Entrepreneurial Perspectives

Entrepreneurship Management - Prof. J.C. Saboo

What do you mean by… Entrepreneur

(oxford dictionary): Person who undertakes an enterprise with chances of profit or loss. Enterprise (oxford dictionary): Bold Undertaking Entrepreneur-New Encyclopedia Britannica: An individual who bears the risk of operating business in the face of uncertainty about the future conditions. Common Meaning: one who starts his own, new and small business

Entrepreneurship: It is a philosophy or process through which an entrepreneur seeks innovation and employment. Entrepreneur Person

Entrepreneurship Process or Philosophy

Entre – enter

Pre – before

Enterprise Object

Neur – Nerve Centre

Entrepreneurship can be described as a creative and innovative response to the environment.

Entrepreneurship Theories 1600: French verb- Entreprendre – to

undertake 1700: Person bearing Risks of Profit in a fixed price contract (Risk) 1725: Richard Cantillon – Person bearing risks is different from Capital Supplier (Risk) 1803: J. B. Say – Shifts economic resources out of an area of lower into an area of higher productivity & greater yields (Value Addition) 1934: Joseph Schumpeter – Innovator and develops untried technology (Productivity & Innovation)

Entrepreneurship Theories… 1961:

David McClelland – highly motivated, energetic, moderate risk taker (Need for achievement) 1964: Peter Drucker – Searches for change, responds to it & exploits as opportunity (Opportunity Focused) 1980: Karl Vesper – Behaviour PerceptionsEconomists, Psychologists, Businessmen, Politicians (Environment) 1983: Gifford Pinchot- Intrapreneur 1985: Robert Hisrich - Creating something different with value, devoting time & effort, assuming risks (FPS); results-rewards and satisfaction (Leadership & Vision)

How do you define an entrepreneur in the 21st Century?

Entrepreneurship “Is the process of creating something different with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, social risks and receiving the resulting rewards of monetary and personal satisfaction and

The Nature and Development of Entrepreneurship Entrepreneur stems from French Verb Entreprendre means between – taker or go between

New Definition involves four aspects: The creation process The devotion of time and efforts The assumption of risks Rewards of independence, satisfaction, money.

To an Individual Self Employment Employment for near & dear Prolonged career for next generations Freedom to use own ideas - Innovation and creativity Unlimited income / higher retained income Independence Satisfaction

To the Nation Provides larger employment Results in wider distribution of wealth Mobilizes local resources, skills and savings Accelerates the pace of economic development Stimulates innovation & efficiency

Factors favouring Entrepreneurship Growth of education- science, technology & management Developed infrastructure facilities Financial assistance Training facilities Protective and promotional policies Globalization Think of numerous other factors?

What makes a Successful Entrepreneur? The urge for achievement Determination to win Win-Win Personality Willingness to take moderate risks Ability to identify & explore opportunities Analytical ability to take strategic decisions

Perseverance Flexibility Capacity to plan and organize Preparedness to undergo physical and emotional stress Positive self concept Future orientation: Vision Ethics and Values :Mission

Who can be an Entrepreneur? Who can take moderate risks Who has ability to work hard Who can capitalize on opportunities Who has some financial strength Who feels the need for achievement Who has desire for responsibility Who has perception of probability of success Who gets stimulation by feedback Who possess skills in organizing Who can be male or female Who may not have previous experience

Characteristics of an Entrepreneur Mental ability Clear objectives Business secrecy H.R. ability Communication ability Technical knowledge Achievement-oriented Perseverance Ethical

Motivator Self-confident Long term involvement High energy level Problem solver Initiator Goal setter Risk taker

Key elements of entrepreneur Innovation Vision Ethics & Values Organizing Skills Risk taking Need for Achievement Study the Profile of a Successful Entrepreneur and identify six key elements in order of priority

Entrepreneur’s Background and Characteristics Family environment Education Age Physical attributes Marital status Working history Family contacts Professional contacts Personal values Lifestyle

Analyze your Personality Feelings about Control Feelings about Independence Willingness to take Risks

What is a job competency? It is knowledge, skills and attitude Knowledge – collection and retention of information. Skills are ability to do something well (hard and soft skills) Motives are reasons for doing something (need) Traits – characteristics way in, which a person responds. Attitude reflects the way of thinking and acting (Self and others determine the attitude)

Performance emerges from the combination of knowledge, skills and attitude

Initiative

– Taking actions that go beyond job requirements or demands of the situation. – Doing things on own before being asked for or being forced by the events. – Taking actions to start the business and expand into new areas, products and services.

