Entrepreneurship

Prof. Suvarna. Vijayakumar. Nimbagal.

Assistant Professor
Hubballi
Entrepreneurship –driver of economic development
Entrepreneurial Opportunities
• Those situations in which new goods, services, raw
materials, and organizing methods can be introduced
and sold at greater than their cost of production.

• Entrepreneurial action :
Action through the creation of new products/ processes
and/or the entry into new markets, which may occur
through a newly created organization or within an
established organization.
McMullen-Shepherd model : Entrepreneurial action
• As illustrated in Figure the McMullen-Shepherd model explains how knowledge and
motivation influence two stages of entrepreneurial action.
• Signals of changes in the environment that represent possible opportunities will be noticed
by some individuals but not others.
• Individuals with knowledge of markets and/or technology are more capable of detecting
changes in the external environment, and if they are also motivated, they will allocate further
attention to processing this information.
• The result of Stage 1 is an individual’s realization that an opportunity exists for someone.
• The individual then needs to determine whether it represents an opportunity for him/her
(Stage 2).
• This involves assessing whether it is feasible to successfully exploit the opportunity given
one’s knowledge and whether it is desirable given one’s motivation.
• In other words, does this opportunity for someone (third-person opportunity belief)
represent an opportunity for me (first-person opportunity belief)?
• Therefore, to be an entrepreneur is to act on the possibility that one has identified
an opportunity worth pursuing.
Entrepreneurial Action

McMullen-Shepherd model
 How entrepreneurs think?
• Entrepreneurs think differently from non-entrepreneurs.
• Entrepreneurs must often make decisions in highly uncertain environments.
• We all think differently in strained environments.
• Given the nature of an entrepreneur’s decision-making environment, he or
she must sometimes
(1) Think structurally-knowledge, structural matches between a technology and
a target market.
(2) Engage in bricolage: creation from a diverse range of available things
(3) Effectuate: A logic of thinking
(4) Cognitively adaptability: describes the extent to which entrepreneurs are
dynamic, flexible, self-regulating, and engaged in the process of generating
multiple decision
 How cognitively adaptable are you?
Mike Haynie’s “Measure of Adaptive Cognition”
Entrepreneurs who are able to increase cognitive adaptability have an
improved ability to
(1) adapt to new situations
(2) be creative: it can lead to original and adaptive ideas, solutions, or
insights; and
(3) communicate one’s reasoning behind a particular response.
The intension to act entrepreneurially
• Entrepreneurs intend to pursue certain opportunities, enter
new markets, and offer new products.
• Entrepreneurial intentions -The motivational factors that
influence individuals to pursue entrepreneurial outcomes.
• Entrepreneurial self-efficacy-The conviction that one can
successfully execute the entrepreneurial process.
• Perceived Desirability -The degree to which an individual has
a favorable or unfavorable evaluation of the potential
entrepreneurial outcomes
Entrepreneur
• An entrepreneur is an individual who creates a new
business, bearing most of the risks and enjoying
most of the rewards.
• The process of setting up a business is known as
entrepreneurship.
• The entrepreneur is commonly seen as an innovator, a
source of new ideas, goods, services, and
business/or procedures.
 WHAT IS ENTREPRENEURSHIP?

• The process of designing, launching and running a new

business.
Sustainable entrepreneurship
• Entrepreneurship focused on preserving nature, life support,
and community (sustainability) in the pursuit of perceived
opportunities to bring future products, processes, and
services into existence for gain (entrepreneurial action)
where the gain is broadly construed to include economic and
noneconomic benefits to individuals, the economy, and
society (development).
Entrepreneurial Mindset
• The entrepreneurial mindset is the attitude someone has to
build a business.
• It means having an open mind, questioning everything, and
being resilient.
• Entrepreneurs need to be OK with failure.
Types of Entrepreneurs
Entrepreneurial origin
New Entrepreneurial Origins: examples
Indian Unicorn
CHARACTERISTICS OF A SUCCESSFUL ENTREPRENEUR
• RISK TAKER
• Entrepreneurs are risk-takers, ready to dive dip into the future of
uncertainty.
• Successful entrepreneurs are willing to risk their time and money on
unknowns, but they also keep resources and plans for dealing with
them.
• SELF-BELIEF, HARD WORK, AND DISCIPLINED DEDICATION
• Entrepreneurs believe in themselves and are confident and dedicated
to their projects.
• Their intense focus on and faith in their idea may be misconstrued as
stubbornness, but it is this willingness to work hard and defy odds that
make them successful.
CHARACTERISTICS OF A SUCCESSFUL ENTREPRENEUR

• Curiosity
• Adaptability
•  Decisiveness
• Team building
• Comfortable with Failure
• Innovation
• Long-term focus
CREATIVITY , INVENTION AND
INNOVATION
CREATIVITY, INVENTION, AND INNOVATION
• Creativity is the act of turning new and imaginative ideas into reality.
•  It is the very first stage of design, where ideas start to actually take form, and a plan can
be developed.
Examples: in the case of Uber, creativity was necessary for producing the concept of ride-
sharing.
• Creativity, invention, and innovation are all interrelated and necessary for growth to
occur.
• Invention is the creation of a new idea or concept.
Examples: product designs, business models, or working prototypes.
• Innovation is the process of turning a new concept into commercial success or
widespread use.
• Innovation ties everything together in business.
• Innovation is the successful exploitation of new ideas.
Innovation
• Innovation is the key to the economic development of any company, region of a country, or
the country itself.
• Inventions and innovations are the building blocks of the future of any economic unit.
• Types of Innovation
• There are various levels of the degree of innovation based on the uniqueness of the idea.
• Breakthrough innovation: Given that they are often the basis for further innovation in an
area, these innovations are usually protected by strong patents, trade secrets, and/or
copyrights. Breakthrough innovations include such ideas as penicillin, the steam engine,
the computer, the airplane, the automobile, and the Internet.
• Technological innovation:—occurs more frequently than breakthrough innovation and in
general is not at the same level of scientific discovery and advancement.
• Ordinary innovation: more numerous innovations usually extend an existing innovation
into a better product or service
Business Idea
Sources of new ideas
• Consumers
• Existing Products and Services
• Sam Walton, founder of Walmart, would frequently visit competitive stores focusing not on
what the competitive store did badly, but rather on what they did very well, so he could
implement a version of these ideas at Walmart.
• Distribution Channel
• Members of the distribution channels are also excellent sources for new ideas reflecting
their familiarity with the needs of the market. Not only do channel members frequently
have suggestions for completely new products, but they can also help in marketing the
entrepreneur’s newly developed products.
• Government
• The government can also be a source of new product ideas,
• new product ideas can evolve in response to government regulations.
• The Occupational Safety and Health Act (OSHA) mandated that first-aid kits be available in
business establishments employing more than three people.
 Business Idea, Opportunities through change
• SOURCES OF IDEAS
• Research and Development
• The largest source of new ideas is the entrepreneur’s own “research and
development” efforts, which may be a formal endeavor connected with one’s
current employment or an informal one.
 Methods of idea generation
• Focus group
• In a focus group, a moderator leads a group
of people through an open, in-depth
discussion rather than simply asking
questions to solicit participant responses.
• The group of frequently 8–14 participants is
stimulated by comments from each other in
creatively conceptualizing and developing a
new product/service idea to fill a market
need.
• In addition to generating new ideas, the focus
group is an excellent method for initially
screening ideas and concepts.
 Brainstorming
• A group method for obtaining new ideas and solutions
• The brainstorming method stimulates people to be creative
by meeting with others and participating in an organized
group experience.
• Although most of the ideas generated by the group have no
basis for further development, sometimes a good idea
emerges.
• When using brainstorming, four rules need to be followed:
• 1. No criticism is allowed by anyone in the group.
• 2. Freewheeling is encouraged—the wilder the idea, the
better.
• 3. Quantity of ideas is desired
• 4. Combinations and improvements of ideas are
encouraged; ideas of others can be used to produce still
another new idea.
Brainwriting
• giving participants more time to think than in a
brainstorming session, where the ideas are expressed
spontaneously.
• Brainwriting is a silent, written generation of ideas by a
group of people.
• The participants write their ideas on special forms or
cards that circulate within the group, which usually
consists of six members.
• Each group member generates and writes down three
ideas during a five-minute period.
• The form is passed on to the adjacent person who writes
down three new ideas, and so on until each form has
passed all participants.
• Participants can also be spread geographically with the
sheets rotated electronically.
Problem inventory analysis
• A method for obtaining new ideas and
solutions by focusing on a problem.
• Consumers are given a list of problems in a
product category and then asked to find
the problems as per the list.
Opportunity recognition process
Opportunity Recognition
• Recognizing an opportunity often results from the knowledge and experience
of the individual entrepreneur.
• This prior knowledge is a result of a combination of education and experience,
and the relevant experience could be work-related or could result from a
variety of personal experiences or events.
• The entrepreneur needs to be aware of this knowledge and experience and
have the desire to understand and make use of it.
• The other important factors in this process are entrepreneurial alertness and
entrepreneurial networks.
• There is an interaction effect between entrepreneurial alertness and the
entrepreneur’s prior knowledge of markets and customer problems.
• Those entrepreneurs who have the ability to recognize meaningful business
opportunities are in a c position to successfully complete the product planning
and development process and successfully launch new ventures
 Need for entrepreneurship 
1.Encourages Innovation
• A majority of entrepreneurs solve challenges in society through technological innovations. For example,
TartanSense—a Bangalore-based startup provides an AI-based Robot vehicle to be used in farms for weed
management. It reduces chemical usage and helps farmers avoid unnecessary costs.
2.Creates Jobs
• Entrepreneurship generates employment
3. Improves Standard Of Living
• Entrepreneurship increases income levels, therefore improving standards of living.
• Entrepreneurs identify challenges in the lives of customers and provide appropriate business solutions.
• Hire new employees who receive remuneration and this income gets circulated in the economy.
4.Introduces Visible Change
• solving existing challenges and gaps in society, impacts various sections of society. A majority of businesses strive
to make the world a better place by contributing to socio-economic development through their products and
services.
5.Contributes To Research And Development
• New products and services need to be tested before they can be launched.
• In the process, entrepreneurs are encouraged to invest their resources into effective research and development.
Entrepreneurial traits
Entrepreneurs and Economic Growth

