprise. This is usually the case with technology companies but it is not ruled out for other ventures also.
Intention Basis • Build to sell .
THE EVOLUTION OF ENTREPRENEURSHIP THEORY Definition of an Entrepreneur : • “ An entrepreneur is a person who undertakes to do a job ” Richard Cantillon (1755). . • In Malaysia the term “usahawan” is used for entrepreneur. The term entrepreneur is a French word first coined by Richard Cantillon.
the dynamics of business set up and expansion and development. . The study of entrepreneurship is concerned with the entrepreneurial behavior.THE EVOLUTION OF ENTREPRENEURSHIP THEORY Definition of Entrepreneurship: • Entrepreneurship involves not only the process that leads to the setting up of a business entity but also the expansion and development of an on going concern.
.An entrepreneur is a person who shifts resources from an area of low productivity to high productivity. • Jean Babtiste Say (1803) .THE EVOLUTION OF ENTREPRENEURSHIP THEORY • Adam Smith (1776) .An entrepreneur is a person who acts as agent in transforming demand into supply.
labor and capital. The entrepreneur transforms and gives added value. • Carl Menger (1871) .THE EVOLUTION OF ENTREPRENEURSHIP THEORY • John Stuart Mill (1848) . .The entrepreneur acts as an economic agent who transforms resources into products and services.An entrepreneur is a prime mover in the private enterprise. The entrepreneur is the fourth factor of production after land .
The economy moves through leaps and bounds and the prime mover is the entrepreneur through the process of creative destruction.The process of entrepreneurship or business development is incremental or evolutionary . It evolves from sole proprietorship to a public company. . • Alfred Marshall (1936) .An entrepreneur is an innovator.THE EVOLUTION OF ENTREPRENEURSHIP THEORY • Joseph Aloysius Schumpeter (1934) .
. This need for achievement is directly related to the process of entrepreneurship. • David McClelland .The entrepreneur is seen as a knowledgeable individual and is instrumental in the development of a city-state where enterprise will emerge.THE EVOLUTION OF ENTREPRENEURSHIP THEORY • Ibnu Khaldun (Abdul Rahman Mohamed Khaldun) .The entrepreneur is a person with a high need for achievement.
Concept of Entrepreneurship • Development of Entrepreneurship • Entrepreneurial Culture and Stages in the entrepreneurial Process o o o o o o o o o Stage-I: Entrepreneurial Interest Stage-II: Generate Ideas for screening Stage-III: Venture Screening Stage-IV: Develop and refine the concept Stage-V: Determine resources required Stage-VI: Acquiring necessary financials Stage-VII: Developing business plan Stage-VIII: Implement and manage Stage-IX: Growth or Exit .
Concept of Entrepreneurship • What makes a culture Entrepreneurial o o o o Treat what people respect Help employees stay healthy Open doors to communication Build camaraderie • Maintaining this entrepreneurial culture o Let the team build itself o Participate without controlling o Don’t forget the little things .
Development of Entrepreneurship Key Dimensions of Entrepreneurship Entrepreneur Economy Venture .
Entrepreneurship in Career Development Subject Area .
Entrepreneurial Culture & Stages in the Entrepreneurial Process • • • • • • • • • (A) Stage – I : Entrepreneurial Interest (B) Stage – II : Generate Ideas for Screening (‘C) Stage – III : Venture Screening (D) Stage – IV : Develop and refine the concept (E) Stage – V : Determine resources required (F) Stage – VI : Acquiring necessary Financials (G) Stage – VII : Developing the business plan (H) Stage – VIII : Implement and Manage (I) Stage – IX : Growth or Exit .
What Makes a culture Entrepreneurial • (a) Treat people with respect • (b) Help employees healthy • (‘c) Open doors to communication • (d) Build camaraderie .
Maintaining the entrepreneurial Culture • (a) Let team build itself • (b) Participate without controlling • (‘c) Don’t forget the little things .