Seeing & acting on opportunities

– Looking for and taking actions to seize opportunities – Seeing and acting on opportunities for business development or for personal growth. – Seeing unusual opportunities – Seizing opportunities, need, procuring and mobilizing necessary resources.

Persistence

– Taking repeated actions to overcome obstacles that get in the way of achieving goals – Taking actions in the face of obstacles. – Ensuring all efforts to solve a problem or barrier.

Information seeking

– Taking action s on own to help reach objectives. – Personally undertaking a research or analysis to find out answers to some problem. – Seeking information to clarify what is needed. – Using networks to obtain information.

Concern for high quality of work – Doing things that meet or beat existing standard of excellence. – Stating a desire to produce work of high quality – Comparing work favorably to that of others. – Making all out efforts to ensure the quality of product or services.

Work commitment to contract – Placing highest priority for getting a job completed. – Taking all the effort to complete a job. – Accepting responsibilities for failures. – Expressing utmost concern for the customers – Readiness to work at any level to get work done.

Efficiency Orientation

– Constantly looking for ways to do things faster or with fewer resources or at a lesser cost. – Using business tools to increase personal or professional efficiency. – Expressing concern for assessing cost versus reward of some improvements, changes or action.

Systematic Planning – – – –

Developing and using logical steps to reach goals. Breaking a large task into several sub tasks. Developing plans after duly anticipating obstacles. Evaluating alternatives on merits and demerits.

Problem Solving

– Identifying and applying new ideas to reach the goals. – Identifying the root cause of the problem. – Developing strategies in the light of objectives, resources, and constraints. – Generating new ideas or innovative solutions.

Self Confidence

– Having a strong belief in own abilities. – Sticking with own judgment in the face of opposition or early lack of success. – Doing something for which chances of success are not very fair.

Persuasion – – – –

Persuading others successfully Selling someone an idea, product or service. Making someone agree to provide resources Convincing with confidence, competence and respect.

Use of Influence Strategies

– Using a variety of strategies to influence others successfully – Developing professional and business contacts. – Using influential people to get own things done. – Carefully limiting the information to be given to others – Using others authority and resources, but remaining ethical

Assertiveness – – – –

Confronting problems and issues with other directly Speaking politely but firmly. Telling others clearly what they have to do Reprimanding those who fail to perform as expected however close they may be.

Monitoring

– Ensuring smooth progress of project or work. – Personally supervising all aspects of the work to its completion. – Developing a system of supervision and monitoring.

Concern for other’s welfare – Having a concern and taking actions to improve other’s welfare. – Responding positively to employees specific needs. – Having a concern for the welfare of employees, their families and society at large.

General Aspect • Political • Socio-cultural • Technological

Business Environment & Entrepreneurship Elements

• Legal

• Promoters’ / shareholder’s values

• Economic

• Mission / objectives • Management Structure

Entrepreneurship Competitive Aspect • Potential New Entrant • Buyers Bargaining Power • Suppliers Bargaining Power • Substitute Products

• Internal Power relationship • Physical assets & facilities • Co. image/ brand equity • Human resources • Financial capabilities •Technological capabilities •Marketing capabilities

Environment Political: System, Stability, Leadership Socio-cultural: Culture, Community,

Values, Ethics, Attitude Technological: Education, Absorption, Competition, Innovation Legal: Regulatory framework, Consumer protection, Concern for environment, Labour laws Economic: GDP, GNP, Resources, Fiscal, Non-fiscal policies, Incentives and Subsidies

Dimensions of Environment SPECTACLES – Social, Political, Economic, Cultural, Technological, Aesthetic, Customer, Legal, Environmental and Sectoral PEETS – Political, Economic, Ecological, Technological and Socio-demographical SLEPT – Social, Legal, Economical, Political and Technological

Factors Influencing Entrepreneurship Individual Socio-cultural factors

Economic Environment

Support Systems Political Environment

Legal Environment

Technological Environment

Porter’s Model in the Competitive Environment Potential New Entrants

Substitute Products

Industry Rivalry

Suppliers Bargaining Power

Buyers Bargaining Power

BCG Matrix

Political & Governmental Environment Global

National

• Trade

Barriers • Trade Agreements • Tariffs & Duties • Political Risks

• Taxation

State Govt.