• Innovation and entrepreneurs undeniably contribute to economic

growth and they are a particular area of concern for policymakers.
• Growth from the entrepreneurial activity doesn't occur evenly across
sectors of the economy.
• Studies of economic growth have pointed towards an apparent paradox
where productivity growth has been “at best modest in recent years,”
despite the pervasiveness of innovation, entrepreneurs, and innovation
ideology.
• According to research from the National Bureau of Economic Research,
this is because innovation affects industries very differently, meaning
that it has a large impact on the growth of some sectors of the economy
but not across all sectors.
The product planning and Development
process
PRODUCT PLANNING AND DEVELOPMENT
PROCESS
• The stages in developing a new product
• Once ideas emerge, they need further development and refinement.
• This refining process— the product planning and development process
—is divided into five major stages:
• Idea stage,
• concept stage,
• product development stage,
• test marketing stage, and
• commercialization, which starts the product life cycle
 Establishing evaluation criteria
• At each stage of the product planning and development process, criteria for evaluation need to
be established.
• These criteria should be all-inclusive and quantitative enough to screen the product carefully in
the particular stage of development.
• So a go forward or stop the decision process can be made.
• Criteria should be established to evaluate the new idea in terms of market opportunity,
competition, the marketing system, and financial and development factors.
• A market opportunity in the form of a new or current need for the product/service idea needs
to exist.
• The determination of market demand is by far the most important criterion of a proposed new
product idea.
• Assessment of the market opportunity and size needs to consider the characteristics and
attitudes of consumers or industries that may buy the product, the size of this potential market
in dollars and units, and the nature of the market with respect to its stage in the life cycle
(growing or declining), and the share of the market the product could reasonably capture.
• Competing products/services, prices, and marketing efforts should also be evaluated,
particularly in terms of their impact on the probable market share of the proposed idea
• The new idea should be able to compete successfully with products/services already
on the market by having features that will meet or be better than the current and
anticipated competition. The new idea should have some unique selling propositions
when compared to the competitive products/services filling the same consumer
needs.
• The proposed product/service idea should be able to be supported by and contribute
to the company’s sales and profits. The manufacturing cost per unit, the marketing
expense, and the amount of capital need to be determined along with the break-
even point and the long-term profit outlook for the product. The compatibility of the
new product/service production requirements with the existing plant, machinery,
and personnel should also be evaluated.
• Entrepreneurs need to be concerned with formally evaluating an idea throughout its
evolution. Care must be taken to be sure the idea can be the basis for a new venture.
This can be done through careful evaluation that results in a go or no-go decision at
each of the stages of the product planning and development process: the idea stage,
the concept stage, the product development stage, and the test marketing stage
Idea stage
• First stage in the product development process
• the need determination should focus on the type of need, its timing, the users
involved with trying the product/service, the importance of controllable
marketing variables, the overall market structure, and the characteristics of the
market.
• Each of these factors should be evaluated in terms of the characteristics of the
new idea being considered and the aspects and capabilities of present methods
for satisfying the particular need.
• This analysis will indicate the extent of the opportunity available.
• In the determination of the value of the new product/service to the firm,
financial scheduling—such as cash outflow, cash inflow, contribution to profit,
and return on investment—needs to be evaluated in terms of other
product/service ideas as well as investment alternatives. T
 Concept stage
• After a new product/service idea has passed the evaluation criteria in the idea stage, it should
be further developed and refined through the interaction with consumers.
• In the concept stage, the refined idea is tested to determine consumer acceptance.
• Initial reactions to the concept are obtained from potential customers or members of the
distribution channel when appropriate.
• One method of measuring consumer acceptance is the conversational interview in which
selected respondents are exposed to statements that reflect the physical characteristics and
attributes of the product/service idea.
• Where competing products (or services) exist, these statements can also compare their
primary features.
• Favorable, as well as unfavorable product features, can be discovered by analyzing consumers’
responses, with the favorable features than being incorporated into the new product/service.
• Features, price, and promotion should be evaluated for both the concept being studied and
any major competing products by asking the following questions :
• How does the new concept compare with competitive products/services in terms of quality
and reliability? Is the concept superior or deficient compared with products/services currently
 Product development stage
• In the product development stage, consumer reaction to the physical product/service
is determined.
• One tool frequently used in this stage is the consumer panel, in which a group of
potential consumers is given product samples.
• Participants keep a record of their use of the product and comment on its virtues and
deficiencies.
• This technique is more applicable for product ideas and works for only some service
ideas
• The panel of potential customers can also be given a sample of the product and one or
more competitive products simultaneously.
• Then one of several methods—such as multiple brand comparisons, risk analysis, level
of repeat purchases, or intensity of preference analysis—can be used to determine
consumer preference
Test marketing stage
• Although the results of the product development stage provide the basis
of the final marketing plan, a market test can be done to increase the
certainty of successful commercialization.
• This last step in the evaluation process, the test marketing stage,
provides actual sales results, which indicate the acceptance level of
consumers. Positive test results indicate the degree of probability of a
successful product launch and company formation
 E- commerce and business start up
• Throughout the evaluation process of a potential new idea as well as in the
development of its marketing strategy, the role of e-commerce needs to be
continually assessed.
• E-commerce offers the entrepreneur the opportunity to be very creative and
innovative.
• Its increasing importance is indicated in the increasing amount of both business-to-
business and business-to-consumer e-commerce sales.
• Factors that facilitated the high growth of commerce on a business-to-consumer or
business-to-business basis include widespread use of personal computers, the
adoption of intranets in companies, the acceptance of the Internet as a business
communications platform, and faster and more secure systems.
• Numerous benefits—such as access to a broader customer base, lower information
dissemination costs, lower transaction costs, and the interactive nature of the
Internet—will continue to expand the volume of e-commerce.
Functions of successful entrepreneurs
Functions of an Entrepreneur:-
1.  Decision Making: The primary task of an entrepreneur is to decide the
policy of production.  He is to decide the scale of production and the
proportion in which he combines the different factors he employs.

2.  Management Control: Management and control of the business are

conducted by the entrepreneur himself. 

3.  Division of Income: He has to take decisions regarding the distribution

of income among different factors of production.
 