II .UNIT .
Idea generation & Creativity • Idea Generation Techniques: (a) Brainstorming (b) Fishbone diagram (‘c) Free Association (d) Mind mapping (e) Visual Brainstorming .Idea Generation Phase .Evaluation Phase (f) Alternative scenarios (g) Attribute listing .
Put to another use E – Eliminate R .Idea generation & Creativity (h) Card board story (i) Chunking (j) False faces (k) Problem reversal (l) SCAMPER SCAMPER is the acronym of : S – Substitute C – Combine A – Adapt M – Modify P .Reverse .
Idea Screening and selection • • • • • • • • • • • Product / Service Sources of advantage Value creation and realization of benefits Customer / Market Competitor’s competitive advantage Management team Creates significant value for customers Significant profit potential Fit with capabilities of the founder Durable Amenable to financing .
Feasibility Analysis • Economic Feasibility • Market Feasibility • Financial Feasibility • Technical Feasibility .
Problems and Assumptions Financial Plan Appendices .The various details that emerge from the feasibility analysis and contribute to larger portion of the business plan are as follows: Executive summary The industry and the firm Market research and analysis The economics of the business Marketing plan Design and development plan Manufacturing and operational plan Management team Overall schedule Critical Risks.
Economic Feasibility • Value – cost – price • Hidden Costs • Trade – offs – Cost Functions • • • • People / Knowledge and machines Scale Vs. Scope Market and demand Risks .
Marketing Feasibility • • • • • • Description of the industry Current Market Analysis Competition Anticipated Future Market potential Potential Buyers and sources of Revenues Sales Projections .
Financial Feasibility • • • • Start-Up-Capital Requirements Calculating Business Start-up costs Project Start-up costs conservatively Segregate one-time start-up costs from recurring costs – Never run out of cash – Cash is king – Know the cash balance now – Do today’s work today – Do the work or get someone else – Do not manage from the bank balance – Know your six months cash balance – Cash flow problems do not just happen – Have cash flow projections – Take care of customers .
Technical Feasibility • Preparing an outline for writing your technical feasibility study • Calculating material requirements • Calculating labor requirements • Transportation and shipping requirements • Physical location of your business • Technology requirements to run your business .
.Project Planning “A project is an organized unit dedicated to the attainment of a goal – the successful completion of a development project on time. within budget. in conformance with predetermined programme specification”.
Economic Projects • Project Identification • Project Selection .Project Classification • Quantifiable and non-quantifiable projects • Sectoral projects – – – – – – Agricultural and allied Irrigation and Power Industry and Mining Transport and communication Social service Miscellaneous • Techno.
Project Classification • Project Formulation • Contents of a project report – – – – – – – – – – – – Executive summary The industry and the firm Market research and analysis Economics of the business Marketing plan Design and development plan Manufacturing and operational plan Management team Overall schedule Critical risks Financial plan Appendices • Project Implementation .
Some of these are as: • • • • • Simple rate of return (SRR) Payback Period (PBP) Benefit Cost Ratio (BCR) Net present value (NVP) Internal Rate of Return (IRR) .Project evaluation There are various methods used for evaluating projects.
as early as possible – Identify when constraints may be violated – Ensure that contingency plans occur before unrecoverable problems occur – Provide and receive project status for the phases and total project • Monitoring changes to workflows • Monitoring system performance • Controlling Changes .Project Monitoring and Control • Monitoring the project – Identify risks. potential project problems.
Creative Problem Solving (CPS) CPS is a simple process that involves breaking down a problem to understand it. generating ideas to solve the problem and evaluating those ideas to find the most effective solutions .
implement the ideas) .Steps in Creative Problem Solving • • • • • • • • Clarify and Identify the problem Research the problem Formulate creative challenges Identify insights Generate ideas Combine and evaluate the ideas Draw up an action plan Do it! (i.e.