Local Issues

• Taxation

• Taxations

• State Laws • Licensing /Approvals • Incentives

• Zoning • Cost of Living • Lifestyle

• Regulations • Protections (Patents) • Govt. spending

Environmental Analysis Scanning to detect change (identify key elements and their characteristics) Monitoring to track development (that affect the survival and profitability of the new business) Forecasting to project the future (such as level of prices, inflation, interest rates, availability of funds, market share, market growth, etc. Assessing to interpret data (what does it all mean to the entrepreneur?)

Entrepreneurship and Economic Development Entrepreneur’s set up Enterprises Entrepreneurs combines resources, put their time and efforts and produce goods or services What they contribute – productivity, output, value addition, income and employment Entrepreneurship is a “Low Cost Strategy”. Entrepreneurs perform the crucial role themselves The spirit of Entrepreneurship – Drive, achieving higher goals, creativity, innovative attitude. A dynamic society emerges and the spirit spreads like a chain reaction.

The Invention Process Market Need

Technology observation

Need Analysis

Parameter Identification

Creative Synthesis

Realization

Invention, which meets the need

Product Evolution Process Fundamentals of Science

Development Phase

Commercial Phase

Concept Testing

Planning

Beginning of Technological

Modeling

Financing

Innovation

Product Testing

Manufacturing

Technology

Recognized Social Need

Marketing Invention / Innovation

The Evolution Process Intersection of Knowledge and a recognized social need Initiation of technological innovation Iterative Synthesis Development Phase Industrial Phase

The Product Planning and Development Process Idea Stage – Idea – Evaluate Concept Stage – Lab Development – Evaluate

Product Development Stage - Pilot Production – Evaluation

Test Marketing Stage- Semi

Commercial Production Evaluation Commercial Stage – Introduction Growth Maturity Decline

Commercialization Role of Government Role of Corporate – Intrapreneurship Role of Individuals – Entrepreneurship

Development of Technology – – –

Utilization of materials Exploitation & transformation of energy Understanding and application of Scientific Principles

The Role of Government – Promotional – Neutral – Regulatory

The Role of Smaller firm T- High, M-High – Large skilled resources,

financial backing. Act as a Supplier or Sub –Contractor T- High, M-Low - Specialist firm, access to low cost research T-Low, M-High – Linkage with well-established channels T-Low, M- Low – Well Suited to small firm Low Tech – High Volume Financial Ability High Tech – Low Volume Strategic Ability Emerging Options – Franchisee; Subcontractor

Entrepreneurship and Management Students Enterprises in protected economy can be mismanaged. Enterprises in competitive environment are essentially to be managed. A Management Graduate is a person trained to manage an enterprise. Naturally, he will deliver the best results. A Management Graduate should not be just a Job Seeker. He can and should take the role of Job Provider. Experience even from HBS confirm that more Management Graduates take Entrepreneurial Role (after some experience) and their income is higher than their colleagues who are in job. “An Entrepreneur has to be a Manager. But a Manager need not be an

Entrepreneurial Decision Process Pull Factors – Perception of Advantages – Spotting an Opportunity – Government Policies – Motivation from Biographies or Success Stories – Influenced by Culture, Community, Family Background, Teachers, Peers, etc.

Push Factors – Job Dissatisfaction – Relocation – Lay-off – Retirement – Boredom

Comparison of Entrepreneurs, Intrapreneurs and Traditional Managers Traditional Managers

Entrepreneurs

Intrapreneurs

Primary motives Perks and promotion

Self-employment, satisfaction and money

Creative freedom and recognition

Time Orientation

Short-term – business establishment; Long-term – growth of business

Tend to follow the middle path

Short-term – meeting quotas and budgets; weekly, monthly, quarterly and the annual planning horizon

Traditional Managers

Entrepreneurs

Intrapreneurs

Activity

Delegates and supervises

Direct involvement Direct involvement , not merely delegation

Risk

Careful

Moderate risk taker

Moderate risk taker

Monetary Risk

Nil

High

Nil

Status

Concerned about unconcern about status status

unconcerned about traditional status

Failure and mistakes

Tries to avoid mistakes and surprises

Attempts to hide risky projects from view until ready

Deals with mistakes and failures

Traditional Managers

Entrepreneurs

Intrapreneurs

Decisions

Like to take their own but unable to disagree with top

Follows dream with decisions

Able to get others to agree to help achieve their dreams

Who serves

Others

Self and customers

Self, customers, and sponsors

Family history

Family members worked for large organizations

Entrepreneurial small-business, professional

Entrepreneurial small-business, professional

Relationship with others

Hierarchy as basic relationship

Transactions and deal-making as basic relationship

Transactions within hierarchy