4. Risk-Taking: To succeed in business, he has to face various kinds of risks. 
5. Innovation: To increase their income, he has to make frequent
innovation. 
The importance of entrepreneurs in economic growth
Capital Formation, Improvement in Per Capita Income, Generation of Employment, and
a Few Others
Economic development essentially means a process of upward change whereby the real per capita
income of a country increases over a period of time. The entrepreneur plays a vital role in economic
development. Entrepreneurs serve as the catalysts in the process of industrialization and economic
growth. Technical progress alone cannot lead to economic development unless technological
breakthroughs are put to economic use by entrepreneurs.
Entrepreneurs initiate and sustain the process of economic development in the
following ways:
1. Capital Formation:
Entrepreneurs mobilize the idle savings of the public through the issues of industrial securities.
Investment of public savings in industry results in productive utilization of national resources. Rate of
capital formation increases which is essential for rapid economic growth. Thus, an entrepreneur is
the creator of wealth.
2. Improvement in Per Capita Income:
Entrepreneurs locate and exploit opportunities. They convert latent and idle resources like
land, labor, and capital into national income and wealth in the form of goods and services. They
help to increase net national product and per capita income in the country, which are important
yardsticks for measuring economic growth.
3. Generation of Employment: Entrepreneurs generate employment both
directly and indirectly. Directly, self-employment as an entrepreneur offers the
best way for an independent and honorable life. Indirectly, by setting up large and
small-scale business units they offer jobs to millions. Thus, entrepreneurship helps
to reduce the unemployment problem in the country.
4. Balanced Regional Development:
• Entrepreneurs in the public and private sectors help to remove regional
disparities in economic development. They set up industries in backward
areas to avail of various concessions and subsidies offered by the central and state
governments.
• Public sector steel plants and private sector industries have put unknown places
on the international map.
5. Improvement in Living Standards:
• Entrepreneurs set up industries that remove scarcity of essential commodities
and introduce new products. Production of goods on a mass scale and
manufacture of handicrafts, etc., in the small scale sector help to improve the
standards of life of a common man. These offer goods at lower costs and increase
variety in consumption.
. 6. Economic Independence:
• Entrepreneurship is essential for national self-reliance. Industrialists help to
manufacture local substitutes for imported products thereby reducing dependence on
foreign countries. Businessmen also export goods and services on a large scale and
thereby earn scarce foreign exchange for the country.
• Such import substitution and export promotion help to ensure the economic
independence of the country without which political independence has little meaning.
• 7. Backward and Forward Linkages:
• An entrepreneur initiates change which has a chain reaction. Setting up of an
enterprise has several backward and forward linkages. For example- the establishment
of a steel plant generates several ancillary units and expands the demand for iron ore,
coal, etc.These are backward linkages.
• By increasing the supply of steel, the plant facilitates the growth of machine building,
tube making, utensil manufacturing, and other units.
• Entrepreneurs create an atmosphere of enthusiasm and convey a sense of purpose.
They give an organization its momentum. Entrepreneurial behavior is critical to the
long-term vitality of every economy. The practice of entrepreneurship is as important to
established firms as it is to new ones.
 Entrepreneurship as a career.
• Today, entrepreneurship has become one of the significant career choices
being pursued by the youth because of the following reasons:
• The ambition to create and execute a business plan from scratch
• The desire to be their own boss and master of their fate
• The motivation to take risks in a changing global economy where several
opportunities lie unexplored
• The aim to be financially prosperous and take their growth trajectory to
unprecedented, new heights
• it needs to be understood that successful entrepreneurship is not just about
pursuing novelty.
• It is about ideation that helps solve a pertinent issue and has a market and a
customer - the potential to be sold for profit.
• Being an entrepreneur teaches life skills, generates creativity and problem-solving skills,
provides a better understanding of markets and economics, and enhances teamwork,
communication, networking, and brings about a never-say-die attitude.
• Failing at entrepreneurship is a learning experience in itself. It will not be apt to think that
every entrepreneur gets rich although if one learns to face challenges and counter failure,
entrepreneurship could be the gateway to limitless earning potential.
• Most jobs have a capped salary – entrepreneurship is just the opposite.
• The entrepreneurial skill set that one develops isn’t only limited to business but
entrepreneurial skills are transferable to almost all spheres of life and careers.
• Entrepreneurs become adept at skills like time management, delegation, perseverance,
critical, analysis, and much more.
• Today, developed economies are moving from ‘managerial’ to ‘entrepreneurial’ economies.
• As an emerging economy, India is witnessing the growth of entrepreneurship like never
before and is therefore ensuring that entrepreneurship is embraced as a career choice by
youth.
• Entrepreneurial careers could be varied from being a first-time entrepreneur to a serial
entrepreneur, an angel investor, a partner in a firm, a corporate entrepreneur, an educator, or
a mentor.
The Revenue Model Matching Game

• Match businesses with a revenue model below. 

Course project : Assignment 1
1. Interview a successful entrepreneur and discuss the
• Characteristics of a successful entrepreneur.
• Mind set of a successful entrepreneur.
• Functions of a successful entrepreneur.
• The process of entrepreneurship: from the idea stage to the
commercialization stage
2. Make an exhaustive report of the above.
Module 2
• Evolution and Theories of Entrepreneurship:
• Innovation Theory by Schumpeter & Imitating,
• Theory of High Achievement by McClelland,
• X-Efficiency Theory by Leibenstein,
• Theory of Profit by Knight,
• Theory of Social Change by Everett Hagen,
• Effectuation theory of entrepreneurship,
1. Innovation Entrepreneurship theory