• General heuristics are “cognitive rules of thumb that are useful in solving a great variety of problems.Heuristics of Problem Solving • Heuristic problem solving are common sense rules drawn from experience. used to solve problems. (Why?) . or a procedure.” • Heuristic problem solving involves finding a set of rules. that finds satisfactory solutions to a specific problem.
The model should include all feasible solutions There exists an algorithm for finding the optimal solution to the model. . A well structured problem has the following characteristics: • • • • All information relevant to the problem can be represented in an appropriate model. All data required should be economically practical to gather.Ill-structure Problems for which there are no known algorithmic solutions are called ill-structured.
Heuristic Problem Solving • • • • • • • • Random solutions Greedy solutions Exchanging heuristics Break-combine heuristics Improving our solutions Local optimization Iterated local search Simulated annealing .
.Brainstorming Brainstorming can be effective way to generate lots of ideas on a specific issue and then determine which idea – or ideas – is the best solution. Brainstorming requires a facilitator in order to guide the session. It should be energetic and openly collaborative.
without any criticism Select your five best ideas best solve your problem. Criteria should start with the word “should” Give each idea a score (0-5 points) The idea with the highest score will best solve your problem. (Keep a record of all of your best ideas) .Brainstorming Step by step process of brainstorming: • • • • • • • Define your problem / issue Give yourself a time limit It must be written down.
Brainstorming Factors to be considered for successful brainstorming – Mixed participants – Enthusiastic facilitator – Well stated challenge .
Brainstorming Factors to be considered for successful brainstorming: – Mixed participants – Enthusiastic facilitator – Well stated challenge .
This history of sustained Research and Development provides a scientific foundation for the Synectics body of knowledge. Prince emphasized the importance of Creative Behaviour in reducing inhibitions and releasing the inherent creativity of everyone. It is also much more rewarding because the end product is action not just ideas. Synectics invented a technique called "springboarding" for getting creative beginning ideas. Gordon emphasized the importance of "'metaphorical process' to make the familiar strange and the strange familiar". The use of the Creative Behaviour tools extends the application of Synectics to many situations beyond invention sessions (particularly constructive resolution of conflict). He expressed his central principle as: "Trust things that are alien. it also adds an important evaluation process for Idea Development. For the development of beginning ideas. 1918 . the alienation of the original problem through the creation of analogies. and alienate things that are trusted. Prince (April 5.Synectics and Value Analysis Synectics was formally created by William Gordon & George Prince Synectics Synectics is a problem solving methodology that stimulates thought processes of which the subject may be unaware.June 9. originating in the Arthur D. This method was developed by George M. Little Invention Design Unit in the 1950s. As an invention tool. the method incorporates brainstorming and deepens and widens it with metaphor. "Success" was defined as getting a creative solution that the group was committed to implement. which takes embryonic new ideas that are attractive but not yet feasible and builds them into new courses of action which have the commitment of the people who will implement them. They set up Synectics Inc. Synectics is more demanding of the subject than brainstorming. .J. (now Synecticsworld) in and the methodology has evolved substantially in the ensuing 50 years. 2009)and William J. as the steps involved mean that the process is more complicated and requires more time and effort." This encourages. Gordon. He and his colleagues developed specific practices and meeting structures which help people to ensure that their constructive intentions are experienced positively by one another. later video) of thousands of meetings. analysis of the results and experiments with alternative ways of dealing with the obstacles to success in the meeting. on the other hand. It is thus possible for new and surprising solutions to emerge. fundamental problem-analysis and. on the one hand. Process The process was derived from tape-recording (initially audio.
collect and record the ideas • Test and evaluate the ideas • Develop the selected ideas into concepts • Present your concepts to the point . Restate the problem. collect and record the first ideas that come to mind • Fins a relevant analogy in one of the listed categories of analogies • Ask yourself questions in order to explore the analogy • Force fit various solutions to the reformulated problem statement • Generate. Formulate the problem as a single concrete target • Generate.Step by Step Process of Synectics • Start with original problem statement • Analyze the problem.