• What makes entrepreneurs different from normal

businessmen is finding innovative solutions and having
foresight.
• Joseph Alois Schumpeter, one of the greatest economists,
put forth the well-known innovative theory which changed
the entrepreneur’s perspective.
• According to Schumpeter, entrepreneurs take the stationary
economy to a new level of development by adding
innovation and creativity of their own.
• Schumpeter also stated that entrepreneurs bring innovation
in two ways namely:
1.By reducing the cost of production
2.By increasing the demand for products
•  He distinguished five types of innovation:
•  (i) a new good,
• (ii) a new method of production,
• (iii) a new market,
• (iv) a new source of supply of raw materials, and
• (v) a new organization of any industry (or market).
 2. Theory of High Achievement by McClelland
• Harvard psychologist David McClelland developed the Achievement Motivation Theory in his book entitled The
Achieving Society in 1967.
• McClelland sought to explain why some societies are more economically successful than others.
• For answers, he looked at the entrepreneurial behaviors of individuals, which he thought were key to the
development of all economies.
• According to McClelland, entrepreneurs do things in a new and better way and make decisions under
uncertainty.
• Entrepreneurs are characterized by a need for achievement or an achievement orientation, which is a drive to
excel, advance, and grow.
• Need for achievement
• The need for achievement contrasts with the need for power—that is, a drive to dominate others in all
situations, and with the need for affiliation—that is, a drive for close personal relationships.
• power and affiliation may help with achievement and can thus be considered valuable means or resources
that can help to satisfy the need for achievement.
• McClelland believed that an achievement orientation develops during middle childhood through
family socialization emphasizing high standards, self-reliance, and less dominant fathers.
• It shows in behaviors such as problem-solving, feedback seeking, goal attainment, and risk-taking.
• McClelland argued that the need for achievement is partially culturally determined with some societies
producing fewer individuals with achievement orientations.
• Societies lacking achievement-oriented individuals are expected to have lower average incomes.
3. X-Efficiency Theory by Leibenstein,
• X-Efficiency refers to the behavior, performance, and efficiency that traders and firms
maintain in imperfect competition.
• In perfect market competition, elements of monopoly do not exist in the market and the
prices of commodities are not controlled by individuals.
• Under perfect competition, firms and individuals are able to exhibit efficiency to the full
potential which in turn causes them to make profits.
• In imperfect competition, the market structure tilts towards monopolistic competition
and exhibits some features of competitive markets.
• The x-efficiency theory evaluates how the inefficiency of individuals and firms is linked
to imperfect competition.
• In 1966, Harvey Leibenstein introduced the x-efficiency theory.
• This theory focuses on how efficiency is maintained by individuals and
firms under imperfect competition.
• The degree of competition and the effects of competitive pressure on
individuals and firms determine how efficient or inefficient they would
be.
• According to Leibenstein, unit costs are significantly influenced by x-
efficiency.
• Although, the x-efficiency theory evaluates the level at which
efficiency is maintained by individuals and firms under imperfect
competition, there are certain drawbacks to the concept.
• The x-efficiency theory is regarded as a controversial theory because it
provokes a popular economic theory; utility-maximizing behavior.
 4. Theory of Profit by Knight
• The Knight’s Theory of Profit was proposed by Frank. H. Knight,
believed profit is a reward for uncertainty-bearing, not risk-bearing.
• Knight had made a clear distinction between risk and uncertainty. The
risk can be classified as a calculable and non-calculable risk.
• The calculable risks are those whose probability of occurrence can be
anticipated through statistical data. Such as risks due to fire, theft, or
accident are calculable and hence can be insured in exchange for a
premium. Such an amount of premium can be added to the total cost of
production.
• While the non-calculable risks are those whose probability of occurrence
cannot be determined. Such as the strategies of a competitor cannot be
accurately assessed as well as the cost of eliminating the completion
cannot be precisely calculated.
• Thus, the risk element of such events is not insurable. This incalculable
area of risk is uncertainty.
• Due to the uncertainty of events, decision-making becomes a crucial
function of an entrepreneur.
• If the decisions prove to be correct by the subsequent events, an
entrepreneur makes a profit and vice-versa.
• Thus, Knight’s theory of profit is based on the premise that profit arises
out of the decisions made under the conditions of uncertainty.
• Knight believes that profit might arise out of the decisions made
concerning the state of the market, such as decisions with respect to
increasing the degree of monopoly in the market, decisions regarding
holding stocks that might result in gains, decisions taken to introduce
new products and techniques, etc.
• The major criticism of the knight’s theory of profit is, that the total
profit of an entrepreneur cannot be completely attributed to
uncertainty alone.
• There are several functions that also contribute to the total profit such
as innovation, bargaining, coordination of business activities, etc.
 5. Theory of social change by Everett Hagen
• Economic development is seen almost exclusively as a process of technological
change which is brought about by the technological creativity of individuals in
society.
• Thus, Everett Hagen sees the entrepreneur as a creative problem solver interested in
things in the practical and technological realm and driven by a duty to achieve.
• The theory of social change by Everett Hagen is described below:
• Theory of social change by Everett Hagen
• Hagen postulates that the sequence of changes separating the typical authoritarian
personality of a stable traditional society from the emergence, many decades later,
of creative entrepreneurial activity is as follows:
Theory of social change by Everett Hagen
 6. Effectuation principles: a theory for entrepreneurs
Effectuation is a process theory that explains the process that entrepreneurs use to create new
ventures.
When looking at ways to create value for a business, entrepreneurs have the choice between ways
of thinking: causal (or predictive) thinking and effectual thinking (or effectuation). Both
approaches are valid, as they solve different problems.
Causal thinking means setting a goal and then acquiring the resources needed to achieve it.
Causal thinkers believe that “If I can predict the future, I can control it.”
Effectuation unsettles traditional business planning and teaches another way of thinking.
According to this theory, it’s impossible to predict the future.
Effectual thinkers believe that “If I can control the future, I don’t need to predict it.”
• It’s the act of bringing things to action – making things happen.
• The entrepreneurs prefer to shape the future, rather than predict it.
• The research revealed that they use the following five principles:
1) Start with your means. Don’t wait for the perfect opportunity. Start
taking action based on what you have readily available: Who you are, what
you know, and who you know.
2) Set affordable losses. Limit risk by spending only what you can afford
to lose at each step.
3) Leverage contingencies. Embrace bad news and surprises that arise
from uncertain situations, and try to use them to create new opportunities.
4) Form partnerships. Collaborate with people and organizations willing
to make a real commitment to jointly creating the future— product, firm,
market—with you. These are your self-selected stakeholders. Don’t worry
so much about competitive analysis and strategic planning.
5) Control the controllable. By focusing on activities within their control,
expert entrepreneurs know their actions will result in the desired outcomes.
Believe that the future is neither found nor predicted, but rather made.
• Social entrepreneurship, commonly defined as
“entrepreneurial activity with an embedded social purpose”
has become an important economic phenomenon at a global
scale.
• some of the most striking social entrepreneurship
innovations originate from developing countries and involve
the deployment of new business models that address basic
human, such as the provision of low-cost cataract surgeries to
cure blindness or the deployment of sanitation systems in
rural villages
 Case Study Analysis
• Identification of the issues and problems confronting the
company
• Analysis of industry conditions and the company’s
situation
• Development of a thorough, well-thought-out action
plan.
Assignment 1
• Write in detail about the following theories of entrepreneurship
• Effectuation principles: a theory for entrepreneurs
• Theory of social change by Everett Hagen
Module 3
• Venture Process: Opportunity sensing and idea generation,
• Environmental assessment,
• marketing plan,
• organizational plan and financial plan,
• Sources of finance and financial planning,
• business plan,
• entrepreneurial growth strategies,
• franchising, stalling,
• sickness and revival, and exiting the venture
Venture process
1. Business opportunity
2. Exploring opportunities in the environment
3. Factors involved in securing opportunities
4. Environmental Factors
5. Marketing plan,
6. Organizational plan and financial plan,
7. Sources of finance and financial planning,
8. Business plan,
9. Entrepreneurial growth strategies,
Venture process
1. Business Opportunity:
• Business opportunity can be described as an economic idea which can
be implemented to create a business enterprise and earn profits.
Elements of Business opportunity:
• Assured market scope,
• An attractive and acceptable rate of return on investment,
• Practicability to encash it,
• Competence of the entrepreneur to encash it,
• Potential for future growth.
2. Exploring opportunities in the environment
• Opportunity spotting by analyzing the needs and problems that exist in the
environment,
• Evaluating the ideas received from different sources to find a creative
solution.
• Identifying a product or service through innovation.
3. Factors involved in securing opportunities
– Ability to perceive ideas which could be used commercially,
– Ability to harness different sources of information,
– Vision and creativity.
Various sources that lead to the ideas
• Problem • Change • Inventions • Competition • Innovation
• Analysis of the environment
– information from customers, wholesalers, retailers, distribution
consultants, etc.
– Record of companies,
– Government publications,
– Publications by various financial institutions,
– Formal studies conducted by strategic planners.
4. Environmental Factors
– Internal Factors (Microenvironment),
– External Factors (Macro environment).
• PESTEL Model
• Political
• Economic
• Social
• Technological
• Ecological
• Legal
• Sources of business ideas
• Examining the entrepreneurial skill set required for a business idea.
• Keep track of current events and be ready to take advantage of business
opportunities,
• Invent a new product or service
• Add value to an existing product
• Investigate other markets
• Improve an existing product or service.
• Steps involved in the idea and opportunity assessment:
• Product identification
• Application and use
• Cost
• Competition
• Technical complexity
• Annual turnover and profit margin
Business plan
• The business plan is a written document prepared by the entrepreneur that
describes all the relevant external and internal elements involved in
starting a new venture.
• It is often an integration of functional plans such as marketing, finance,
manufacturing, and human resources.
• According to Steve Hafner the business plan must address the integration
and coordination of effective business objectives and strategies
• It also addresses both short-term and longterm decision making for the
first three years of operation.
• Thus, the business plan or the game plan or road map—answers the
questions, Where am I now? Where am I going? and How will I get there?
• Potential investors, and suppliers require a business plan
WHO SHOULD WRITE THE PLAN?
• The business plan should be prepared by the entrepreneur;
• however, he or she may consult with many other sources in its
preparation.
• Lawyers, accountants, marketing consultants, and engineers are useful
in the preparation of the plan.
• the Internet also provides a wealth of information as well as actual
sample templates or outlines for business planning.
• To help determine whether to hire a consultant or to make use of other
resources, the entrepreneur can make an objective assessment of his or
her own skills.
• Table is an illustration of a rating to determine what skills are lacking
and by how much.
SCOPE AND VALUE OF THE BUSINESS PLAN—
• The business plan may be read by employees, investors, bankers,
venture capitalists, suppliers, customers, advisors, and
consultants.
• Since each of these groups reads the plan for different purposes,
the entrepreneur must be prepared to address all their issues
and concerns.
• The business plan must try to satisfy the needs of everyone,
whereas in the actual marketplace the entrepreneur’s product
will be trying to meet the needs of selected groups of customers.
 Three perspectives- preparing a BP
• First is the perspective of the entrepreneur, who understands better than
anyone else the creativity and technology involved in the new venture.
• The entrepreneur must be able to clearly articulate what the venture is
all about.
• Second is the marketing perspective. Too often, an entrepreneur will
consider only the product or technology and not whether someone would
buy it.
• Entrepreneurs must try to view their business through the eyes of their
customers.
• Third, the entrepreneur should try to view his or her business through the
eyes of the investor. Sound financial projections are required; if the
entrepreneur does not have the skills to prepare this information, then
outside sources can be of assistance.
Outline of
Business Plan
Outline of a BP
• I. Introductory Page
• A. Name and address of the business
• B. Name(s) and address(es) of principal(s)
• C. Nature of business
• D. Statement of financing needed
• E. Statement of confidentiality of the report
• II. Executive Summary—Two to three pages summarizing the complete business plan
• III. Industry Analysis
• A. Future outlook and trends
• B. Analysis of competitors
• C. Market segmentation
• D. Industry and market forecasts
• IV. Description of Venture
• A. Product(s) B. Service(s) C. Size of business D. Office equipment and personnel E. Background of the
entrepreneur(s)
• V. Production
• Plan A. Manufacturing process (amount subcontracted) B. Physical plant C. Machinery and equipment D.
Names of suppliers of raw material
• VI. Operations Plan
• A. Description of company’s operation B. The flow of orders for goods and/or
services C. Technology utilization
• VII. Marketing Plan
• A. Pricing B. Distribution C. Promotion D. Product forecasts E. Controls
• VIII. Organizational Plan
• A. Form of ownership B. Identification of partners or principal shareholders C.
Authority of principals D. Management team background E. Roles and
responsibilities of members of the organization.
• IX. Assessment of Risk
• A. Evaluate the weakness(es) of business B. New technologies C. Contingency plans
• X. Financial Plan
• A. Assumptions B. Pro forma income statement C. Cash flow projections D. Pro
forma balance sheet E. Break-even analysis F. Sources and applications of funds
• XI. Appendix (contains backup material)
• A. Letters B. Market research data C. Leases or contracts D. Price lists from suppliers
I. Introductory Page
• This is the title or cover page that provides a brief summary of the business plan’s
contents.
• The introductory page should contain the following:
• The name and address of the company.
• The name of the entrepreneur(s), telephone number, fax number, e-mail address,
and Web site address if available.
• A paragraph describing the company and the nature of the business.
• The amount of financing needed.
• A statement of the confidentiality of the report.
• This title page sets out the basic concept that the entrepreneur is attempting to
develop.
• Investors consider it important because they can determine the amount of
investment needed without having to read through the entire plan.
 II. Executive summary
• This section of the business plan is prepared after the total plan is written.
• About two to three pages in length, the executive summary should
stimulate the interest of the potential investor.
• This is a very important section of the business plan and should not be
taken lightly by the entrepreneur since the investor uses the summary to
determine if the entire business plan is worth reading.
• It should highlight in a concise and convincing manner the key points in the
business plan.
• Generally the executive summary should address :
• What is the business concept or model?
• How is this business concept or model unique?
• Who are the individuals starting this business?
• How will they make money and how much?
 III. Environmental analysis
• Assessment of external uncontrollable variables that may impact the business plan
• Environmental and Industry Analysis It is important to put the new venture in a proper context by first
conducting an environmental analysis to identify trends and changes occurring on a national and
international level that may impact the new venture.
Examples of these environmental factors are:
• Economy. The entrepreneur should consider trends in the GNP, unemployment by geographic area,
disposable income, and so on.
• Culture. An evaluation of cultural changes may consider shifts in the population by demographics, for
example, the impact of the baby boomers or the growing elderly population. Shifts in attitudes, such as
“Buy American,” or trends in safety, health, and nutrition, as well as concern for the environment, may all
have an impact on the entrepreneur’s business plan.
• Technology. Advances in technology are difficult to predict. However, the entrepreneur should consider
potential technological developments determined from resources committed by major industries or the
U.S. government. Being in a market that is rapidly changing due to technological development will require
the entrepreneur to make careful short-term marketing decisions as well as to be prepared with
contingency plans given any new technological developments that may affect his or her product or service.
• Legal concerns. There are many important legal issues in starting a new venture. The entrepreneur should
be prepared for any future legislation that may affect the product or service, the channel of distribution,
price, or promotion strategy.
• Industry analysis
• Reviews industry trends and competitive strategies
• Industry demand- Demand, as it relates to the industry, is often available
from published sources.
• Knowledge of whether the market is growing or declining, the number of
new competitors, and possible changes in consumer needs are all
important issues in trying to ascertain the potential business that might be
achieved by the new venture.
• Most entrepreneurs generally face potential threats from larger
corporations.
• The entrepreneur must be prepared for these threats and should be aware
of who the competitors are and what their strengths and weaknesses are
so that an effective marketing plan can be implemented.
• Most competitors can be easily identified from experience, trade journal
articles, advertisements, Web sites, or even the yellow pages.
IV. Description of venture
• description of the venture Provides complete overview of the product(s),
service(s), and operations of a new venture.
• This will enable the investor to ascertain the size and scope of the business.
• This section should begin with the mission statement.
• This statement basically describes the nature of the business and what the
entrepreneur hopes to accomplish with that business.
• This mission statement or business definition will guide the firm through long-term
decision-making.
• Key elements are the product(s) or service(s), the location and size of the business,
the personnel and office equipment that will be needed, the background of the
entrepreneur(s), and the history of the venture. If the product is very technical, it
will be important to make sure that its description is clear and easy to understand.
• Table summarizes some of the important questions the entrepreneur needs to
answer when preparing this section of the business plan.
 V. Production plan
• Production plan Details how the product(s) will be manufactured
• If the new venture is a manufacturing operation, a production plan is
necessary.
• This plan should describe the complete manufacturing process.
• If some or all of the manufacturing process is to be subcontracted, the plan
should describe the subcontractor(s), including location, reasons for selection,
costs, and any contracts that have been completed.
• If the manufacturing is to be carried out in whole or in part by the
entrepreneur, describe the physical plant layout; the machinery and equipment
needed to perform the manufacturing operations; raw materials and suppliers’
names, costs of manufacturing; and any future capital equipment needs.
• If the new venture does not include any manufacturing functions, this section
should be eliminated from the plan.
 VI Operations Plan
• All businesses—manufacturing or nonmanufacturing—should include an
operations plan as part of the business plan.
• This section goes beyond the manufacturing process (when the new venture
involves manufacturing) and describes the flow of goods and services from
production to the customer.
• It includes inventory or storage of manufactured products, shipping, inventory
control procedures, and customer support services.
• A nonmanufacturer such as a retailer or service provider would also need this
section in the business plan to explain the chronological steps in completing a
business transaction.
• For example, an Internet retail sports clothing operation would need to describe
how and where the products offered would be purchased, how they would be
stored, how the inventory would be managed, how products would be shipped,
and, importantly, how a customer would log on and complete a transaction.
 VII Marketing plan
• Describes market conditions and strategy related to how the product(s) and service(s)
will be distributed, priced, and promoted.
• Marketing research evidence to support any of the critical marketing decision
strategies as well as for forecasting sales should be described in this section.
• Specific forecasts for a product(s) or service(s) are indicated to project the
profitability of the venture.
• Potential investors regard the marketing plan as critical to the success of the new
venture.
• The entrepreneur should make every effort to prepare as comprehensive and detailed
a plan as possible so that investors can be clear as to what the goals of the venture
are and what strategies are to be implemented to effectively achieve these goals.
• Marketing planning will be an annual requirement (with careful monitoring and
changes made on a weekly or monthly basis) for the entrepreneur and should be
regarded as the road map for short-term decision making
 VIII Organizational plan
• Describes form of ownership and lines of authority and responsibility of
members of new venture.
• If the venture is a partnership, the terms of the partnership should be included.
• If the venture is a corporation, it is important to detail the shares of stock
authorized and share options, as well as the names, addresses, and resumes of