Innovation Innovation is defined as the ability to apply creative solutions to problems or opportunities to enhance or to enrich people’s lives. Innovation could take the form of • • • • • a new good a new method of production a new market a new source of supply of raw materials carrying out of a new organization .
III .UNIT .
interest in international markets has increased manifolds and thereby observed enhanced entrepreneurial activity in this domain also.International Entrepreneurship Opportunities With the globalization of the World economy. Some new ventures are born global (such as IT firms in India) .
.Nature of International Entrepreneurship International Entrepreneurship is the development of international new ventures or start ups that from inception engage in international business thus viewing their operating domain as international from initial stages of the firm’s operation.
.Nature of International Entrepreneurship • It is the study of the nature ?& consequences of a firm’s risk taking behavior as it ventures into international markets. • A business organization that from inception seeks to derive significant competitive advantage from the use of resources and sale of outputs in multiple countries.
Nature of International Entrepreneurship • International Entrepreneurship is a firm level activity that crosses national borders and focuses on the relationship between businesses and the international environments in which they operate. . proactive and risjk seeking behavior that crosses national borders. • Combination of innovative.
. venture based con specialized resources are able to capitalize on markets elsewhere • Dr. . Reddy’s Lab • Biocon • And many more……….Examples The liberalization and globalization of Indian business has seen a lot of increased activity in this field.
• Companies that engage in some form of international business are involved in exporting than in any other type of business transaction. .Importance of International Business to the firm • International Business is all business transactions – private and governmental – that involve two or more countries.
• Diverse Markets with vibrant and varied cultural heritage. . sub-contracting.Importance of International Business to the firm • Another core Issue is the company’s growth and the importance of networking and interaction i.e. collaborations. etc.
Importance of International Business to the firm • • • • • • • Helps as growth strategy Helps in managing product life cycle Technology advantages New business opportunities Proper use of resources Availability of quality products Earning foreign exchange .
Complexities • • • • • • Controlling the market Exhausting natural resources Importance to Luxuries Trade practices Economic Development Shifting of Investment .
. This requires making alterations to your offerings at times. The main reason for organizations to tread across borders has noticeably been to acquire access to larger markets.International Vs Domestic Entrepreneurship The dimensions on which the international and domestic entrepreneurship differ are basically to do with the reasons to go international as compared to just focus attention on domestic markets.
International Vs Domestic Entrepreneurship Uncontrollable Factors: Economies Balance of payments Type of system Political-legal Environment Cultural Environment Technological environment .
There is an emergence of a transport infrastructure to support trade.2003) In 1960.High Mass Consumption The economy is geared towards mass consumption.Take Off Industrialization increases. It does not set down the detailed nature of the pre-conditions for growth. Like many of the other models of economic developments it is essentially a growth model and does not address the issue of development in the wider context. According to Rostow. Stage 2 -. Stage 1 -. The consumer durable industries flourish. Growth is concentrated in a few regions of the country and in one or two manufacturing industries. If the stage 2 has been reached then injections of investment may lead to rapid growth. For the economies of LDCs to grow. The service sector becomes increasingly dominant. Resource allocation is determined very much by traditional methods of production. The economy is producing a wide range of goods and services and there is less reliance on imports. savings and investment grow entrepreneurs emerge. with workers switching from the agricultural sector to the manufacturing sector. Technological innovation is providing a diverse range of investment opportunities. Limitations Many development economists argue that Rostows's model was developed with Western cultures in mind and not applicable to LDCs.Stages of Economic Development Rostow's Stages of Development Walt Whitman Rostow (1916. Agriculture is the most important industry and production is labor intensive using only limited quantities of capital. Stage 4 -. As incomes. suggested that countries passed through five stages of economic development. The level of investment reaches over 10% of GNP. development requires substantial investment in capital.Traditional Society The economy is dominated by subsistence activity where output is consumed by producers rather than traded. the American Economic Historian.Drive to Maturity The economy is diversifying into new areas. Thus as a predictive model it is not very helpful.Transitional Stage (the preconditions for takeoff) Increased specialization generates surpluses for trading. Perhaps its main use is to highlight the need for investment. the right conditions for such investment would have to be created. The economic transitions are accompanied by the evolution of new political and social institutions that support the industrialization. Any trade is carried out by barter where goods are exchanged directly for other goods. External trade also occurs concentrating on primary products. Rostow. It addition its generalized nature makes it somewhat limited. The growth is self-sustaining as investment leads to increasing incomes in turn generating more savings to finance further investment. policy makers are unable to clearly identify stages as they merge together. Stage 3 -. W. . In reality. W. Stage 5 -. If aid is given or foreign direct investment occurs at stage 3 the economy needs to have reached stage 2.
Stages of Economic Development
Stages of Economic Development
The Stages of Economic Development and Entrepreneurship
In his classic text W.W. Rostow suggested that countries go through five stages of economic growth: (1) the traditional society (2) the preconditions for take-off (3) the take-off (4) the drive to maturity and (5) the age of high mass-consumption. While these stages are a simplified way of looking at the development of modern economies, they identify critical events. While Rostow focused on the age of high mass-consumption, Porter following recent developments in the Rostow (1960). economics of innovation. Michael Porter8 has provided a modern rendition of this approach by identifying three stages of development: (1) a factor-driven stage, (2) an efficiencydriven stage and (3) an innovation-driven stage. The factor-driven stage is marked by high rates of agricultural self-employment. Countries in this stage compete through low-cost efficiencies in the production of commodities or low value-added products. Sole proprietorships—i.e. the self-employed—probably account for most small manufacturing firms and service firms. Almost all economies experience this stage of economic development. These countries neither create knowledge for innovation nor use knowledge for exporting. To move into the second stage, the efficiency-driven stage, countries must increase their production efficiency and educate the workforce to be able to adapt in the subsequent technological development phase: the preconditions for take-off plays a crucial role. The drive to efficiency describes the first transition that is predominantly institutional in nature. To compete in the efficiency-driven stage, countries must have efficient productive practices in large markets, which allow companies to exploit economies of scale. Industries in this stage are manufacturers that provide basic goods and services. The efficiency-driven stage is marked by decreasing rates of self-employment. In the efficiency-driven economy capital and labor play a crucial role in productivity and the focus is on technology, in the decision making process. For over a century there has been a trend in economic activity—exhibited in virtually every developing country—toward larger firms. In 1957 Robert Solow at MIT modified Douglas‟s earlier findings on the contributin of capital and labor by a kind of exponential growth factor suggested by Schumpeter early on in the Century. As the Nobel Laureate Paul Samuelson (2009, 76) recently pointed out, “This „residual‟ Solow proclaimed, demonstrated that much of post-Newtonian enhanced real income had to be attributed to innovational change (rather than, as Douglas believed, being due to „deepening‟ of the capital/labor K/L ratio).” The transition to the innovation driven stage is characterized by increased activity by individual agents. In the innovation-driven stage knowledge provides the key input. In this stage the focus shifts from firms to agents in possession of new knowledge.9 The agent decides to start a new firm based on expected net returns from a new product. The innovation-driven stage is biased towards high value added industries in which entrepreneurial activity is important. Institutions dominate the first two stages of development. In fact, innovation accounts for only about 5 percent of economic activity in factor-driven economies and rises to 10 percent in the efficiency driven stage. However, in the innovation-driven stage when opportunities have been exhausted in factors and efficiency, innovation accounts for 30 percent of economic activity. We see an S-shaped relationship between entrepreneurship and economic development because in the first transition stage entrepreneurship plays a
Institutional Support For New Ventures
Supporting Organizations The Government of any nation has a critical role to play in ensuring the development of a vibrant business eco-system.
etc.Vibrant Business Eco-system • Government Support • Infrastructure Support – Industrial Areas / Economic Zones • Financial Support – Debt & Equity Funding. • Skills Support – Supply of educated. trained workforce • Incubation Support – Mentoring-technical & business guidance for success & growth of ventures • Procedural Support – Simplifying the process of starting & doing business . Tax Holidays. qualified.