the directors and officers of the corporation.
• It is also helpful to provide an organization chart indicating the line of
authority and the responsibilities of the members of the organization.
• Table summarizes some of the key questions the entrepreneur needs to
answer in preparing this section of the business plan.
• This information provides the potential investor with a clear understanding of
who controls the organization and how other members will interact in
performing their management functions.
 IX Assessment of risk
• Identifies potential hazards and alternative strategies to meet business plan
goals and objectives
• Every new venture will be faced with some potential hazards, given its
particular industry and competitive environment.
• First, the entrepreneur should indicate the potential risks to the new venture.
• Next should be a discussion of what might happen if these risks become reality.
• Finally, the entrepreneur should discuss the strategy that will be employed to
prevent, minimize, or respond to the risks should they occur.
• Major risks for a new venture could result from a competitor’s reaction;
weaknesses in the marketing, production, or management team; and new
advances in technology that might render the new product obsolete.
• Even if these factors present no risks to the new venture, the business plan
should discuss why that is the case.
X. Financial plan
• Projections of key financial data that determine economic feasibility and necessary
financial investment commitment.
• It determines the potential investment commitment needed for the new venture
and indicates whether the business plan is economically feasible.
• three financial areas: First, the entrepreneur should summarize the forecasted
sales and the appropriate expenses for at least the first three years, with the first
year’s projections provided monthly.
• The second major area of financial information needed is cash flow figures for at
least three years, although sometimes investors may want to see five-year
projections.
• The last financial item needed in this section of the business plan is the projected
balance sheet.
• This shows the financial condition of the business at a specific time.
• It summarizes the assets of a business, its liabilities (what is owed), the investment
of the entrepreneur and any partners, and retained earnings.
 XI. Appendix
• The appendix of the business plan generally contains any backup material
that is not necessary in the text of the document.
• Reference to any of the documents in the appendix should be made in the
plan itself.
• Letters from customers, distributors, or subcontractors are examples of
information that should be included in the appendix.
• Any documentation of information—that is, secondary data or primary
research data used to support plan decisions—should also be included.
• Leases, contracts, or any other types of agreements that have been
initiated also may be included in the appendix.
• Finally, price lists from suppliers and competitors may be added.
Why BP fail?
• poorly prepared business plan can be blamed on one or more of the
following factors:
• Goals set by the entrepreneur are unreasonable.
• Objectives are not measurable.
• The entrepreneur has not made a total commitment to the business or
to the family.
• The entrepreneur has no experience in the planned business.
• The entrepreneur has no sense of potential threats or weaknesses to
the business.
• No customer need was established for the proposed product or service
• Entrepreneurial growth strategies,
• Franchising, stalling,
• Sickness and revival, and exiting the venture
Entrepreneurial growth strategies
• Different combinations of different levels of these types of knowledge
are represented in Figure and provide a model of different growth
strategies.
• Most of these growth strategies can lead to a competitive advantage
because they capitalize on some aspect of the entrepreneur’s, and the
firm’s, knowledge base.
• These growth strategies are
• (1) penetration strategies,
• (2) market development strategies,
• (3) product development strategies, and
• (4) diversification strategies.
1.Penetration Strategy
• A penetration strategy focuses on the firm’s existing product in its
existing market.
• A strategy to grow by encouraging existing customers to buy more
of the firm’s current products.
• For example, a pizza company engages in an extensive marketing
campaign to encourage its existing customer base of university students
to eat its pizza three nights a week rather than only twice a week.
• This growth strategy does not involve anything new for the firm and
relies on taking market share from competitors and/or expanding the
size of the existing market.
• Therefore, this growth strategy attempts to better exploit its original
entry
2.Market Development Strategy
• Strategy to grow by selling the firm’s existing products to new groups of
customers.
• Growth also can occur through market development strategies.
• Market development strategies involve selling the firm’s existing
products to new groups of customers.
• New groups of customers can be categorized in terms of geographics or
demographics and/or on the basis of new product use.
a. New Geographical Market This simply refers to selling the existing
product in new locations. For example, a firm selling its products in
Singapore could start selling its products in Malaysia, Thailand, and
Indonesia. This has the potential of increasing sales by offering products to
customers who have not previously had the chance to purchase them.
• B. New Demographic Market :Demographics are used to characterize
(potential) customers based on their income, location, education, age,
gender, and so on.
• For an entrepreneur who is currently selling the firm’s existing product
to a specific demographic group, the business could grow by offering
the same product to a different demographic group.
• C. New Product Use: An entrepreneurial firm might find out that people
use its product in a way that was not intended or expected.
• This new knowledge of product use provides insight into how the
product may be valuable to new groups of buyers
3. Product development strategy
• A strategy to grow by developing and selling new products to people who
are already purchasing the firm’s existing products.
• Experience with a particular market development strategy
• Strategy to grow by selling the firm’s existing products to new groups of
customers product development strategy.
• A strategy to grow by developing and selling new products to people who
are already purchasing the firm’s existing products to a customer group is a
source of knowledge on the problems customers have with existing
technology and ways in which customers can be better served.
• This knowledge is an important resource in coming up with a new product.
• For example, Disney Corporation built on its existing customer base of
Disney movie viewers and developed merchandising products specifically
aimed at this audience.
4. Diversification Strategies
• Diversification strategies involve selling a new product to a new market.
• Even though both knowledge bases appear to be new, some diversification
strategies are related to the entrepreneur’s (and the firm’s) knowledge.
• There are three types of diversification;
a. Backward integration: A step back (up) in the value-added chain toward the
raw materials, which in this case means that the manufacturer also becomes a
raw materials wholesaler. In essence, the firm becomes its own supplier
b. Forward Integration : A step forward (down) on the value-added chain
toward the customers , which in this case means that the firm also becomes a
finished goods wholesaler. In essence, the firm becomes its own buyer.
c. Horizontal integration: Occurs at the same level of the value-added chain but
simply involves a different, but complementary, value-added chain
Franchising
• Franchising is also an alternative means by which an entrepreneur may expand his or her
business by having others pay for the use of the name, process, product, service, and so
on.
• Franchising :An arrangement whereby a franchisor gives exclusive rights of local
distribution to a franchisee in return for payment of royalties and conformance to
standardized operating procedures
• Franchisor The person offering the franchise
• Franchisee The person who purchases the franchise
• Entrepreneurs use franchising to reduce the risks of new entry and from the perspective
of the entrepreneur.
• Business relationship between two entities wherein one party allows another to sell its
products and intellectual property. For example, Dominos and McDonalds operate in India
through franchising.
• Regardless of the mode used, entrepreneurs need to be good negotiators.
• They need to negotiate with external parties to obtain the human and financial resources
necessary to fuel business growth.
Joint Venture
• joint venture Two or more companies forming a new company
• A joint venture is a separate entity that involves a partnership
between two or more active participants.
• Sometimes called strategic alliances, joint ventures can involve a
wide variety of partners that include universities, not-for-profit
organizations, businesses, and the public sector.
• For example, Boeing, Mitsubishi, Fuji, and Kawasaki entered into a
joint venture for the production of small aircraft to share technology
and cut costs
Types of Joint ventures
a. Industry–university agreements created for the purpose of doing research are
another type of joint venture that has seen increased usage.
• A profit corporation has the objective of obtaining tangible results, such as a patent,
from its research investment and wants all proprietary rights.
b. International joint ventures: are rapidly increasing in number due to their relative
advantages.
• Not only can both companies share in the earnings and growth, but the joint
venture can have a low cash requirement if the knowledge or patents are capitalized
as a contribution to the venture.
• Also, the joint venture provides ready access to new international markets that
otherwise may not be easily attained.
• Finally, since talent and financing come from all parties involved, an international
joint venture causes less drain on a company’s managerial and financial resources
than a wholly-owned subsidiary
Acquisition
• Purchasing all or part of a company
• Acquisitions provide an excellent means of expanding a business by
entering new markets or new product areas.
• One entrepreneur acquired a chemical manufacturing company after
becoming familiar with its problems and operations as a supplier of
the company.
• An acquisition is the purchase of an entire company or part of a
company; by definition, the company is completely absorbed and no
longer exists independently.
Merger
• Joining two or more companies into one company
• A merger—or a transaction involving two, or possibly more, companies in which only one
company survives—is another method of expanding a venture.
• Merger motivations range from survival to protection to diversification to growth.
• When some technical obsolescence, market or raw material loss, or deterioration of the
capital structure has occurred in the entrepreneur’s venture, a merger may be the only
means for survival.
• The merger can also protect against market encroachment, product innovation, or an
unwarranted takeover.
• A merger can provide a great deal of diversification as well as growth in the market,
technology, and financial and managerial strength.
•  A merger occurs when two separate entities combine forces to create a new, joint
organization. Meanwhile, an acquisition refers to the takeover of one entity by another.
• Tata Motors’ acquisition of Jaguar Land Rover
• Merging of Glaxo Wellcome and SmithKline Beecham to GlaxoSmithKline
 Difference between Acquisition and mergers
ACQUISITIONS MERGERS
Meaning
An acquisition is a cycle wherein one organisation assumes or A merger is a cycle wherein more than one organisation’s
takes over the responsibility for another organisation. approach functions as one.

Issuance of Shares

No new shares are issued in case of acquisitions. New shares are issued in case of mergers.

Mutual Consent and Decisions

The choice of acquisitions is probably not shared, or of mutual A merged business entity is settled upon by common assent
consent in nature; in the event that the acquiring organisation and mutual consent of the involved organisations. Rather it is a
assumes control over one more venture without the acquired planned and friendly one.
company’s assent, it is named an unfriendly takeover or hostile
takeover.
Company’s Name

The obtained or acquired organization, for the most part, The merged business entity works under another name or a
works under the name of the parent organisation. Sometimes, new name.
nonetheless, the previous company can hold its original name,
assuming the parent organisation permits it.
Exit Strategy
• Every entrepreneur who starts a new venture should think about an
exit strategy.
• Exit strategies include an initial public offering (IPO), private sale of
stock, succession by a family member or a nonfamily member, merger
with another company, or liquidation of the company.
• The sale of the company could be to employees (an ESOP employee
stock ownership plan) or to an external source (a person or persons,
or a company). The IPO, private sale of stock, and merger options
 Succession plan
• Only about 60 percent of businesses have a succession plan in place.
• For very small businesses, this percentage is likely to be a lot lower.
• plan for the succession of the business to can be to
• either a family member,
• an employee,
• or an external party.
1. Transfer to Family Members : Successfully passing down a business to a family member faces tough odds.
• Research by the Family Business Institute indicates that only 30 percent of family businesses survive into the second
generation and only 12 percent survive into the third generation.
• An effective succession plan should also be communicated clearly to all employees.
• This is particularly relevant to key personnel who may be affected by the succession transition.
• The solution to minimizing the emotional and financial turmoil that can often be created during a transfer to family
members is a good succession plan.
• An effective succession plan needs to consider the following critical factors:
• The role of the owner in the transition stage: Will he or she continue to work full-time? Part-time? Or will the
owner retire?
• Family dynamics: Are some family members unable to work together?
• Income for working family members and shareholders.
• The current business environment during the transition
2. Transfer to Nonfamily Members
• Often, family members are not interested in assuming responsibility for the business.
• When this occurs, the entrepreneur has three choices: train a key employee and retain
some equity, retain control and hire a manager, or sell the business outright.
• Passing the business on to an employee ensures that the successor is familiar with the
business and the market.
• The employee’s experience minimizes transitional problems.
• In addition, the entrepreneur can take some time to make the transition smoother.
• The key issue in passing the business on to an employee is ownership.
• If the entrepreneur plans to retain some ownership, the question of how much becomes an
important area of negotiation.
• The new principal may prefer to have control, with the original entrepreneur remaining as a
minority owner, stockholder, or consultant.
• The financial capacity and managerial ability of the employee will be important factors in
deciding how much ownership is transferred.
• Since evidence indicates that most entrepreneurs wait until it is too late, it is important to
begin the process long before there is a need to sell or transfer the ownership of the
business.
3. OPTIONS FOR SELLING THE BUSINESS
• There are a number of alternatives available to the entrepreneur in selling the venture.
• Some of these are straightforward, and others involve more complex financial strategy.
• Each of these methods should be carefully considered and one selected, depending on the
goals of the entrepreneur.
a) Direct Sale This is probably the most common method for selling the venture. The
entrepreneur may decide to sell the business because he or she wants to move on to
some new endeavor or simply decides that it is time to retire. A sale to a larger company
that can infuse much-needed capital may also provide opportunities for the company to
grow and reach larger markets. If the entrepreneur has decided to sell the business but
does not need to sell immediately, there are a number of strategies that should be
considered early in the process.
• The entrepreneur should concentrate on keeping costs under control and focus on higher
margins and profits.
• Get all financial statements in order, including budgets and cash flow projections
• Prepare a management documentation of the business explaining how the business is
organized and how it operates
b) Employee stock option plan (ESOP) A two- to three-year plan to sell the
business to employees.
• The ESOP establishes a new legal entity, called an employee stock
ownership trust, that borrows the money against future profits. The
borrowed money then buys the owner’s shares and allocates them to
individual employees’ retirement accounts as the loan is paid off. The ESOP
has the obligation to repay the loan plus interest out of the cash flow of
the business
c) Management Buyout It is conceivable that the entrepreneur only wants to
sell or transfer the venture to loyal, key employees.
• Since the ESOP can be rather complicated and expensive, the entrepreneur
may find that a direct sale would be simpler to accomplish.
• Other methods of transferring or selling a business are through a public
offering or even a merger with another business
Module 4
• Emerging trends in entrepreneurship and contemporary issues
and practices: Rural entrepreneurship, Social entrepreneurship,
family business and entrepreneurship, and technology-driven
entrepreneurship.
• Ethical and Environmental challenges.
 Emerging trends in entrepreneurship
1. Startup accelerators: Often privately funded and mostly used by tech
startups, these accelerators help companies with the strongest potential of
success obtain funding in exchange for equity.
2. Student Sandbox and Business Lab: Universities are developing student
sandboxes on and off their campuses to support student startups.
• Sandboxes operate like business incubators except that they are more
focused on developing and mentoring student startup teams and are
often tied into some type of entrepreneurship degree program or course.
• Many sandbox programs provide students with the opportunity to win
seed money, grants, and business services and receive coaching and
mentorship from successful startup founders.
• Some examples include Student Sandbox, Student Startup, and Venture
Lab.
3. Crowd Funding: Crowd funding, also known as social funding, new phenomenon where
Startups are typically funded by way of bootstrapping, investors (venture capital or angel) and
bank loans.
• Now entrepreneurs and business owners, along with artists, nonprofit leaders, and
community groups, are using their social networks to raise money for their businesses,
community projects, and events or to develop a new product.
• Artist Share, Indiegogo, Kickstarter, RocketHub and other crowd funding companies help
individuals pitch their ideas to the masses to get financial support.
4. Bootcamps: An entrepreneurship bootcamp is an intense hands-on program for small
business owners, startup founders and new entrepreneurs.
• Bootcamps will focus more of their attention on teaching the practical application for new
venture creation and small business management within a short period of time. Their aim is
to help teach, equip and direct entrepreneurs.
• There is a growing trend in entrepreneurship boot camps dedicated to teaching and training
military veterans.
• Some examples include Cowboy Bootcamp for Entrepreneurs, Entrepreneurship Bootcamp
for Veterans (EBA), and Fast-Trac (Kaufman Foundation - partners).
5. Fully Online Entrepreneurship Degree:
• Many academics and institutions felt that entrepreneurship must be
taught in a traditional classroom by a fulltime business faculty.
• With the innovation in technology, growth in social media interaction
for startups and funding options that are being generated online, more
Universities have adopted a virtual option for their entrepreneurship
seeking students.
• A few examples of these institutions include Whitman School of
Management, Spears School of Business, Ross School of Business and
Colorado Technical University.
Rural Entrepreneurship
• Rural entrepreneurship refers to initiatives and activities of the entrepreneurs related to the establishment
of industrial and business units in rural areas.
• Rural entrepreneurship can be the panacea for the problems to poverty, migration, economic disparity,
unemployment, and underdevelopment associated with rural areas and backward regions.
• Rural entrepreneurs can be considered as an important catalyst in bringing about the economic
development of a country and of rural areas within the country. Rural entrepreneurs are that class of
entrepreneurs who carry out entrepreneurial activities by establishing Industrial and business units in the
rural sector of the economy.
• Rural entrepreneurship concentrates on finding and stimulating rural entrepreneurial talents and thereby
promotes the growth of indigenous enterprises.
• Rural entrepreneurship augments the economic value of rural areas by introducing new methods of
production, new markets, and new products. Moreover, it also generates employment opportunities in rural
areas and thus ensures rural development.
• In India as per the Census of 2011, out of the 121.2 million population in India, the size of the rural
population is 833.1 million which is about 68.84 percent of the total population.
• The economic development of India largely depends on the progress of rural areas and the improvement of
the standard of living of rural masses.
• Rural entrepreneurship can significantly contribute to the national economy by enhancing the pace of rural
development.
Need For Rural Entrepreneurship
i. Rural industries being labour intensive serve as an antidote to the widespread problems
of rural disguised unemployment and underemployment stalking the rural areas.
ii. The development of rural industries by providing jobs to rural unemployed helps in
reducing disparities in income between rural and urban areas.
iii. These industries promote balanced regional development by dispersing industries to
rural areas.
iv. Development of rural industries serves as an effective means to build up village
republics.
v. Rural industries also help preserve the age-old rich heritage of the country by protecting
and promoting art and creativity.
vi. Rural industrialization fosters economic development in rural areas. This checks
migration from rural to urban areas, on the one hand, and lessens the disproportionate
growth in the cities, reduces growth of slums, social tensions, and atmospheric pollution,
on the other.
vii. Rural industries also lead to development without destruction, i.e., the most
desideratum of the time.
Rural entrepreneurs : types
1. Farm Entrepreneurs -These are people whose primary occupation and main source of livelihood, is
farming. Persons not having land or other farming resources but are willing to take up an enterprise in the
village that will aid agriculture are regarded as farm entrepreneurs.
2. Artisan Entrepreneurs- These entrepreneurs represent the skilled persons in rural society. Such skills
are either acquired through professional training in association with their kinship group, or through
inheritance as for example, blacksmithy, carpentry, etc.
3. Merchant and Trading Group-This includes primarily the business community of rural areas who
form a small segment of rural population. It shares the larger trades in the community. These people are
perceived as traditionally exploitative class and play the role of middleman in business to the pursuit of any
vocation in the rural areas.
4. Tribal Entrepreneurs -Tribal entrepreneurs are predominantly in tribal villages and could be
regarded as an entrepreneurial class by itself. Their source of origin is the tribal community. Their
entrepreneurship may however lead to the pursuit of any vocation in the rural areas.
5. General Entrepreneurs -Some examples of this class are high school drop-outs, educated-
unemployed, landless labourers, wage earners, and persons belonging to the scheduled castes, etc.
• The rural entrepreneurs can initiate their enterprise in any of the category classified as rural industry.
• i. Forest based industries that include honey making, beedi making, bamboo products, cane products,
wood products, coir industry, etc.
• ii. Agro based industries include processing and sale of agricultural products such as pickles, jiggery,
juice , fruit jam, dairy products, products made out of rice, oil processing from oil seeds.
•
 SOCIAL ENTREPRENEURSHIP
• A social entrepreneur refers to an individual who pursues novel ideas with
the potential to solve or alleviate certain community-oriented problems.
Social entrepreneurs often are willing to take the risks associated with their
venture to help address issues, enabling positive change in society.
• Social entrepreneurs often start their venture or initiative after recognizing
the prevalence of a certain problem in society and creating a solution to
address it using their entrepreneurial skills. Their overall goal is to make a
positive societal change while creating social capital to further their
objectives.
• Social entrepreneurs will often devote much of their lives to their passions
and interests in order to bring about positive changes to the areas they are
concerned about.
Characteristics of Social Entrepreneurs
• Social entrepreneurs certainly differ when it comes to individual personalities;
however, they also share similar characteristics necessary for success as
individuals willing to undertake significant risks and uncertainties to achieve
positive changes in areas that might be resistant to new ideas or approaches.
• Social entrepreneurs first need to possess a strong passion that drives their
desire to see their ideas and initiatives becoming successful, while also adopting
a healthy impatience that ties in with their uncomfortableness with sitting back
to wait for change to happen.
• They also need to come up with practical but innovative ideas for social issues
and often use market forces and principles.
• It allows them to break away from constraints imposed by the traditions and
customs within the fields of certain disciplines to take risks that others are
afraid of taking.
Family business and entrepreneurship

•  in general a family-owned business is one:

1) In which two or more extended family members influence the business through the
exercise of kinship ties management roles and ownership rights, and/or,
2) Which the owner intends to pass to a family heir.