Incentive Schemes by Central Government (A) Credit Guarantee Fund Schemes for SSI Small scale industrial units particularly the first generation of entrepreneurs faced difficulties in accessing bank credit because of their inability to provide adequate collateral security for loans .
10Lacs w/o collateral / third party guarantees • The scheme is being operated by the credit Guarantee Trust Fund for small for small industries (CGTSI) set up by Govt.f. 2000 • Alleviating the problem of collateral security & impediment to flow of credit to Small Scale Industries (SSI) sector • The govt. approved Credit Guarantee Fund Scheme for small industries on 19th May. of India & SIDBI • The trust was incorporated on 27th July.e. 2000 • Loans up to Rs.• Govt. 2000 • The scheme has been operationalised w. 2001 . 1st January. launched the credit Guarantee Fund Scheme for small Industries on 30th August.
25 Lacs & to provide for counter guarantees to other institutions . 25 Lacs. Necessary modifications have been carried out in the indenture of the trust to enable CGTSI to guarantee loans up to Rs.The Govt. decided to increase the eligibility limit of loans to be guaranteed from Rs. 10 Lacs to Rs.
Incentive Schemes by Central Government (B) Salient Features of the scheme – Eligibility & Coverage – Guarantee & Annual Service Fee – Commencement of guarantee cover – Invocation of Guarantee .
Incentive Schemes by Central Government (‘C) Eligible Institutions – All scheduled commercial banks & Regional Rural Banks (Categorized under sustainable viability) or such of those institutions as may be directed by GOI – Contribution to the Corpus Fund of CGTSI – Progress of Credit Guarantee Scheme .
the nationalized banks and even NGOs are conducting various programs including EDPs The office of DC (SSI) has also opened a women cell to provide coordination & assistance to women entrepreneurs _ _ SIDBI has been implementing two special schemes for women : (i) Mahila Udyam Nidhi & (ii) Mahila Vikas Nidhi SIDBI also provides training _ .Incentive Schemes by Central Government (D) Initiatives for women entrepreneurs Women entrepreneurs have achieved remarkable success The small Industries Development Organization (SIDO). the various State Small Industries Development Corporations (SSIDCs).
Fiscal Incentives to new Industrial Units & their substantial Expansion .Other Incentives Proposed .Relaxation of PMRY Norms .Development of Industrial Infrastructure .Procedure for release of assistance under the new Initiatives .Development of village & small Industries (VSI) Sector .Transport Subsidy Scheme .Incentive Schemes by Central Government (E) Incentives for North Eastern Region .
MSME Finance IDBI Bank SME Products: Sulabh Vyapar / Business Solutions Dealer Finance / Dealer Solutions Vendor Financing / Vendor Solutions Funding under CGFMSE Loans to small road & water transport operations Finance to professionals & self employed Finance to medical practitioners Working capital financing to IT & ITES entities Lending against the security of future credit card receivables Entrepreneurial Development Fund Laghu Udyami Credit Cards (LUCC) SME Hoisery Current Account .Financial Institutions & Small Scale Industries Industrial Development Bank of India (IDBI) .
Financial Institutions & Small Scale Industries Small Industries Development Bank of India (SIDBI) – Objectives • • • • Financing Promotion Development Co-ordination for orderly growth of industry in the small scale sector .
Lack of marketing network .Lack of appropriate infrastructure .Technology obsolescence .Delayed payments .Poor quality .Incidence of sickness .Managerial inadequacies .Small Industries Development Bank of India (SIDBI) (A) Development Outlook The major issues confronting SSIs are identified to be as follows: .
Small Industries Development Bank of India (SIDBI) (B) Co-ordination and Understanding As an apex institution SIDBI makes use of the network of the banks & state level financial institutions which have retail outlets SIDBI has signed memorandum of understanding with 18 banks & the agencies .
(NSIC) .Financial Institutions & Small Scale Industries • • • • State Bank of India Punjab National Bank ICICI Bank National Small Industries Corporation Ltd.
2007 as a follow-up of the merger of the two Ministries of Small Scale Industries & Agro and Rural Industries into a newly formed Ministry of Micro. Small & Medium Enterprises. Government of India has been playing a key role for development of Micro. Small & Medium Enterprises – Development Institute (MSME-DI) They are field Institution office of the Development Commissioner (MSME) under the ministry of Micro. thereafter upgraded as small Industries since June. These were established in 1960 as Small Industries Service Institute Extension Centre. consultancy & training.Financial Institutions & Small Scale Industries Micro. vendor development programme as well as various awareness & modernization programmes. The Institute strives to achieve its avowed objective through a gamut of operations ranging from training. Small & Medium Enterprises. buyer-seller. small & medium enterprises through counseling. . consultancy. meet.
SMEs developed in a manner which made it possible for them to achieve the following objectives: .Government Policies for Small Scale Industries The Micro. Small and Medium Enterprises (MSME) sector has been recognized as the engine of growth all over the world. SMEs in India met the expectations of the Government in this respect.
• • • • • • • • • High Contribution to domestic production Significant export earnings Low investment requirements Operational Flexibility Location wise mobility Low intensive imports Contribution towards defense production Technology-oriented industries Competitiveness in domestic and export markets .
At the same time, one has to understand the limitations of SMEs, which are as follows:
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Low capital Base Concentration of functions in one / two persons Inadequate exposure to international environment Inability to face impact of WTO regime Inadequate contribution towards R&D Lack of professionalism
In site of these limitations, the SMEs have made significant contribution towards technological development and exports. EMEs have been established in almost all major sectors in the Indian industry as follows:
Food Processing Agricultural Inputs Chemicals and Pharmaceuticals Engineering, Electricals, Electronics Electro-medical equipment Textiles and Garments Leather and leather goods Meat products Bio-engineering Sports goods Plastics products Computer Software, etc.
MSME-New Policy and Definition
The small scale industry sector output contributes almost 40% of the gross industrial value-added 45% of the total exports from India (direct as well as indirect exports) and is the second largest employer of human resources after agriculture. The development of small scale sector has therefore been assigned an important role in India’s national plans. In order to protect , support and promote small enterprises as also to help them become self-supporting, number of protective and promotional measures have been undertaken by the Government.
The promotional measures cover • • • • • • • • Industrial extension services Institutional support in respect of credit facilities Provision of developed sites for construction of sheds Provision of training facilities Supply of machinery on hire – purchase terms Assistance for domestic marketing as well as exports Special incentive for setting up enterprises in backward areas. etc. Technical consultancy and financial assistance for technological up gradation .
infrastructure.Government Policies and Support – A brief History • 1948-91: Office of Development Commissioner was established in 1954 • 1991-1999: Small Industries Industrial Development Bank was created • 1999 onwards: A new ministry was formed and a new policy package was announced in August 2000 to address the problems of credit. marketing and technology up gradation effectively .
small and Medium enterprises Development act 2006. Focus Areas: Credit / Finance Priority Sector Lending Institutional Arrangement Credit Guarantee Scheme Performance and Credit Rating Scheme . the Government has recently fulfilled one of the needs felt and articulated by this segment for long.Present Policy Frame work and Focus Areas By enacting the micro.
Technological Up gradation • • • • • • • • Department of Science and Technology Department of Bio-technology National Research and Development Corporation Commercial Activities Promotional Activities Development and Promotion of Rural Technology Export of Technology Dissemination of Information on Technology and its and its transfer to Industry .