• Characteristics/Features of Family Business

1) Clearly separate management and ownership.
2) Have a clearly defined vision.
3) Take time to understand the family’s concerns and the needs of individuals.
4) Have a common language of trust inside and outside the family business.
5) Speak with one voice.
6) Have defined roles and responsibilities for family members, shareholders, and
employees.
8) Have high staff loyalty and low staff turnover.
9) Consider appointing non-executive directors to help bring objectivity.
10) It also considers the family business members who aren’t involved in the business.
Types of family business
1) Family–Owned Business: A family–owned business is a for- profit enterprise in which a controlling number
of voting shares( or other form of ownership), typically but not necessarily, a majority of the shares are owned by
members of a single extended family, or are owned by one family member but significantly influenced by other
members of the family.

2) Family-Owned and Managed Business: A family- owned and managed business is a for-profit enterprise in
which a controlling number of voting shares (or other form of ownership), typically but not necessarily a majority
of the shares, are owned by members of a single extended family, or are owned by one family member but
significantly influenced by other members of the family. The authority conferred by this controlling interest
permits thee family to determine objectives, methods, methods for achieving them and policies for implementing
such methods. And this business has the active participation by at least one family member in the top
management of the company so that one or more family members have ultimate management control.

3) Family- Owned and Led Company: A family-owned and led company is a for- profit enterprise in which a
controlling number of voting shares (or other form of ownership), typically but not necessarily a majority of the
shares are owned by members of a single extended family, or are owned by one family member but significantly
influenced by other members of the family. The authority conferred by this controlling interest permits the family
to determine objectives, methods for achieving them and policies for implementing such methods. And this
business has the active participation by at least one family member in the Board of Directors of the company so
that one or more family members have at least a high level of influence over the company’s direction, culture and
strategies.
Advantages of family business
The overriding characteristic that distinguishes most family businesses is a unique atmosphere that creates a ‘sense
of belonging’ and an enhanced common purpose among the whole workforce. Although intangible, this factor
manifests itself in a number of very competitive edges. These are summarized in the panel opposite, but it is worth
examining them in detail:
1) Commitment: People who set-up a business can become very passionate about it-- it is their creation, they
nurtured it, built it up and for many such entrepreneurs their business is their life. This very deep affection translates
naturally into dedication and commitment, which extends to all the family members who come to have a stake in the
success of the business.
2) Knowledge: Family businesses often have particular ways of doing things--- special technological or commercial
know –how not possessed by their competitors; knowledge that would soon become general in a normal commercial
environment, but which can be coveted and protected within the family.
3) Flexibility in Work, Time and Money: Essentially, this factor boils-down to put the work and time into the
business that is necessary and taking –out money when you can afford to. A further aspect of commitment is that if
work needs to be done and time spent in developing the business, then the family puts in the time and does the work
—there is no negotiating of overtime rates or special bonuses for a rushed job.
4) Long-Range Thinking: But although families are good at thinking long-term, they are not so good at formalizing
their plans—writing them down, analyzing the assumptions they are making, testing past results against earlier
predictions--- n short, the strength means that the long- range thinking is there, while the weakness is that this
thinking is undisciplined5) Stable Culture: For a variety of reasons, family business tend to be stable structures. The
chairman or Managing Director has usually been around for many years and the key management personnel are all
committed to the success of the business and they too are there for the long-term. Relationships within the company
have usually had ample time to develop and stabilize, as have the company’s procedural ethics and working
practices- everybody knows how things are done.
6) Speedy Decisions: In a family controlled business, responsibilities are usually very clearly defined and the
decision- making process is deliberately restricted to one or two key individuals. In many cases, this means that if
 Disadvantages of family business
1) Rigidity: walking through the doors of some family businesses can be like entering a time
tunnel. Sentiments such as, ‘Things are done this way become dad did them this way’ and ‘ You
cannot teach an old dog new tricks.’ Reflect the ways in which behavior patterns can become
ingrained and family businesses become tradition- bound and unwilling to change.
2) Business Challenges: The business challenges that particularly affect family firms can be
divided into three categories:
i) Modernizing Outdated Skills: Very often the skills possessed by a family business are a product
of history and, as a result of developments in technology or a change in the marketplace; these
skills can quickly become obsolete. Problems in this area are not necessarily triggered by drastic
changes such as the effect of word-processing technology on typewriter manufacturers.
ii) Managing transitions: It represents another major challenge for family businesses—it can often
be the make or break for a family firm. In summary, the challenge to the business is typified by a
situation in many companies where the founder is getting- on in years and his son, the heir
apparent, is convinced that things need to be done differently. The merest hint of this potential
conflict can be disruptive, causing enormous uncertainty among staff, suppliers and customers
iii) Raising Capital: In comparison with the wide range of funding alternatives open to publicly
held companies with a diversified shareholder base, family businesses obviously have much more
limited options when it comes to raising capital. But over and above these family businesses
commonly have a problem with the very concept of raising money from outside sources.
Technology Entrepreneurship
• Technology entrepreneurship is an investment in a project that assembles and deploys specialized
individuals and heterogeneous assets that are intricately related to advances in scientific and
technological knowledge for the purpose of creating and capturing value for a firm.
• The role of technology in the business landscape cannot be overstated.
• Getting the staff up to date with emerging trends not only boosts productivity, but it has immense
bearing on your bottom-line
• Today, the IT department in every business, big or small is indispensable.
• IT experts are largely attributed to the changing dynamics at the organizational level.
• These experts are becoming crucial given their capacity to help a business maintain its competitive
edge.
• Every business relies on technology in big and small ways.
• As technology evolves, businesses have an overriding need to incorporate some form of
technology.
• it’s an integral component of any business.
• There are several elements that technology has transformed for the better.
 Role of technology
1. Improving Communication -In many ways than one, technology simplifies
communication. Whether it’s a social connection or a mission-critical data.
• IT is fundamental for effective communication internally and externally.
• In house, technology streamlines the types off data relay that occur between
sections or departments.
• There is a need for an organization to stay up to date with new email marketing
tactics or ways of sending company wide data via digital platforms.
• Externally, technology has made communication easy.
2. Marketing and Business Growth -From an external communication point of view, a
business will use new technology to advertise and break into new markets.
• Forward thinking enterprises advertise digitally with a view to drive traffic.
• Even though it is a brick and mortar business, technology has to be part of the
marketing mix, if expect to grow revenue.
• There is need for experts who are conversant with search marketing, web
optimization and social media targeting.
3. Streamlines Decision Making-Decision making in any business is a critical process.
• technology is needed to streamline the decision making process.
• There is a need to keep track of customer and market data.
• Technology in form of business-relevant software facilitates error-free reporting.
• guarantees of accuracy with metrics drawn from the finance, marketing and customer engagement
departments.
• It is technology that captures critical data and helps a business to see its weak areas, and ways of
how to strategize accordingly.
4. Boosting Your Competitive Edge-Nowadays, other businesses in the same niche are spending
more to market and advertise.
• The need to stay on top of the completion is crucial.
• Nobody wants to associate with a brand that is barely visible online.
• The competitors use technology to weigh and to drive their traffic. Technology is using viable online
tools to drive the sales.
5. Enhancing Customer Relationship : Reputable CRM management systems let the entrepreneur
discover what the customer wants.
• It’s advisable to target the right customer at the right time to avoid them crossing over to the
competitor.
•  cloud storage makes it critical to have robust cyber security measures to keep the assets and data
safe.
Ethical challenges

• Ethical issues ;
• Discrimination
• Unethical accounting
• Health and safety
• Nepotism and Favoritism
• Privacy
• Corporate Espionage
Thank you..