UNIT .IV .
responsibility. In addition to ability. belief sand respect other key personal qualities that define a professional are honor. .FAMILY & NON FAMILY ENTREPRENEURS Role of Professionals The real professional is able to see trends and value them in the emerging patterns of relationship and is able to value it. reputation and trustworthiness. A professional ids continuously on work towards his / her development and growth professional should be able to guide social establishment by way of training and competence development on his / her part. He / she brings more professionals into organization from other field to understand and get things done. confidence. The professional has an understanding of the way things work in the sphere of activity that he/ she is and has adequate knowledge.
Elements of Professionalism
• Altruistic: Showing unselfish concern for welfare of others • Accountability responsibility and reliability • Excellence
Knowledgeable Competency to retrieve and handle information Appropriate decision making skills Competency in communication
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Integrity the quality of being honest moral soundness undivided or unbroken Dutiful appreciation of the role aptitude for personal development Respect to others
Professionalism v/s Family Entrepreneurs
Family entrepreneurship is defined as ownership control by members of a family strategic influence of a family in the management of the firm concern for family relationship the dream of continuity across generation
• • • • • Degree of open mindedness New Practices Impartial HRM Organization Decision making style
Role of Woman Entrepreneur
Reasons why women have started looking towards entrepreneurial careers in today’s time:
• Limited job opportunities • Pressing need to earn income to supplement the family income due to the high cost of living • Social pressure of increasing standard of living • Utilization of spare time • Self esteemed need • Increasing socio-economic awareness • Impact of role models in industry and business • Constant motivation by government institutions • Impact of media • Attractive incentive, subsidies and schemes
• Health clubs • Job contract for packaging goods • Mini Laundry. dress materials. etc.Opportunities for Women Entrepreneurs • • • • • • • • • Beauty Parlors Communication Centers Community Kitchens Computer maintenance Computer services and information dissemination Computer training at various levels Crèches Culture centers Distribution and trading of household provisions as well as saris. community eating centre And many more………………… .
Role of Women Entrepreneurs • • • • • Desire to serve others Needs in community Self-Actualization Desire to achieve change Other .
VC is a fund which is managed by class of people / organizations that support stimulate and sustain entrepreneurship by way of providing for equity capital at different stages of a venture depending upon their fund requirements and growth aspirations. .Venture Capital: Nature & Overview Venture Capital (VC) is one of the many ways in which a growth-oriented venture can obtain funds in exchange for certain equity in the venture.
Venture Capital: Nature & Overview Venture capitalists provide funds and at the same time support to the extent of Being like a business partner-sharing the risks & rewards Being like mentor VC is different from other type of financing as in following: • Development Finance • Seed capital • Term Loan • Passive equity investment support • R&D funding sources .
5 % PA To obtain returns from this fund. The asset management company (AMC) manages the investments for the trust and charges the fund an annual operating cost of approx. When 4 out of 20 succeed in expected manner.Venture Capital Process The venture capital model typically works by way of an investment made by investors in an fund (Trust). 4 will succeed and 6 may do okay. 2. adding value to the companies they fund. The upside of this whole equation is shared between the AMC and investors approx. This fund has a fixed time period of 5+2 years. The venture capital funds do not shy away from risk but manage them by way of a balanced portfolio of investments. a venture fund may invest in up to 20 companies out of which 10 would fail. the AMC invests in several companies. . All new ventures are high risked. That is why the expectations of a VC fund are of gaining the typical 300-400 % ROI in each venture. the fund is able to obtain more than type of returns that they had in mind while investing. 25:75 subject to minimum invested return. coaching. Typically.there is a significant chance of loss. focusing on the people and the ideas and mentoring.
At the same time. .Locating Venture Capitalists The spread of VC firms in India is not confirmed to one specific location but are located mostly in large metropolitans type of locations. there are global firms in this league that operate in India also.
Thank you .